Tag: Fintech

4 trends impacting banks in 2019

On By mehranmuslimiblogIn Banks, FintechLeave a comment

Thought leaders ATOS published “Toward next-generation financial service ecosystems”, which analyses mega-trends in financial services and why we should all prepare for a fundamental shift in the next few years.

As its report says, banks are at a crossroads, and the “rise of non-banking platform companies are now disrupting the most profitable parts of the banking value chains. New players could capture up to a third of incumbent banks’ revenues by 2020.”

ATOS has identified four challenges and opportunities that will have the biggest impact on banking, providing they leverage the emerging technology.

1. Faster response to customer demands

Retail banks that adopt digital tech will see a 5% to 20% boost in revenues thanks to an improved service. They will also reduce their network costs by anything from 15% to 35%, and increase customer satisfaction by 10% to 15%. In advanced economies, two-thirds of banking customers execute half their financial transactions online. Customer loyalty is becoming elusive and branches are less relevant as a result. To respond, banks may shift from a product-centric to a platform- centric approach focused on customer-driven strategies.

2. Optimise costs

Fintechs are more agile and have lower operating costs than banks, making for strong competition. Digital banks can enjoy a cost-to-income ratio of below 30%, whereas banks are in 40% to 60%. Banks have some options, including shifting to lower-cost, standardised utility processes for selected administrative activities and using AI to improve customer response times and reduce employee redundancies.

3. New revenue streams

With banking business models changing thanks to neobanks, there is a need for traditional banks to reassess their position. They could position themselves as a hub platform and introduce new services for underserved segments of the community, such as mobile only banking for Gen Z and the unbanked.

4. Develop security and compliance systems

Customer data has now become a ‘product’ for financial institutions and this requires enhanced security and insights, which could be provided by AI. For example, PSD2 requires banks to implement secure application programming interfaces (APIs) to make account transactions and data available to third parties. Developing system using AI-generated insights from civil and military intelligence could dramatically reduce the cost of cybercrime and enhance consumer trust.

There is nothing here that is earth shattering; it is what many have been saying throughout 2018, yet the banks continue to be slow in their response. Perhaps 2019 will the year they wake up and start moving forward.

5 technologies disrupting banking by 2023

On By mehranmuslimiblogIn AI, Banks, Big Data, Digital Innovation, Fintech1 Comment

Over the next five years banking is going to change dramatically and will be nothing like we know it today. The changes will come due to technology and will provide financial institutions with both opportunities and challenges.

The global recession put a spotlight on banks; these institutions were largely responsible for the near-collapse of economies and although they have weathered the storm, people’s trust in them has not been restored.

Out of the failure of financial institutions came the bitcoin protocol and blockchain technology. This was followed by the arrival of fintech startups and neobanks, both of which threaten the consumer account monopoly enjoyed by retail banks, which is referred to as ‘legacy’ in the financial media. According to various consultancies, new players could capture up to a third of incumbent banks’ revenues in the next 2–3 years. If banks don’t respond to this, they are in danger of disappearing.

However, there is good news for the traditional banks: the new technologies that are threatening the banking industry also present significant opportunities. They can leverage big data and advanced analytics to improve customer experience, as well as build trust, loyalty and revenues. Dan Cohen, SVP at Atos, said: “Banks are at a crossroads. Continuous fintech innovation and new technologies such as blockchain are disrupting the market. While it creates threats, it also opens multiple opportunities for financial services to reinvent themselves and thrive.”

Here are five of the technologies that will advance fintechs and potentially cause more disruption in the banking sector, unless the banks are agile enough to incorporate them.

1. A hybrid cloud

Cloud computing tech has gone mainstream in banks pretty fast. It was found that at least 75% of bankers said their most successful cloud initiatives had already achieved expansion into new industries, creation of new revenue streams, and expansion of their product/services portfolio.

2. APIs

The combination of open platform banking and open APIs will change the entire banking ecosystem in its current state. In this scenario, the bank will serve as a platform, on top of which third-party companies can build their own applications using the bank’s data.

3. Robotic process automation

Robotic process automation (RPA) has helped banks and credit unions accelerate growth by executing pre-programmed rules across a range of structured and unstructured data.

4. Instant payments

Consumer demand for instant payments is on the increase. With instant payments, more transactions will be made digitally instead of in cash, which means that payments will become less expensive and more user friendly.

5. Artificial Intelligence (AI)

The benefits of AI in banks and credit unions are widespread, reaching back office operations, compliance, customer experience, product delivery, risk management and marketing to name a few

The case for decentralisation

On By mehranmuslimiblogIn Bitcoin, Blockchain, FintechLeave a comment

Image result for decentralisation

Centralisation came in the second phase of Internet development. In the first phase of the web, Internet services were built on open protocols, but by the time of the new millennium this was rapidly changing to centralised platforms. Firms like Google and Amazon, Facebook and Apple (GAFA) designed software that outpaced the open protocols, and once smartphones arrived, the trend picked up speed.

The centralisation effect

What then happened is that startups found it much harder to grow their businesses online, because of the dominance of centralised platforms that could change the rules at any moment and take away the newcomers’ audience. Innovation has been stifled and the Internet environment is less dynamic because of it. Furthermore, centralisation has aided the rise of fake news and the numerous debates over privacy and biased algorithms.

One response to centralisation might be to impose government regulation on the largest Internet companies, but the problem here is that the web is software based, which means the networks can be redesigned to exploit market forces. So, this type of solution is not of much benefit.

Decentralisation is the answer

Cryptonetworks are a decentralised solution. They are governed by communities and have the potential to outperform centralised platforms.  The reason they are an answer is that they behave in a different way to those platforms that are centralised. For example, when a  centralised platform starts up they do everything they can to recruit users and third-parties like developers, businesses, and media organisations to give the service added value. Facebook is a good example of this. As platforms like this move up the adoption S-curve, their power over users and third parties steadily grows. Again, look at Facebook.

Cryptonetworks operate in a very different way. These decentralised networks “ use consensus mechanisms such as blockchains to maintain and update state, 2) use cryptocurrencies (coins/tokens) to incentivize consensus participants (miners/validators) and other network participants,” as Chris Dixon suggests.

Other advantages are that they also stay neutral as they grow, and use open source protocols, whereas centralised platforms use a ‘bait and switch’ approach. Users have a voice via the community that governs the decentralised network and users work together towards a common goal – community growth and strengthening the token’s value.

Ultimately, the question of whether decentralized or centralized systems will win the third era of the Internet depends on who is going to build the most compelling products. The entrepreneurs working on decentralised platforms are up against the strong cash flow of Google etc, but on the other hand they also have a growing fan base that will provide robust support.  Decentralisation also provides a more level playing field for third-party developers and businesses, and that could well be one of its biggest advantages.

 

 

 

Google offers $25 million for AI challenge

On By mehranmuslimiblogIn AI, Big Data, FintechLeave a comment

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It’s today’s big story: Google is offering $25 million in grants to nonprofits, universities and other organisations working on AI projects that will benefit society,

as part of its AI for Social Good initiative. Google will open the application process this coming Monday and will announce winners next spring at Google’s annual I/O developer conference.

Details of the challenge explain that Google.org is issuing an open call to organizations around the world to submit their ideas for how they could use AI to help address societal challenges. Selected organizations will receive customized support to help bring their ideas to life: coaching from Google’s AI experts, Google.org grant funding from a $25M pool, credit and consulting from Google Cloud, and more.

Google says the programme is meant to help solve the world’s most pressing problems, such as crisis relief, environmental conservation and sex trafficking.

However, it is also clear that this ‘competition’ comes at a time when Google’s own use of artificial intelligence is under increasing scrutiny, including “in controversial military work or reported efforts to build a censored search engine in China,” as CNET says. There has also been Project Maven, a U.S. Defense Department initiative aimed at developing better AI for the military that resulted in a rebellion by Google’s own employees and some 4,000 of them petitioned the executives to stop the project, which the company duly did and promised not to engage in similar projects again.

At the press announcement, Google’s head of AI, Jeff Dean, avoided discussing these issues, although he did mention Google’s ethical principles that outline how it will and will not use the technology.

Yossi Matias, vice president of engineering, said in an interview last week, “The gist of the program is to encourage people to leverage our technology. Google can’t work on everything. There are many problems out there we may not even be aware of.”

It is going to be interesting to see what initiatives come out of this global challenge. Hopefully we will see a diverse range of ideas for AI use that can improve the world when it is so badly in need of repairs in all areas of existence.