Recently I had the opportunity to speak about “8 Trends that Will Reshape the FinTech landscape in 2019”. The webinar event was hosted by Imarticus Learning (https://imarticus.org) and it was one enlightening evening.
Here are some highlights of the event:
What is FinTech?
“Fin” part in FinTech stands for Financial services and “Tech” is for Technology. Together it meant to “design and deliver the Financial Services through the innovative use of technology”.
• Traditional banks were reasonable with the use of technology.
• Got busy with the rules, regulatory and compliances neglected the tech.
• Innovation boomed in the technology sector (smartphones, uber, WhatsApp and so on).
• Impacted our lives profoundly.
• Fundamentally changed the way we interact with these services.
• A major shift in expectations for the end-user experience and convenience.
A clear gap was formed between what traditional banks are offering and what consumer are expecting. FinTech today is the bread of new solution and services addressing that gap.
Why It Matters?
• Non-finance and technology companies such as PayTm, GPay, Lendingkart and so on addressing the gap.
• The financial landscape is evolving and changing at an unprecedented pace. A new banking model is evolving in which traditional banks are on backend and frontend is for FinTechs.
• Banks must have to evolve. Some will succeed, but many will not.
• Estimated 30% of banking job will disappear in the next 10 years.
• New jobs will demand a completely different skill set, understanding of tech and creative thinking to leverage it.
It matters to not just the big financial institutions or banks, but an individual too who is in midst of all this.
“People need banking. They don’t necessarily need banks.” ~Bill Gates
1) Open Banking
Shared financial information available with multiple financial institutions/services providers.
A great example in India is UPI (unified payment services).
• almost all the major banks under one umbrella.
• open up the system to the third party solution providers.
• a very simple and secure process.
• delightful customer experience.
In the year 2019, it should open the door for a multitude of services such as:
• easier comparison of services, thus promoting healthy competition.
• lenders get a better view of consumer’s financial conditions, usage pattern, financial behavior.
• small business gets benefited as they can be easily assessed for a business loan or a credit line.
The concept of banks originated around the 13th century.
• simple, all about maintaining records in the bank’s central ledger
• cheques and drafts enabled money transfer
• multiple ledgers, multiple entries for single transaction
• slow process and costs
Unfortunately, that pretty much is same even today. Nothing much changed in 700 years.
The blockchain is, however, has the potential to change it for all good.
• decentralized ledger
• one ledger, one entry
• each transaction gets verified by all
• fast, save resources and cost.
“It not as much of technology but is a philosophy.”
3) ML (Machine Learning)
ML stands for Machine Learning.
• branch of Artificial Intelligence (AI).
• uses algorithms and statistical models to learn from data.
• learn without being explicitly programmed.
ML is a big deal for Financial Institutions.
• image recognition for KYC
• fraud detection systems evolving from the static rules to dynamic neural network
What makes it special?
• It will detect the change in the data patterns and tune the model by itself. You do not need a data scientist to keep tuning the model.
• When the data quality is not perfect, it can actually still create meaningful insights for business to make decisions.
• When the data is coming we do not need to store, process and transform it before we can create analytics. It can just stream through the neural network and the AI engine can pick up the pattern and help the businesses to serve customers.
• It can handle unstructured data, therefore AI can be applied in places like image recognition or voice recognition.
4) Lending (p2p)
Lending is an age-old tradition.
• Banks formalized it.
• A parallel system of lending also exists, but unstructured.
Typically one goes to the bank when in need of a loan. Bank may choose to provide or reject. Interestingly at the same time, there is a customer who wants to deposit money in the bank, but not happy with the return getting on it.
p2p Lending is all about connecting these two individuals in an environment which can leverage their experience and need better than the traditional ways.
• allows one to lend money with better returns to the other in need.
• based on the information available and loan requirement these platforms prepare creditworthiness to facilitate loans.
• one or more lenders can get engaged on the platform for single lending.
• some example: fair cent, lending kart
5) RPA (Robot Process Automation)
RPA stands for Robotic Process Automation.
• virtual workforce
• software robots
• carry out repetitive processes.
• uses the latest tech like OCR, ML.
• adhere to regulatory, rules
• efficiently undertaking processes like KYC, AML
• work 24×7
Once automation processes are streamlined it operates at a 100% quality rate. Leave room for humans to cater to strategic priorities.
Saves cost, improves turn around time and improves accuracy.
“If you not using RPA, then as a business leader you have lost the competitive advantage and as an employee your job. You just don’t know yet. ~ A Industry Leader”
Customers today expect to be treated as individuals and not as broad demographic segments
• each customer is different
• deliver offers and rates that are relevant to each individual.
• banks already know a lot about its customer.
• transform data into insights that are predictive, personally relevant and useful.
predictive personal finance advice, custom loan offering and so on
Today’s tech provides the capability to build real-time self-learning models which can result to best possible contextual experience for the customer with each interaction.
Cloud computing is the delivery of computing services such as servers, storage, databases, networking, software, analytics and more over the Internet “the cloud”.
Three main types:
• Software-as-a-service (SaaS)
• Infrastructure as a Service (IaaS)
• Platform as a Service (PaaS)
Why Cloud Computing?
• Reduces costs
• Easily scalable
• Improved efficiency
• Enables new-gen services
“The sky isn’t the limit; only the beginning”
As the financial industry growing with FinTech, it is attracting a lot of negative attention and constantly in cross-hair of cyber attacks. So security is the uttermost priority. Fortunately, FinTech is flexible enough to adapt to different methodologies and swiftly.
• Biometric: Access to our accounts required a fingerprint, face, or even your voice. Hacking accounts would become much harder and fraud next to impossible. Besides, it will also make logging in easier and faster.
• Behavioural: Our behavior provides unique markers. And algorithmically can be used to secure.
• Decentralization: Keeping things in the open/transparent is another essential method for staying safe. For example, blockchain is virtually impossible without the collective efforts of everyone on the chain, but secure as hell.