The Fin­Tech Dis­rup­tion

Fin­Tech is now driv­ing an evo­lu­tion in the ex­ist­ing busi­ness and op­er­a­tion mod­els of banks. As a re­sult, Fin­Tech of­fer­ings are help­ing banks in cut­ting down over­head costs

Dataquest - - C9ONTENTS - ( The au­thor is ex­ec­u­tive di­rec­tor at i-ex­ceed)

Tra­di­tional en­try bar­ri­ers faced by new play­ers in the bank­ing and fi­nan­cial ser­vices in­dus­try have long dis­ap­peared due to the emer­gence of new busi­ness mod­els and tech­nolo­gies. At the meet­ing point of such tech­nolo­gies and busi­ness mod­els, a rev­o­lu­tion led by Fin­Tech is un­der­way and it is cre­at­ing a new value chain by en­abling fi­nan­cial in­sti­tu­tions to derive op­por­tu­ni­ties out of modern dis­rup­tive en­vi­ron­ments.

These days, banks and fi­nan­cial in­sti­tu­tions are in­creas­ingly work­ing with dis­rup­tive tech­nolo­gies and star­tups to not just sur­vive the chang­ing times, but thrive in it. With rad­i­cal changes ex­pected in the scale, scope, and com­plex­ity of cus­tomer de­mands as well

as the bank­ing ser­vices avail­able, tools such as SMAC (So­cial, Mo­bile, An­a­lyt­ics and Cloud) are pro­vid­ing banks with the means to reach more cus­tomers than ever be­fore. Fi­nan­cial in­clu­sion has be­come a key focus area for the cen­tral gov­ern­ment, so sev­eral ben­e­fi­cial reg­u­la­tory poli­cies have also added greater im­pe­tus to the Fin­Tech rev­o­lu­tion.

The big­gest com­pa­nies across the world to­day are suc­cess­ful be­cause of how they lever­age data. To en­sure com­pet­i­tive­ness in to­day’s dig­i­tal world, a bank should strate­gize its busi­ness mod­els by ef­fi­ciently mak­ing use of in­sights from data (his­tor­i­cal as well as re­cent). Tech be­he­moths such as Google, Ap­ple, and Face­book have en­tered the fi­nan­cial of­fer­ings space; mean­while, banks have started de­ploy­ing tech­nolo­gies to boost their ser­vices. So, as the lines be­tween tech gi­ants and Fin­Techs blur, ac­ces­si­bil­ity, con­ve­nience, and per­son­al­iza­tion be­come crit­i­cal to en­sure suc­cess. Here are some of the rea­sons why cus­tomers love and choose Fin­Tech solutions: Ease of use Cost and time ef­fi­cient Im­proved user ex­pe­ri­ence New fea­tures that uses cut­ting-edge tech­nol­ogy

THE EVOLV­ING BUSI­NESS MOD­ELS OF BANKS AND FI­NAN­CIAL IN­STI­TU­TIONS

Fin­Tech is now driv­ing an evo­lu­tion in the ex­ist­ing busi­ness and op­er­a­tion mod­els of banks. As a re­sult, Fin­Tech of­fer­ings are help­ing banks in cut­ting down over­head costs this is re­sult­ing in a pull model that tar­gets cus­tomers ir­re­spec­tive of lo­ca­tion. With the erad­i­ca­tion of phys­i­cal bound­aries, banks and fi­nan­cial in­sti­tu­tions have also been able to sup­ple­ment and boost ser­vices such as cus­tomer ac­qui­si­tion, on­line shop­ping, travel/ en­ter­tain­ment ser­vices and more, with tech­nol­ogy. This has led to the rise of AI-driven mar­ket­places where cus­tomers and banks are in­ter­act­ing in ways never seen be­fore.

The Global Fin­Tech Re­port 2017 by PwC states that 82% of in­cum­bents ex­pect to in­crease Fin­Tech part­ner­ships in the next three to five years. In this con­text, the pur­suit of cus­tomer cen­tric­ity has be­come a key pri­or­ity for all con­cerned par­ties. This pur­suit is also en­abled by the ris­ing ex­pec­ta­tions that cus­tomers now have of their banks to meet the ex­cel­lent de­sign and ser­vice qual­ity pro­vided by some of the world’s big­gest tech com­pa­nies. More­over, as mil­len­ni­als be­come the key de­mo­graphic around the world for all in­dus­tries, fi­nan­cial in­sti­tu­tions also need to evolve to cater to their needs. All this has led to changes in the im­prove­ment of per­for­mance, user ex­pe­ri­ence, and cus­tomiza­tion ca­pa­bil­i­ties of the prod­ucts and bank­ing ser­vices to­day.

AI: MA­CHINE LEARN­ING FOR IM­PROVED PER­SONAL BANK­ING

We are ex­pe­ri­enc­ing a dig­i­tal shift in all walks of life and as we progress, AI will ul­ti­mately drive this shift with the ul­ti­mate goal of im­prov­ing cus­tomer en­gage­ment and over­all ex­pe­ri­ence. These are two cru­cial fac­tors of mea­sure­ment of busi­ness suc­cess and they can be per­fected by im­ple­ment­ing AI to study his­tor­i­cal data with re­gards to cus­tomer habits and pref­er­ences. The in­for­ma­tion thus gained can of­fer ser­vice providers ac­tion­able in­sights into the evolv­ing new-age cus­tomer in or­der to dif­fer­en­ti­ate them­selves from com­pet­ing ser­vice providers.

Con­ver­sa­tional AI plays a key role here. What ini­tially be­gan as a sim­ple cus­tomer re­sponse sys­tem has be­come a dy­namic vir­tual as­sis­tant that ev­ery lead­ing bank is im­ple­ment­ing. Ex­am­ples such as HDFC OnChat and EVA, SBI In­Touch, YES mPower, YES Pay Bot and Di­gibank are just a few notable ex­am­ples and they all play a crit­i­cal yet sim­ple role – un­der­stand cus­tomer queries of vary­ing com­plex­i­ties and re­spond ap­pro­pri­ately. The in­built AI in these cases can mimic hu­man in­ter­ac­tions and pro­vide as­sis­tance in car­ry­ing out dif­fer­ent pro­cesses re­lated to ac­count man­age­ment, funds trans­fer, bill pay­ment, and much more in real-time.

It is in­evitable that soon fa­cial recog­ni­tion, voice recog­ni­tion, and nat­u­ral lan­guage pro­cess­ing will enter the equa­tion and pro­vide a boost to the bank­ing rev­o­lu­tion that is al­ready un­der­way. At the heart of all this ad­vance­ment is ma­chine learn­ing. Thanks to the ocean of data gen­er­ated by wide­spread app us­age the world over, AI based sys­tems have plenty of ref­er­ences to learn from in or­der to de­liver cor­rectly. Not only does this en­able them to of­fer con­tex­tual of­fer­ings for their cus­tomers, it also sets them up to suc­cess­fully con­duct com­plex trans­ac­tions in real-time.

A Capgem­ini re­port in­di­cates that about 9 out of 10 In­dian com­pa­nies say that AI has ac­tu­ally cre­ated new jobs. A ma­jor­ity of these jobs are ad­mit­tedly at the se­nior

man­age­rial level, but it is nonethe­less an im­pact that many did not see com­ing. With plenty of new ser­vices and new fea­tures be­ing made pos­si­ble by AI, the scope for job cre­ation in the fi­nan­cial sec­tor is im­mense. On a strate­gic level, AI en­ables the de­ploy­ment of tech­nol­ogy to bet­ter serve cus­tomers, en­hance per­for­mance, and boost rev­enue, but the hu­man cap­i­tal im­pact can­not be un­der­stated.

UPI: OPEN DATA SHAR­ING FOR A DIG­I­TAL BANK­ING FU­TURE

An­other key evo­lu­tion be­ing driven by Fin­Tech in­no­va­tions and part­ner­ships in In­dia is the UPI (Uni­fied Pay­ments In­ter­face) real-time pay­ment sys­tem. De­vel­oped by the NPCI (Na­tional Pay­ments Cor­po­ra­tion of In­dia) to pro­pel In­dia to­wards a cash­less econ­omy, UPI en­ables users to in­stantly trans­fer funds be­tween bank ac­counts on a mo­bile plat­form. In fact, since its launch in Au­gust 2016, the value of UPI trans­ac­tions had risen to INR 27 billion[3] by May 2017. Cur­rently, no other na­tion can boast of a pay­ment so­lu­tion as well de­signed as UPI, and In­dia leads the world when it comes to UPI pay­ment pro­cesses.

In­dia is pro­ceed­ing at break­neck speeds when it comes to mar­ket ma­tu­rity and the adop­tion of dig­i­tal pay­ment solutions. A ma­jor rea­son for this is In­dia’s large smart­phone user base that is big­ger than that of most coun­tries. But it is also the propen­sity to use, dis­played by this user base that is en­cour­ag­ing the wide­spread adop­tion of UPI pay­ments by lead­ing ser­vice providers and tech­nol­ogy com­pa­nies. The gov­ern­ment’s push for a dig­i­tized econ­omy and a cash­less one has also lent an air of in­evitabil­ity to this.

UPI clearly ben­e­fits ev­ery­one – users and mer­chants. Not only is it a sim­ple, fast, and ef­fec­tive way to trans­fer money be­tween dif­fer­ent par­ties, it is highly de­pen­dent on smart­phone us­age and adop­tion. With more than 440 mil­lion[4] smart­phone users pro­jected in In­dia by 2022 ac­cord­ing to Statista, this is some­thing that has no dearth of in In­dia. A key ad­van­tage of UPI is that a user can op­er­ate all their bank ac­counts through one sin­gle app, an un­beat­able ben­e­fit that will soon con­vince any­one who has ever faced the is­sue of too many apps on their phone or the is­sue of stor­age space run­ning out. While UPI was met with some skep­ti­cism ini­tially, banks and fi­nan­cial in­sti­tu­tions have re­al­ized that it will not nec­es­sar­ily re­place mo­bile wal­lets or net­bank­ing; it will only sup­ple­ment ex­ist­ing pay­ment operations.

Al­ready, lead­ing tech com­pa­nies have joined the list of UPI-en­abled ser­vice providers in the coun­try. Ini­tially only the BHIM (Bharat In­ter­face for Money) app sup­plied UPI trans­ac­tions, but now play­ers such as Google Tez, What­sApp, Paytm, Airtel Pay­ments Bank, PhonePe and many more have also joined the lengthy queue. Ap­ple Pay is also ex­pected soon in In­dia, and it won’t be a sur­prise to find that UPI will be their pre­ferred pay­ment in­ter­face.

CON­CLU­SION

Ul­ti­mately, Fin­Tech is de­signed to de­velop and de­liver a bet­ter user ex­pe­ri­ence for all par­ties. Dis­rup­tion is of­ten viewed as a bad thing, but in this sce­nario, Fin­Tech com­pa­nies are lever­ag­ing dis­rup­tions to cap­i­tal­ize on new op­por­tu­ni­ties. Fin­Tech re­solves long-stand­ing busi­ness prob­lems, reaches un­der­banked peo­ple and coun­tries for fi­nan­cial in­clu­sion, and of­fers an un­beat­able de­gree of trans­parency. By giv­ing in­sights into data that was al­ways there, Fin­Tech has rev­o­lu­tion­ized the bank­ing and fi­nan­cial ser­vices in­dus­try com­pletely..

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