It is often said that a bank is a technology company in disguise. The relentless rise of fintech startups in recent years clearly suggests that the more a traditional bank can think and act like a tech company at the foot of the fleet, the greater its chances of surviving and thriving in the future. The rise of neobanking ushers in an era of remote digital banking. In this brave new world, the target customers are millennials and Gen Zers, their banks of choice are smart apps running on a smartphone, and those smart apps are powered by disruptive technologies like artificial intelligence and the blockchain. This article explores technological disruption scenarios that signal the arrival of a new normal in financial services.
New-age customers tend to look down on traditional banking services. Instead of filling out forms in a branch, they prefer to approach their bank through a responsive, feature-rich Android or iOS app that understands their needs and offers contextually relevant products and services. This is why traditional banking is under attack from the financial technology sector. One way for traditional banks to protect their territory is to invest heavily in improving the customer experience through real-time natural language processing technologies such as conversational AI. HDFC Bank offers an Android-based conversational bot called EVA, which can respond to the daily queries of bank customers through natural language interactions with precision and speed. EVA can also glean valuable information on customer trends and behaviors, which can be used to create personalized offers for customers.
Where there is money, there is also fraud. Think about credit card transactions and online payments. With over a billion credit card transactions per day globally, nearly $ 25 billion was lost in 2018 alone to fraud. Any technical solution to this complex problem presents a double-edged sword. Take a very aggressive stance against fraud, and there are too many bogus rejection transactions, which creates unhappy customers. Take a very benign attitude, and there are too many credit cards affected by fraud, eroding customer trust. Big credit card companies like American Express and MasterCard are investing heavily in machine learning and deep learning algorithms to carefully balance their aggressive or benign attitude by constantly learning about fraudulent behavior, fine.–tune their fraud analyzes and prediction models, and determine in real time whether a current credit card transaction is above or below an acceptable risk threshold.
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In the traditional banking sector, borrowing and lending is fraught with friction. For borrowers, it conjures up unpleasant images of mind-numbing paperwork, opacity, delay and uncertainty. For lenders, this means an internal struggle between someone trying to sell a loan and someone trying to minimize the risk of default. Today, consumer credit is undergoing a revolution thanks to digital lenders. The ability to exclude human underwriters and use the power of AI and automation to determine who to lend, how much to lend, and at what rate to lend, all within minutes, has opened up a new market for hyper lending. -staff. For example, Simpl offers a Buy Now Pay Later solution that allows consumers who do not have a credit card to make monthly credit purchases online. Recalling the old world khata in the neighborhood kirana store, it makes intra-month consumer borrowing frictionless for large segments of the population.
It may come as a shock to many that more than 70 million people, or 1% of the world’s population, are refugees or have been forcibly displaced from their countries of origin due to persecution. Financial inclusion is a huge challenge even for legitimate citizens in all countries, but it takes on a truly worrying dimension for refugees who have completely lost their identity. The World Food Program, run by the United Nations for more than 100,000 Syrian refugees in Jordan, has used blockchain technology to create fully trusted digital identities. This trusted digital identity framework is used to provide food security, cashless services and direct cash transfers to the refugee community. The use of Blockchain technology can not only improve the quality of life and dignity of refugees, it can also eliminate the leakage of funds and corruption historically associated with such programs.
China, Sweden, and some countries in the Caribbean and Middle East are the pioneers of central bank digital currencies (CBDCs). China was the first major economy to announce Digital Currency Electronic Payment (DCEP), a fully digital currency available through a mobile wallet app, linked 1: 1 with RMB fiat currency, and designed to eventually replace M0. Built using Blockchain and Distributed Ledger technologies, CBDCs are able to overcome the limitations of paper money. For most economies, printing and managing paper money is frictional and erodes 1-2% of GDP. Additionally, CBDCs can increase tax revenues by reducing tax evasion and money laundering, thereby increasing financial compliance and national security. CBDCs can also provide central banks with powerful insights into the purchasing habits of citizens. In the long run, CBDCs can make crosses–fast and painless border payments, and can also lead to the DCEP becoming an alternative global reserve currency.
As Millennials and Gen Z enter a period of plenty, smartphones become ubiquitous, and advanced technologies such as artificial intelligence and blockchain become more affordable, every financial service provider must fully embrace the digital revolution. In a colorful interview for PBS’s documentary Triumph of the Nerds in 1996, Steve Jobs said that Apple’s main competitive advantage was that its main competitor had “absolutely no taste.” What Jobs was trying to say was that new age computer users preferred sleek computer interfaces to simply functional interfaces. Likewise, banking customers of the new era may no longer be satisfied with the functional interfaces and mundane experiences offered by traditional banks. Digital disruptions have irreversibly altered the taste buds of consumers. there is no going back.
This article was written by Santanu Paul, CEO and Managing Director of TalentSprint, and Vishal Kanvaty, Chief Innovation Officer of NPCI