Digital Banking

FI series 4
Bank Regulation, Digital Banking, Fintech Regulation, Rural Banking Solutions and Financial Inclusion

Financial literacy – The fourth pillar of Financial Inclusion

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The post first appeared on linkedin. To get more such insights, please connect with me here. While I was privileged to go to school, get educated, watch tv, buy books, during my adolescent days. I never realized some people do not have access to primary education until I saw this ad on Doordarshan – राष्ट्रीय साक्षरता मिशन [National Literacy Mission. My first question to my parents was – why is education so important yet inaccessible ? Guess you reap what you sow, and in 2016 when I was working on my dream project, I was again stuck with the same query only change being education replacing financial education.  My mission of enabling change, empowering lives by including them into a formal financial system was based on the knowledge of money, the power to learn, analyze, and grow. Unless people know about the power of money – its growth pattern, method, or savings schemes, why would anyone be willing to attach himself/herself to a system? That’s why I regard Financial literacy as the fourth pillar of financial inclusion, with the other three being – technology, women inclusion, and regulation. Financial Education –What it means and Stats? Financial education helps individuals in understanding numeracy, risk diversification, inflation, and interest compounding. It assists individuals in making informed decisions regarding – balancing a budget, fund the children’s education, buy a home, avail a personal loan, understand the risk associated with debts and ensure an income at retirement. When people are financially literate, they would be keen to explore the products and services offered by banks and use them for their benefits. It accelerates the pace of financial inclusion, where everyone can access the necessary banking facilities rather than relying on the orthodox systems of money market such as borrowing money from Zamindaars or village money lenders As per stats available from Nov 2018, the highest financial literacy in any country is 71%, while in developing and underdeveloped nations its below 25%, what the figure indicates that a lack of knowledge about finance and financial products, many people are unable to access banking and financial services, and are therefore kept out of financial markets making financial illiteracy a critical barrier to financial inclusion. How to Improve Financial Literacy? While improving knowledge in modern days could be done via online apps or courses, our focus should be creating awareness of financial literacy. So how it could be attained, here are few pointers – As an individual – Ask a question? Next time you meet your local vegetable seller or housekeeping staff ask a question – Do you know you can grow your money in Bank with minimal charges? Based on their answer, educate them, make them aware of what financial literacy is and why it is of utmost importance to you and your family. As a firm – Involve in CSR or tie up with an NGO Corporate Social Responsibility or CSR is an ethical way for firms to work for the inclusive growth of the society. Stressing to create equal opportunities’ for the consumers, stakeholders, suppliers would help the firm in gaining brand recognition and building trust. As an example, CRISIL foundation launched a proof of concept for a financial inclusion program in Assam and Rajasthan to empower individuals in making informed financial choices. Another example is a Financial Literacy program ran by Disha Trust and ICICI bank Foundation to increase awareness about organized banking and insurance channels.  Pair it up with Digital Literacy On the one hand, awareness of banking products and services are critical, but even the channels via which it would be consumed is crucial, as we aim to provide banking services at minimal cost and that could only be done via digital means. Hence digital skills and financial knowledge are the essential tools for the empowerment of the common people.  As a Bank – Upgrade and Launch Banks in developing and underdeveloped nations could collaborate with fintech firms to upgrade to a digital platform and also launch their literacy program. This program could help in empowering consumers with the available financial Inclusion products/services, enable them to make informed decisions and right choices based on their financial needs. Listening from horse’s mouth would also help them in trusting the authenticity and make them aware of their rights and responsibilities as consumers of financial products and enable people to make optimum utilization of the available technology forming a strong financial inclusion eco-system. A couple of examples who successfully did execute these initiatives were RBL Bank, HDFC Bank, and RBI.  If you a Bank or NBFC looking to use technology and innovation in expanding the business and enable social inclusion, we are here for you.  Teknospire, a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here.  Watch out this space to get more insights on Banking as a service [BaaS] and Financial Inclusion.

Regulation in Financial Inclusion
Bank Regulation, Digital Banking, Fintech Regulation, Rural Banking Solutions and Financial Inclusion

Regulation need to strike a balance to enable Financial Inclusion

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The post first appeared on linkedin. To get more such insights, please connect with me here. This is the third part of my Financial Inclusion series, in case you have missed the two here is the link for part one and two. Regulation in Financial Inclusion has two aspects one is about “laying the right rule” the other is “supervision” that it does not leads to downfall. While many policymakers in underdeveloped and developing nations provide a sturdy base with legalities and processes, some developed and developing nations need supervision that they are not misused. What the history and experts tell… As dictated by policymakers and research reports, Financial Inclusion is a way to lessen poverty and enhance the collective prosperity of society. With access to banking services, communities experience an inclusive growth with improved source of income and promotion of economic growth. However, the measures need to be BALANCED, or otherwise, geographies may face a crisis as happened in the US [sub-prime crisis] in 2007 and India[microfinance crisis] in 2010. Both of these situations had one thing common, the overextension of loans to non-credit-worthy borrowers and relaxation in underwriting standards leading to instability. So, even though financial institutions were able to report high profitability for years through rapid growth in loans, it led to significant indebtedness among non-credit-worthy borrowers contributing to financial instability and social discontent. Hence, while policymakers are keen to empower inclusion, the regulation needs to be in place to avoid uncertainty. On the other hand, in 2015, Bill and Melinda Gates in their annual letter cited regulation as one of the major barriers to implement Digital Banking, one of the “key” in enabling inclusion. The letter quoted – “There is a lot of work ahead to get regulators in developing countries to update their financial regulations. If the regulations limit digital banking, as is still the case in most countries, innovators can’t enter.” How Can Regulation enable Financial Inclusion? Short answer – striking balance. Long answer, the solution could be divided into three categories – One and all Do you recollect the rule that attracted penalty if you withdraw from another bank ATM, more than five times? Finally, the regulation came and hashed it. As irrespective of the bank, a customer is using the same service. Then why a penalty? Putting it another way whether you do an online fund transfer or go to a bank and issue a draft, both services need to be under the same umbrella. But these loopholes are the pain points for the customer. We need regulation that puts in all services to the customer under one roof helping and enabling inclusion.  Regular Review Of Policies Everything comes with an expiry date, then why a policy laid in the ’50s would still be applicable? Do you remember a rule where banks used to charge prepayment penalty fees on loans, many might have even paid it. However, RBI in April 2012 reviewed its decision of providing a relief to borrowers from foreclosure charges, helping them to switch to a newer bank with better rates or in case of sufficient liquidity prepay and attain peace of mind. So clearly a quick review of policies can make things better and help consumers in trusting regulators.  Support Innovation and Technology We need policymakers and regulators to lay down rules that push “Digitization.” Just as an online shop offers ‘x%’ discount for new user signup, we need a push for people to switch to digital banks. Maybe offering banks a subsidy if its digital users are xx% of their customer base. Even Banks and NBFC’s need to have support from the government in buying digital software that could engage users in availing digital services. Launch of quick and easy KYC norms are other factors that need regulators attention and could empower inclusion. Regtech firms are undoubtedly innovating to assist in making the operations smooth, they could also collaborate with fintech firms in expanding the banking services and enabling last mile banking. At the end, its all about striking the perfect balance amongst the protocols and convenience. And, Teknospire could assist you with that.  If you a Bank or NBFC looking to use technology and innovation in expanding the business and enable social inclusion, we are here for you.  Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here  Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

women and financial inclusion
Digital Banking, Rural Banking Solutions and Financial Inclusion

Women are the “Changemakers” to Financial Inclusion

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The post first appeared on Linkedin. To get more such insights, please connect with me here. My last post on LinkedIn spoke about “extra push” from government, brands, banks, and technology. While these are guiding lights of the Financial Inclusion game, the torch-bearing initiators in each household are women. Women the changemakers of the society, it’s worth mentioning the famous quote from Erick S Gray – Whatever you give a woman, she will make greater. If you give her sperm, she’ll give you a baby.. If you give her a house, she’ll give you a home. If you give her groceries, she’ll give you a meal. If you give her a smile, she’ll give you her heart. She multiplies and enlarges what is given to her. So, if you give her any crap, be ready to receive a ton of shit!” Indeed, women who take care of savings, child’s education, an extra hand to earn if she is included in financial and social inclusion, can involve a home. That’s the power of WOMEN! However, what sounds so ideal is not entirely true!  Women in Financial Pyramid A look at the different surveys conducted talking about involvement in financial planning, decisions, and discussion – A survey conducted by Apollo Munich Health Insurance in collaboration with AC Nielsen found that Indian women still viewed as supplementary bread earners According to the World Bank’s Global Findex Database 2017, in developing economies female account owners are, on average, five percentage points more likely than male account owners to have an inactive account. In India, however, this gender gap is about twice as large, says the report, adding that 54 percent of women with an account made no deposit or withdrawal in a year as compared to 43 percent of men. An estimated $300 billion credit shortfall for women-owned micro-, small-, and medium-sized enterprises in emerging economies, and women are also more likely to be dissatisfied with banking services worldwide. While you may not believe these surveys, look around you – your home, extended family, friends, community helpers, female colleagues where do you see “women” in the financial pyramid? Also, did you notice they have the power to drive the financial discussion, and that’s the key to Financial Inclusion. Bridging the gap of Financial Inclusion with Women We just realized the power of WOMEN, but how do we harness it? Start small Start with your housekeeping or house helper at home, educate them with the power of Digital Banking. Offer them to pay salary via digital means, help them and show them how 100 rs in a bank for three months can earn them interest. Government and banks are advocating and offering a zero-balance account for all. Take it to the next step, availing of mobile banking for funds transfer to their native place or assisting them with a loan for child’s education. Ask her to involve her neighbors and friends. Be the Guiding Light A famous quote says it all – if you want a change, be the change. Could you be the guiding light connecting the grass root individuals to government initiatives or banks? One of the famous example I could quote is Mrs. Chetana Sinha Ji of Mann Deshi Foundation a social activist working rigorously to empower women. She has worked at the grass root level to provide banking services exclusively to a bank with her initiative Manndeshi Bank. In one of the interviews with Teknospire, she quoted about her experience of starting Manndeshi bank. She shares, one of the women came to her asking – I just have 5rs, would bank allow me to open an account? Would you be the guiding light for many such people? Banks expanding and empowering women Banks need business opportunities, new customers and always look for expansion. Targeting the “female segment” could help them gain more business, and this could be done at reduced CAPEX. Just for example a bank looking for opening a branch can opt for a digital banking solution via “mobile” or gather “agents as entrepreneurs” to launch Agent Banking to a new area. If you are willing to be a guiding light or a bank expanding the digital services, we are here for you. Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here  Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

Digital Banking, FinTech, Online Banking

KPIs to measure ROI of a digital bank

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The post first appeared on FINTECH FUTURES. To get more such insights, please connect with me here. An Avaya survey in India a couple of years ago found that 51% of Indians use online banking whereas another report by the Office for National Statistics says 69% of UK population bank online. Digital banking that knocked on the customers doors in the 1990s with the advent of the internet has the potential of reducing cost, save the environment (with paperless mode), offer convenience and raise profitability for the banks. Has that happened? Are digital banks able to generate a positive return on investment (ROI) while keeping the customers engaged? Let’s dig in to find out. Key performance indicators (KPIs) to measure the success of a digital bank Once a bank has finalised a digital strategy, and the most suitable bidder amongst the solution providers is onboard, what are the KPIs that could help the bank to measure the ROI? Digital traction metrics Digital traction metrics is a way to audit your digital strategy and whether it is helping in attaining a positive ROI. It applies to any digital platform that offers digital services and products. For the banking industry, the metrics would indicate number of users (existing or new) who signed up for internet and/or mobile banking. What was the growth rate in a month and channels via which customer was acquired? How much time was spent on each transaction? How many transactions got dropped in between? What was the number of active users? What was the conversion rate and which channel helped majorly in converting? A quick reference of the key metrics below would be helpful: Cost to acquire a typical customer (CAC) The expenses put in by sales and marketing teams divided by the number of new customers added on to the repository would define CAC, and as part of this, you could also include infrastructure cost, production cost, wages etc to get a more accurate figure. Source: quicksprout Lifetime value of a typical customer (LTV) LTV, also known as customer lifetime value (CLV) or lifetime customer value (LCV) is a forecasting method to estimate the projected revenue from a customer over the lifetime of their relationship with your business. Knowing the number helps banks in determining how much one should invest in customer acquisition and retention. As a matter of fact, banks hold their customer for a longer period when compared to other verticals. So picking a simple example if a customer purchases: the worth of products/services from your bank over the lifetime of your relationship $1,000 the total cost of sales and service to the customer $600 LTV $400 ($1,000 – $600) Based on the data above, if banks are investing more than $400 on product purchase, sales and marketing it would generate a negative ROI for the bank. Other KPIs set by industry leaders While the above KPIs mention the metrics of any digital platform, experts from the industry, such as Deloitte and DBS Bank, for example, present different criteria. In its Digital Banking Benchmark Report, Deloitte evaluated ten retail banks in Luxembourg on eight dimensions representing 235 criteria. The milestone covers the daily banking services that a bank could/should offer on its web platform or mobile application. Source: Deloitte For DBS Bank, which wanted to transform a bank in India to scale with few branches, a solution of a mobile-only bank seems feasible, but how to execute and generate an ROI? DBS explains: “You have to balance it. And the way we balance it is through group scorecards, which really drive everything we do and clearly indicate to people the amount of time we expect them to spend on certain areas. The top part of the scorecard is all financial metrics, customer metrics, shareholder value-add, and revenue generation. The middle part is where the core of the digital transformation comes in, and we ascribe 20% of the value of the scorecard to this, which is then used to drive compensation for the company. Below that we have the strategic initiatives we need to get done, and that’s another 40%. So big transformations like automated lending into India or how to transform future-ready employees, go in that box.” Strategies to be adopted by banks to attain a positive ROI A digital banking product cannot only save cost for you but could make a place for new revenue models.   DIY Service With digital banking, research suggests that you can save up to $5 on a branch visit, $2.50 for a customer call to a call centre. With online banking, the customer is using their device and broadband connection. All you need is keep the website up and running.   Low-cost funds transfer Issuing a demand draft in India means an additional amount to be paid by the customer. If it is an inter-bank transfer customers not only need to pay extra charges, but spend a lot of time on conducting the transaction. With a digital banking solution the customer can make money transfers seamlessly at no additional cost. Digital banking also helps to make global transfers faster.   Environment friendly Lessen your paperwork by releasing e-statements, offers on email and electronic know your customer (e-KYC) submission. Support digital transformation, be environment-friendly and save on paper costs.   Support and maintenance Deploying chatbots or voice assistants as customer support can help banks in slashing the cost of employing full-time customer support. And now with the serverless mode, you can reduce the infrastructure cost by only paying when in use and not for idle time.   Customised products While booking an air ticket from my net banking, a pop-up appears to include travel insurance at just XYZ price. Or when you use your card at a fuel station, you get a message of a cashback or X% discount on next purchase. These personalised product offerings can help to keep the customer engaged and also drive revenues.Digital banking with the use of open application programming interfaces (API) could

Digital Banking, Rural Banking Solutions and Financial Inclusion

Financial Inclusion needs an extra push!

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The post first appeared on linkedin. To get more such insights, please connect with me here. What is the longest distance you traveled to avail a service? Okay, I am not talking about marathons! But while you are reading this on your smart device waiting for a booked cab or live cricket score, pause as many individuals across the globe do not have access to formal banking system within 5 km radius. Would you walk to your bank to get cash or make a fund transfer? Sounds like a problem!  A days wage in urban cities  Imagine your housemaid or daily worker at a construction site, can they skip a day’s work to go to the bank and open an account? It would cost them a day’s wage that lights up his home. Yeah, you can argue that they carry a mobile phone, what is stopping them from accessing banking services? But as simple as it sounds, opening a bank account is not easy for them with no proper address proof or valid documents for KYC. Even if with government schemes like Pradhan Mantri Jan Dhan Yojna [PMJDY] they might be the proud owner of an account, but majority of this set do not use them for savings, to receive pays, to pay bills, or to avail loan as going to a bank, depositing the money is again cutting a day’s wages. What Needs to be Done A digitized system like salary automation for daily wagers, housekeeping or domestic helps to make it easy for them to avail banking services via digital channels. With an account in place, use of mobile to pay bills, shop @local stores or transfer funds to their native place could be seamless. Government initiatives that help vendors opting for a digitized mode with a tax rebate or a recognition/honour.  Awareness in rural places Individual staying in rural areas across the globe face crunch when they need loan [for farming or kids’ education or setting up a small scale industry] but lack of bank branches make it real trouble. Then comes the business minded “middlemen” who provide loans at such a higher rate that leads to a lifetime indebtment to an individual. Many people in rural places are also not aware that a savings bank account can help them earn some interest, so better to keep the money in the bank than in a locker at home. Lastly, the lack of knowledge that banking could be availed via a simple phone owned by them is just the root cause of not availing banking services. What Needs to be Done Regional and Cooperative banks availing banking stack as a service as against buying and integrating multi-vendor ecosystem which had been the technology-related challenge Create awareness among people on how “banking can help” and “how to use it.” While technology has a part to play in the digital revolution, its the individuals and banks who need to participate and go with the flow. If you are a Bank looking to adopt or expand the digital services we are here for you. Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

Digital Banking in US
Digital Banking, Financial Inclusion, FinTech, FinTech Europe, Industry Observation, Open Banking

Digital Banking – Initiatives, Use Cases, Examples, Opportunities in the US

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The year 2012 was a bit frustrating for Olympic tourist in London as VISA was the only card to be accepted. Banks in the US who have offered Mastercard to their customer were under pressure to issue new VISA cards to engage their loyal customer and earn revenue from international payments. For a developed nation like the USA that excels in technology adoption issuing new card may not be a significant task and that reflects in their growth and economy with flexible products, services, underbanked population dropping to 6.5%[ in 2017]. Indeed, U.S. is far ahead in innovation in the banking sector when compared to other countries. Our post of today would talk about these initiatives, opportunities, and examples of Digital Banking in the U.S. Examples of Fintech-Bank Collaboration to enable Digital Banking in the US   Legence Bank integrating their CBS Legence Bank in Eldorado, Illinois was looking for a tool that guides their customer on solid banking practices. They needed a tool that could integrate all customers’ accounts at one place and help them analyze their spending decisions. Collaborating with CSI, a fintech offering banking solutions that got integrated with their legacy banking system helped in educating young customers about making smart budgeting plans.   Live Oak Bank integrating with Plaid Another interesting collaboration happened when Live Oak Bank in the US collaborated with Plaid to serve the small businesses and personal customers with security and speed. Live Oak Bank was looking for speedy on boarding process so that the customer could use the online banking platform within hours if possible and should be secured validating and following all legal processes. Plaid offered their secured solutions that helped Live Oak Bank in expanding their services to different verticals, and they also started offering personal banking platform to other regions. Implementations / Examples of Digital Banking in the US Banks need to draft a “Digital Strategy” to move and align with the digital wave. Each Banking services be it in Corporate Banking or Cards and Payments now has a Digital Solution available. What Banks need to work on is analyzing all aspects of Digitization and evolving truly as Digital Institution. Let’s take a closer look at some of the banks in the US who followed banking trends and emerged victorious in serving tech-savvy millennials.   American Express AmEx or American Express is a brand that doesn’t need an introduction in the US. Popularly known as “premium brand” it has been one of the banks that understand “How customer and relationship need to be nurtured while offering comfort and convenience.” An article covered by The Financial Brand dictates some of the “good things” that make AmEx a top choice in customers, sample these –   Onboarding Simple and QuickAmEx bid goodbye to long paper forms, quick and easy onboarding process helps in saving customer’s valuable time. In fact the application for an American Express card is so simple that it takes ~30 seconds. Digitization Rocks! Compatible With All DevicesIs your Banking form only compatible with Desktop? How about opening it on Tab? AmEx made sure that all the screen sizes and device compatibility is applicable for the application form to avoid any inconvenience to the customer Integration of Third Party PluginsAmEx always shows its value to its customers by displaying the comparison chart and dictating the actual value customer would derive. Does your banking software allow the customer to integrate with other third-party plugins to compare and make informed decisions? Using Data effectivelyAmEx uses data points not only to mitigate risks but also to detect fraud. Are you using your data effectively? Above features may not be “newer innovations” but are making customer life more straightforward and that’s what distinguish you from your competitor. Wells Fargo Wells Fargo another leading bank in the US who led the Digital Banking initiative implemented Balance Scorecard [BSC] to track and measure the online financial services [OFS]. The case study that studies the implementation in the year 1997 and 1998 came up with the following conclusions – It’s worth to highlight the fact that even in those days when digitization was not end to end Wells Fargo was able to reduce its cost by 22%, imagine with modern technologies and innovation how much operational cost could be reduced for a bank leading to an increase in profit margins. History of Banking and adoption of Digital Channel in the US October 8 that is celebrated as National Online Bank Day triggers nostalgic feelings of banking to be a brick-and-mortar business. The simplefund’s transfer used to take 2-3 days and depositing a cheque on bank holiday was utterly forbidden. We have indeed come a long way of Banking …. Initiatives in the U.S to adapt to Digital Banking Stanford Federal Credit Union (or Stanford FCU) was one of the first to offer banking by telephone and conducting its first four internet transactions, introducing Online Banking to US residents. Wells Fargo was the first bank to provide secure credit card transactions on the internet. As they celebrated 20 years of internet banking on their website in 2015, they mentioned – people being reluctant to avail banking services online. An exciting story shared by early adopter is worth sharing – One of the major hurdles faced by Banks in the past while adopting digital channels is “assuring security” to the customers. With lack of regulation, Banks themselves managed compliance to assure best services to the customers. But with innovation in technology speeding up, there was a rise in adopting the Digital banking initiatives by the US residents. We now see tech-savvy millennials demanding IoT based banking services, easy acceptance to contactless payments and use of VR/AR in banking institutions. Opportunities for Digital Banking in the U.S Different modules of Banking have been digitized with Fintech and Bank collaboration, but as Banking is like the veins of any country’s economy, it has the potential to evolve further. Some of the innovative use cases being explored by enterprises in

Open Banking
Digital Banking, Financial Inclusion, FinTech Trends, Open Banking, Open Banking API

Open Banking: End of Card Payments?

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Any new technology or innovation always opens up the debate about the relevance of such models in the first place. When it comes to the Open Banking APIs (Application Programming Interfaces), the newest offering of FinTech, there are ongoing discussions on how it can bring about a revolutionary banking experience which is beneficial to the end users. The basic idea behind all these innovations remain to offer a better experience to consumers and leverage the choice of integrated systems that are widely available today. However, one of the most intriguing questions around the Open Banking model is about the potential it holds to change the payment ecosystem entirely. How Open Banking works? Taking one of its many applications, to provide assistance to you, so that you get the best of the deals available and can manage your finances efficiently, Open Banking will enable companies to give more accurate personal financial guidance, tailored to your particular circumstances and delivered securely and confidentially. To provide tailored advice, companies need to know how you use your account. At the moment, to get personal financial guidance, you have to hand over your confidential banking information to price comparison websites. Open Banking will use APIs (Application Programming Interfaces) to share customer information securely. Companies will be able to use open banking APIs to see your transaction information to tell you what you might save when considering the current account best suited to you. Or if you run a small business you could find the best deals for your business accounts and loans. No in-betweens, no interruptions, just pure and simple direct customer-to-service relations. Open Banking: End of Card Payments in Future? That’s certainly a possibility! Fundamentally, Open Banking is a concept that is all about the free flow of data. It allows third-party service providers to access financial information of the customers securely (with their consent) and in real time. An excellent example of this could be the banking payment mechanism which requires each transaction to be done manually using the payment cards. However, in an Open Banking platform, the API/app could download consumers’ transaction data directly from their accounts to process payments thus enabling cardless transactions. Although the concept is still in its nascent stage and will take some time to shape up, it will allow the third party organizations to initiate payments between the bank accounts of customers. What will probably happen, as a result, is this: Banks will no longer be required for processing the transactions/ card payments. An authorized third-party organization will be able to make payments on behalf of its customers. Customers won’t have to wait in long queues to make purchases using physical cards at stores. They will be able to easily make payments using digital wallets on their SmartPhones or Smart watches using emerging technologies such as Samsung Pay, Apple Pay, etc. Can Open Banking Change The Entire Payment Ecosystem? To be able to understand this significant shift towards cardless payments powered by Open Banking, it is important to have clarity on the working of the payment cards first. The payment card, essentially, is a token backed with a unique PIN or customer’s signature as authentication, which helps in identifying both the payer and the source to process any payment. Enter Open Banking into the picture! Open Banking replaces the payment card with the actual bank details of the customer without requiring any physical validation. By ensuring a robust authentication system in place (such as phone verification), the model can be easily used to process transactions directly. There are several benefits of saying ‘Bye-Bye’ to the cards and using Open Banking APIs to process payments. Benefits of Using Open Banking APIs for Transactions Over Cards a. Cost Saving This is perhaps one of the primary benefits of using Open Banking APIs to process payments instead of using cards. The open banking model is such that it requires no physical token leading to cost savings for card processors and savings on the infrastructure cost for managing expired/fraudulent cards. b. Ease of Setting Up The ease in setting up Open Banking products as compared to the card payment mode is another reason that makes the possibility of this phenomenal shift stronger. The open banking services are designed thoughtfully to offer solutions collaboratively with payment transfers such as allowing easy linking of the credit cards or bank details of the end-users. c. Convenience Convenience and ease of doing transactions is another attraction of the Open Banking model as a whole. Furthermore, storing bank details of customers is much easier as compared to the cumbersome credit card data, considering security & compliance as essential factors while making payment transactions. Instant purchase history, remote deactivation, and biometrics enabled virtual card provisioning are just a few of the features of cardless payments worth mentioning. Open APIs just make it easier for bank customers to transfer their bank accounts, manage payments, and perform transactions through third parties: both banks and non-banks. The concept creates new opportunities for Service Aggregators to offer better customer service from multiple service providers on a single platform. Does Open Banking Model Translate To the Cardless Payments? If you are still wondering about the Pros of moving to Cardless Payments, here is a list of some of the pros of this new way to pay for your everyday purchases using Open Banking API’s: Convenient as you don’t need your card for making payments and can do transactions without keying in a PIN or signing a receipt. Lessens the threat of hacking where the card might be scanned for stealing valuable information. Cardless payment means no reading of magnetic data strip. The verification token (OTP) is for single use only, making it perfectly safe for ‘Use and Forget’. Convenient and quick payments, which mean no hassle of queues and lining up. Cost and time-efficient without any worrying about remembering multiple cards and account details. Taking Stock of Future Possibilities As rightly said by Kristin Moyer, Vice President of Research and Distinguished Analyst at Gartner and I quote, “Open

open banking
Digital Banking, Financial Inclusion, FinTech, Open Banking, Open Banking API

Open Banking: Who will really get benefitted?

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Banking, as a domain, has always been a competitive one. To keep up with the pace of the dynamic nature of this sector, banks & financial institutions are gradually making the shift to experiment with newer technologies, like Open Banking and innovative concepts like FinTech, designed specifically for the banking sector. The basic idea behind all these innovations remain to offer a better experience to consumers and leverage the choice of integrated systems that are widely available today. Are you OPEN to Open Banking? The impact of technology in making our lives better and smoother can’t be overemphasized enough. FinTech (an excellent combination of finance and technology!) is one such area making the traditional banking system seem redundant with each passing day. The rise of Fintech sector has been exponential in the last few years with Fintech adoption seeing a sharp rise globally from 16% in 2015 to 33% in 2017 on an average. Open Banking API (Exclusively covered as Open Banking API: A Journey, 1st part of this series of 3) is the newest offering of FinTech that holds immense potential to bring about a transformational banking experience to its end users. However, before making the switch to Open Banking, it is essential to understand what the concept is trying to achieve and who will it really benefit? So What’s the Buzz called ‘Open Banking’ All About? With Open Banking, banks are moving to Agile technologies, building strong partner networks, and creating robust mobile platforms which cater to consumer’s needs, thus enabling direct financial transactions between customers and businesses and making cross-platform payments a reality. It works as a systematically designed collaborative model. Here the customer’s banking and other financial information/data is shared to trusted third parties (with the customers’ consent, of course!) through APIs with the aim of offering enhanced capabilities to the users. Thus, Open Banking is a financial services term as part of the financial technology that refers to: The use of Open APIs that enable third-party developers to build applications and services around the financial institution. Greater financial transparency options for account holders ranging from Open Data to private data. The use of Open Source technology to achieve the above. In short, “Open Banking is the possibility of creating new digital business and ecosystems through APIs provided by the banks. This allows customers: To have a greater control over their data Have a better experience in a secure, agile, and future-proof method To generate new revenue streams, and to create a long-term sustainable service model for the industry as a whole. Who will ‘Open Banking’ Really Benefit? The benefits of an Open Banking model aren’t just limited to consumers but extend to service providers as well. It benefits, one and all, associated with it. Benefitting Consumers Among the many benefits of Open Banking to consumers, the most important include:Giving the Benefit of Choice to Customers As a service provider, banks generally offer limited options and the same services to all their customers. Open banking, on the other hand,  gives the benefit of choice to customers as they now have the freedom to select from multiple service providers available. It also empowers customers to take charge of their finances and make informed decisions to manage their accounts. Easing Payments with Smart Devices With Open Banking APIs, customers won’t have to wait in long queues to make purchases using physical wallets at stores. The concept will allow emerging technology applications such as Google Pay, Samsung Pay, Apple Pay, PayTM etc. to make payments using digital wallets using your Smartphone or smartwatch. Ease of Remittance and Currency Exchange Increased number of migrants across the globe for better economic opportunities means an increased amount of money to be sent back to their families. Banks have always found international money transfer and remittances to be a painful and expensive process.Instead of paying a large transfer fee to the ‘money transfer businesses’ or facing the lack of proper setup, especially in rural areas, FinTech companies like NDASENDA, have made this entire process extremely simple, smooth, less expensive, and much faster. Thanks to Open API, the money can be transferred, services can be bought and bills can be paid seamlessly by using one single mobile App at the comfort of your home. Various service providers such as We Swap, World Remit, mPesa etc. are offering ‘currency exchange services’, by using Open Banking, in a very secure and seamless way to transfer even minuscule amounts of money overseas. Customized Product Offerings Open banking holds the potential to offer customized and relevant product & service options to the consumers which most banking apps fail to do. Open banking APIs introduce the concept of service personalization in banking to benefit customers immensely. Customers can now have access to multiple accounts in one place. The customers will be able to enjoy the best deals available with greater transparency. An opportunity is here to see your current financial position in a single application on your Smartphone. It is just a matter of ‘single click’. All the financial data at one place gives the consumer the leverage to take quick credit decisions and avail the best deals possible. Open to better offers by credit providers and instant credit and remittance of the same. With all the accounts linked together by an app and available on a single platform, the consumer is ‘all-powerful’ to make a choice in how to pay. This will also bring in some innovative offers by the banks and the financial institutions to make new customers and retain the old ones. It’s raining Profits! Benefitting Banks and Financial Institutions Collaborative Advantage Open Banking gives an opportunity for banks to stay ahead of the competition by letting them explore data-sharing agreements with fintech and other non-financial service institutions. Allows Banks to Be Futuristic The model allows banks to be futuristic by letting them understand both data privacy mandates that exist as well as the likely changes they need to adapt for a better customer experience. Thus making decision-making foresighted and insightful.

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