2020's Four 'Tech-Tonic' Trends For Financial Services - Who Can Successfully Leverage Them?

Rahul Bhargava, Chief Technology and Product Officer, Incred Financial Service | Wednesday, 11 March 2020, 05:06 IST

Rahul Bhargava, Chief Technology and Product Officer, Incred Financial ServiceThe rapid adoption of digital technology has been the defining trend of the last decade in India. Armed with low cost smart phones and data, an average users life is already peppered with hundreds of digital touchpoints daily. No matter what you need to do – communication, entertainment, daily news, ticket booking, buying things – there is an app for that! Isn’t it remarkable that you can order something online from your couch at 11 pm at night and have the thing show up at your doorstep the very next day. In fact, millennials find it very hard to imagine a world just a few years ago when there was no Google, Whatsapp, YouTube or even mobile phones. This pervasiveness of digital technology in our lives is forcing every single business to rethink their approach to getting/engaging customers and at the same time optimizing their operations and backoffice.

Financial Services are no exception. If anything, the expectations are even higher. If I can get pizza at a click of a button, why should I not be able to check my bank account, make a payment, buy stocks, get loan etc etc. Next generation of consumers may not have a need to ever visit a bank branch. Take lending for instance where we have seen a lot of activity lately. It’s an age old business, with almost an infinite demand for credit, where essentially a lender is looking to answer two questions – Is this borrower able to pay back the loan? And does he intend to? These two questions are still as relevant today as they were hundreds of years ago. What has changed is the ways lenders can answer these questions and the speed at which new solutions have emerged in the last 10 years. While Banks rely on past payment data provided by credit bureaus and their time tested credit policies, new lenders have emerged that combine that data with bank statements, mobile phone data and app usage patterns to answer the same two questions. The exhaustive physical, paper based processes of yesteryears are being phased out in favour of paperless, digital solutions. And on top of this, all of them want to create a smooth, hassle free experience for borrowers. The debate continues whether the experience is as smooth as can be and also whether the alternate data is proven in predicting risk of default, there is no doubt that newer and newer technologies will continue to emerge here.

“We will see smart banks partner with technology players for wide ranging initiatives - be it co-lending, providing consumer mobile apps, backend services or other innovations”

And we see the same pattern in all other financial services, be it payments, insurance, wealth management, etc. Age old questions in these businesses are being answered in new ways leveraging technology. So where does it go from here? And who wins and who loses? I believe 4 trends are worth noting in that context.

1. Rise of the ‘Phygital’

India is a vast country with low consumer trust. Even though financial services are digital by nature, people generally prefer human interface while making their purchase decision. Consequently, firms should seriously look at a combination of physical and digital (Phygital) approach. This will particularly be seen in smaller towns and cities and is expected to play an integral role in customer sourcing and onboarding. Using this approach, the trust deficit will be addressed by the human interface while technology will deliver a seamless service experience.

2. Data will continue to be the kingmaker, but used judiciously and with consent

Though the phrase ‘data is the new oil’ seems to have become a cliché now, the value of constantly emerging data only continues to increase. It is unveiling superior transparency within the financial system, enabling BFSI players to take targeted policy measures and informed decisions. It has also been instrumental in minimizing Non Performing Assets (NPAs). Availability of GST data, mobile data etc will give BFSI new insights. However, since financial services deal with people’s money, they are subject to regulation and compliance with data protection directives will be key here. A good data consent framework coupled with digital data availability is a trend to watch closely

3. Voice and vernacular will be the next frontier

As financial products expand to the next 300 million customers, mobile apps in local languages and voice-driven interfaces will proliferate. Chatbots might emerge from very elementary lead collectors today to truly smart entities. They are expected to help customers choose the right product and complete various parts of onboarding/servicing processes flawlessly and more economically

4. AI and ML will become more mainstream

Companies won’t necessarily need to hire data scientists to leverage artificial intelligence technology. The depth of AI/ML stack available with cloud service providers such as AWS, Microsoft Azure, and Google today is remarkable and is making the technology available as a service. Modern players will leverage these stacks through AI/ML engineers and develop meaningful differentiators in their core business. For example, advances in facial recognition could be game-changing in onboarding and collections – especially in non-metro areas – by bringing more individuals into the financial services arena.

To take advantage of these trends, we need a combination of deep financial services domain expertise and a deep rooted belief in power of technology to transform businesses. One or the other won’t suffice. We will see smart banks partner with technology players for wide ranging initiatives – be it co-lending, providing consumer mobile apps, backend services or other innovations. We are also seeing career bankers joining/starting technology driven ventures. And technologists have woken up to the enormous impact they can have on their immediate society with such super charged financial services. With this influx of talent, no wonder fintech was the biggest VC funded sector in India in 2019 and will continue to remain a very exciting place for bankers and technologists alike!

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