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Collaborate To Innovate

With banks and fintechs working together, the future beholds a win-win partnership with a potential to grow together by building new products with improved analytics, use of AI & ML and emerging technologies

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Innovation by the fintech community has changed the consumer banking and payments space in the past two years more rapidly than in the 20 years before that.  The availability of financial services on new technology platforms combined by the rapid adoption of devices is helping India move closer to becoming a progressive market in this space.

With advances and adoption of technology, the lines between what a fintech company can do and what a bank can do are slowly blurring. One of the major trends we will see is API banking. What API banking will do is enable third parties to develop value-added solutions and features that can easily be integrated with bank platforms. This secure transfer of information will lead to a complete reinvention of consumer services, while maintaining privacy and confidentiality. API banking is already a regulation in some parts of the world as is also termed as ‘open banking’.

A lot of focus will be on mobile and branchless banking. Today, mobile banking lets you execute a set of transactions; in the future, the app will let you do much more including personalisation, your spend analytics and investment recommendations on the basis of your risk profile - in short, become your personal banker. We would also see innovation in voice-based banking. Ordering a cheque book would be as simple as opening the app and ordering it with a voice command. The app, using a voice reminder state that a phone bill is due, with your voice response being sufficient enough for the app to pay the bill.  Such simplicity will not only help people who are not comfortable with the app’s navigation, it will also help the visually and physically challenged with their banking needs.

Another trend we will see is real time processing of loans. Lenders are observing a shift in loan origination channels. Applications received through the physical medium is diminishing, while the digital channel is growing rapidly. Financial institutions must develop strategies based on the online platform for lending or risk losing their business to nimbler institutions. This will involve a complete digital transformation of the back-office process and not just include front end form automation.  With the increase in housing finance companies and NBFCs trying to provide loans to the retail sector, “instant loans” has become a hygiene factor.  Paper-based lending would become a thing of the past.

There will be a rise of integration of payments in message/ commerce based apps. Messaging-based apps in China have built a complete e-commerce ecosystem, built around QR codes.  Not only can you connect to your friends, you could also do transactional banking such as bill payments, P2P payments, but also access wealth management products such as credit, investment and insurance. You could also directly pay a seller through using an in-app transaction or by showing the QR code in a POS transaction. Adopting them here, could raise concerns around authentication and safety of these transactions- banks will have to use fraud monitoring techniques to keep unscrupulous elements at bay.

With banks and fintechs working together, the future beholds a win-win partnership with a potential to grow together by building new products with improved analytics, use of AI & ML and emerging technologies. The large amount of consumer data that is acquired and analysed because of this partnership and with the use of complementary abilities of banks and fintechs, unique products and smart solutions with an enhanced customer experience would be available to the users.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Magazine 28 April 2018 FinTech anniversary special

Ramaswamy Venkatachalam

The author is managing director, India & South Asia, FIS

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