Fintech the ultimate disruption that will change traditional banking

When we say technology is amazing, we probably have felt its incredibility. And so, when Arthur C Clarke said, “Any sufficiently advanced technology is equivalent to magic,” it went well with Terry Pratchett saying that “It's still magic even if you know how it's done.”

Financial reforms such as demonetization and the digital India revolution in the year 2017, along with the advancement of technology at the global level have revolutionized Fintech in India. There has been a dramatic shift to focus on understanding data semantics and exponentially expand the power of computing with Artificial Intelligence (AI), Machine Learning, Bots, RPA (robotic process automation), etc. Thus, the importance of fintech units can’t be impressed on more.

Fintech: The key to better customer experience

Rise of cashless and paperless economy

Online banking has increased cashless transactions and minimized the use of paper money. This doesn’t mean that the traditional methods have been completely replaced. The older methods are just being upgraded to offer evolved services like:

1. Faster online banking

2. Use of Next-Gen Chatbots

3. Implementing new regression model powered by Machine Learning

4. Embedding AI to aid backend operations of banks

These things are precursors of traditional banking moving towards an automated banking structure. In the long run, you are definitely going to see a lesser use of cash for daily transaction and paper for reporting, accounting, checking, and other back-office operations.

In fact, the NITI Aayog is creating IndiaChain, “India’s largest blockchain network, to reduce fraud, speed up contract enforcement, and increase transparency” hinting the importance of blockchain for consumer-centric services.

Reduced delivery TAT

According to a research conducted by PWC, the AI-focused Fintech start-ups have attracted a higher investment over the last two years with an average of US$1 billion in investments. The financial institutions have been working towards creating smarter virtual financial assistance or the Chatbots to reduce delivery turnaround time(TAT). This will completely efface the need to have a face-to-face conversation with bank officials or the need to stand in long queues.

The use of mobile devices for financial transactions has grown and is expected to be a whopping $3.4 trillion by 2022. This increase in the use of personal finance and banking apps by customers for time-saving and simplified money transactions is beneficial for all involved parties – because the financial institutions want to reduce their costs while the clientage wants an effortless experience.

Banking ecosystems as open marketplace

The drudgery of the present financial system is that it lacks cohesiveness with multiple institutions offering multiple products. How about having an exclusive space where versatile financial providers offer multiple products all at one place?

The fintech revolution will help banks become an open marketplace of banking, insurance, and other products for customers who prefer to hold the reigns of their finances at the click of a mouse.

This process has already started in India with initiatives such as UPI and AEPS making banking more ‘open’.

Making online security preventive

In the fintech sphere, data is the new oil. This makes protecting data against vulnerabilities, hackers, and other cyber threats an utmost priority. The cybersecurity measures till now have been more reactive than preventive which is about to be changed with the fintech revolution.

The banks have already adopted the latest data security measures to ensure complete data privacy of sensitive information about individuals and enterprises. This requires an overhaul of the core security architectures of financial organizations. Steps to ensure this involves the use of mobile phones as authentication devices implementing biometrics, one-time passwords (OTPs), and code-generating apps, making passwords and PINs a thing of past.

Furthermore, to reduce misuse of digital identities, organizations need to enable adaptive authentication or risk-based authentications. This also brings into focus the use of advanced cybersecurity concepts like data labelling, selective data sharing, and identity-aware data sharing to reduce data theft and security breaches.

What's the future?

Traditional banks are now investing more in leveraging the power of fintech to bring a financial innovation within their organizations. You will be seeing more of the two ends – the traditional banks and the fintech sector blending to become one and simplify life for the customers.

Authored article by Manav Jeet, MD & CEO, Rubique.