Trends We’re Watching in 2020

Banking at the Edge 2.0

In the tech world, “edge computing” refers to moving computing power from cloud servers and data centers onto connected network devices such as mobile phones and Internet of Things (IoT) sensors. This reduces latency and enables superior real-time data analysis—allowing self-driving cars to process sensory inputs and make instant decisions on the road, for example.

In banking, edge computing is helping financial firms and their clients more efficiently process transactions at data sources. Payments and e-commerce have been transformed, with customers enjoying increasingly fast, seamless, and hyper-personalized products and services.

One emerging aspect of Banking at the Edge 2.0 is the shift from Know Your Customer (KYC) to Know Your Machine (KYM).

Driven in part by the rollout of the next-generation 5G wireless networking standard, we are approaching an era in which the proliferation of decentralized processing power and connected devices produces an explosion of machine-to-machine (M2M) commerce between Internet of Things (IoT) devices and the vendors and banks that serve them. Expected to outnumber humans 5-to-1 by 2025, these billions of machines will soon be given wallets and the authority to transact without human intervention—meaning that they, too, will need to undergo KYC-like identity verification and anti-fraud checks.

This new KYM process will add monumental operational and security challenges to an already expensive KYC system, but will also present tremendous growth opportunities to firms that can successfully develop KYM technology. The Citi Ventures portfolio company Car IQ has taken major steps in that direction, developing proprietary technology that aggregates many data points to create a digital identity for cars. This technology can be used for M2M payments as well as KYM systems, potentially helping to unleash M2M commerce across industries and open up a vast, emerging market.

Purpose Goes Mainstream

For years, a relatively small subset of consumers has chosen to transact only with businesses that match their ideology or values, seeking out companies that follow Environmental, Social, and Governance (ESG) principles such as protecting the Earth and fostering diversity and inclusion. As a result, merchants such as Toms and Ben & Jerry’s have demonstrated that they create social value beyond maximizing shareholder profits by emphasizing their “triple bottom lines” of people, planet, and prosperity.

These days, however, purpose has gone beyond niche markets and public-relations campaigns to become a necessary component of all companies’ consumer strategies. With TIME’s Person of the Year Greta Thunberg leading weekly, worldwide climate marches and BlackRock CEO Larry Fink calling for business leaders to “link purpose to profit,” it is clear that demand for corporate social responsibility has moved wholly into the mainstream.

This demand is particularly pronounced among Millennials and Generation Z, who are fast becoming the majority of consumers. According to a 2019 Deloitte Global survey of Millennials, 42 percent said they have begun or deepened a business relationship because they perceive a company’s products or services to have a positive impact, while 37 percent said they have stopped or lessened a business relationship because of a company’s ethical behavior.

The business response to this growing commitment to purpose has been widespread and significant. The Business Roundtable recently updated its Statement on the Purpose of a Corporation to include ESG principles, while nearly 3,000 companies including dairy giant Danone North America have become certified B Corporations, amending their corporate charters to include the interests of wider stakeholders in the fiduciary duties of directors and officers. Citi, for its part, was the first U.S. bank to publicly release the results of its gender pay gap analysis and was recently named the most responsible financial institution in America.

Moving forward, this new integration of profit and purpose increasingly will manifest itself in actual services and products that allow consumers to operate in a more responsible manner. In a 2019 Deloitte Global survey, 73 percent of CXOs said their organizations had changed or developed products or services in the past year to generate positive societal impact.

Technology will help facilitate this transition, with granular data collection and analysis leading to more sustainable and socially responsible solutions. One such example is Worthi by Citi, an online platform recently launched by Citi Ventures Studio that analyzes employment data from a variety of sources to help people better understand their personal work landscape and leverage their skills to attain their career goals. By tapping into the massive data and compute power now at our fingertips, tools such as Worthi can help solve some of society’s most pressing problems and accelerate this vital trend.