In the age of AI, big data and cloud, the question is not why, but how fast one can adopt tech’s disruptive forces
For its part, Mumbai-based Rockmetric is deploying advanced cognitive systems, which can act on human-like commands and provide deep analytics for bankers. On the keying of a simple question, for example, ‘What’s the default rate in Delhi’s Safdarjung area?’ the interface instantly churns out the answer. You can also find out which loan products are hot in another area, and more.
It is a new era in technology as a new breed of non-bank technology companies kick-start a digital revolution, which breaks down processes, systems, analytics, and human interactivity to get banks more future ready and improve the speed of doing business. “Data analytics can bring advanced analytical tools to financial services,” says Nimesh Mehta, founder, Rockmetric, which provides banks cloud-based analytical tools.
From advanced analytics to new-age authentication tools to artificial intelligence (AI), which interacts with customers to advanced algorithms, which can track credit-worthiness, the marriage of financial services and technology, more popularly known as ‘fintech’, is sweeping the banking sector. For instance, now, the time taken to process a simple loan can be 10 seconds or fewer, cutting time in a process that used to take a few days.
The first winds of disruption, perhaps, started with payment innovations such as credit and debit cards, then progressed to paying utilities on the Net. But, this structure has now morphed to making payments to e-mail IDs, UPI codes, mobile numbers, and even social media IDs. Cutting-edge machine learning and the power of computing is enabling software to talk to other applications.
Banks, usually perceived to be conservative in adapting to the times, are slowly opening up their systems to new fintech companies to engage with customers, and improve efficiency and even raise the rate of return. “Innovation is not something you can do in isolation,” says Deepak Sharma, chief digital officer, Kotak Mahindra Bank. “We work and partner with all the accelerator, VC firms and startups,” he says.
It’s an era where emerging platforms and mushrooming technologies provide a plethora of paths to improve access to financial services for customers. In fact, newer technologies are reducing banking roles and offering customers lower prices or higher returns. So, if the banks don’t deploy these systems, their competitors will, and this could easily mean loss of business to the banks. “We have partnerships with over 50 startups under the bank’s ART (alliances, relationships and technology) philosophy. This allows us to leverage the latest innovations in the financial ecosystem,” says Ritesh Pai, chief digital officer, Yes Bank.
Other banks like HSBC too are focusing on investing in these startups and fintech. “Globally we have set up a central team and investment funding to explore opportunities in fintech firms,” says Jai Panwani, COO, HSBC India. “We are also partnering with operators for cloud, big data and AI in various business domains based on client and market needs.”
Tech companies are also constantly gearing up for the change. Raj Menon, EVP and Head of Custo-
mer Experience Solutions at Aurionpro says, “The biggest opportunity for fintech firms would be in the digital space for migrating of front-end activity of a bank to digital channels followed by the automation of servicing and fulfillment processes.”
Be There Or Be Left Out
As demand rises for more user-friendly ways to interact on the mobile, the use of chatbots and talkbots will become increasingly common. AI is another such area. AI allows bankers to ask questions and dig deep into databases, and various scenarios and customer profiles, and even make decisions based on new emerging data sets and analytics.
In fact, AI and deep analytics will free up capacities and increase capabilities of banks to deliver more products across the value chain without incurring significant costs. Earlier, banks had to incur higher costs to maintain and run branches for routine functions. Now, with digitisation and online processing and interoperability, banks don’t need a huge branch network, but just the ability to deliver products to end-consumers.
If banks don’t invest in new fintech-driven capabilities, newer banks and NBFCs, which employ such strategies will reach customers before traditional financial firms. In fact, the arrival of the internet, mobile accessibility and advanced databases has allowed new-age fintech companies, with limited resources, to start on a level-playing field with incumbent banks, challenge many on their turf and wean market share.
The existing scale and size of banks may not really matter to a fintech startup if it can provide services at a fraction of the cost. Consider, for instance, that robo-advisory fintech can compete with banks’ investment advisory arms at no cost.
Hence, new fintech NBFCs that deploy advanced tech capabilities are working closely with fintech startups. “We are actively participating in the fintech ecosystem are open to tying up with not only startups but also older companies for products and services that complement our offerings,” says Bhupinder Singh, founder & CEO, Incred, a financial services firm in Mumbai.
Increasingly, fintech will be responsible for enabling banks to gain a level of sophistication and high performance that would not be easy on their own, or simply through strategies that involve human interactivity. Advanced analytics are automating existing manual processes increasingly, providing a high-level of comfort and service to customers.
Complementing banks’ fintech foray are new rural technologies to assist banks in rural India, also known as agritech. Leading banks such as ICICI Bank, SBI and Bank of Baroda have already taken the lead by offering farmers through mobile apps added-on services such as weather trends, prices at mandis, etc.
“Collating all kinds of numerical values from fields as big data and analysing it using AI would assist banks in making decisions regarding financing requests from farmers,” says Rajiv Tevtiya, co-founder and CEO, RML AgTech, a firm offering solutions to farmers on their mobile phones.
In the foreseeable future, banks will add more automation points within their retail branches to create a leaner and more retail-centric banking operations, and fintech firms will play an important role in this transformation. To be sure, fintech is not going to be a one-time disruption, but a continuous improvement as computing power combines with newer technologies – that will usher game-changing consumer behaviour and business models. Banking is not going to be the same – ever.
The Sound Of Disruption
Banking is facing the forces of technology in its traditional businesses
Payments: In the first line of banking disruption, cutting-edge technology is transforming how transfers are processed. E-mail IDs, mobile numbers, social media accounts now suffice as the only IDs necessary to transfer money – not bank accounts. Fintech firms are leading the way in terms of speed, convenience, and multi-channel operations
Lending: In this bread-and-butter business of banks, fintech firms are using analytics and data mining to find new customers to source loans. Customers that don’t have a credit history or even a bank account can now access loans. Banks could lose business to fintech firms
Deposits: This is a big chunk of banking cash management and provides access to inexpensive capital for lending. Fintech firms are mapping deposits using data-analytics to seek out lucrative deposits and wean them away to other deposit systems. Applications to map and manage deposits are going to be the next disruption
Investment advisory: Robo-advisories are mushrooming and levelling the playing field. Technological platforms provide the same level of service to high-networth individuals, or investment solutions to the lower-end of the masses. Robo-advisors are also providing new age tools and sophisticated financial management. Distribution of wealth products is becoming automated and traditional banking proprietary channels become less effective
AI: Chat bots and virtual robots do routine and sophisticated tasks. AI can soon evolve not only to source and interact with customers, but also evaluate credit appraisal and even disburse loans, without human intervention
BIG DATA: Allows fintech firms to leverage broader sets of data to make trades, gather information on customers, companies, and use clustered data to identify problem areas, reduce costs and improve operations
BLOCKCHAIN: Is a decentralised system that can disintermediate all the processes as it provides multiple ledgers and highly sophisticated record keeping
CYBER SECURITY: Will assume greater importance as internet driven systems have vulnerabilities. Ability to detect fraud will be key to a secure digital future