Financial Inclusion

Finance, Financial Inclusion, FinTech Trends, Payment Banks

How wallet Helps in Last Mile Banking?

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You might have been using your ATM card as an easy substitute for checkbook, but did you know then, that it was just the start of an era? As more time passed, more and more alternatives for traditional banking arose, changing the scenario forever. Not to mention the lack of traditional banking infrastructure which also promoted the growth of digital banking methods. As per the official data, even as of today, only 27% of villages in India have a bank in 5 km radius. A large mass of India’s population lives on the environs of the formal economy. Living in far-flung corners of the country, Illiteracy, lack of financial education, not being aware of the availability and/or value of financial services and lack of connectivity are few of the many reasons why consumers in these areas remain unbanked. Moreover, banks in rural areas are few and far in-between, making the reach difficult for many during working hours. To address these obstacles and to broaden financial inclusion, Indian government came up with solutions to help in reach built out for last mile banking which aimed to give every household access to banking facilities by offering them zero-balance accounts across all commercial banks. After the prime minister of India launched Jan Dhan Yojna, we saw a world record number of bank accounts opening in a single day and things seemed promising. But, a study done 3 months after the scheme was launched, revealed more than 75% of accounts to be dormant. Neither banks nor ATMs are located within reach of all. Opening an account was way easier than to actually keep it rolling on regular basis and encouraging them to have some savings too. People living in remote areas and the people at the base of the economic pyramid, the ones who are underbanked and unbanked, are in true need to be financially included. But then did JDY, despite having the genuine concern and the intention of solving it, actually served its purpose? The answer is NO, well not completely. This was further trodden by the demonetization move and the impact it had on traditional currency and transactional methods. In an interview with CNN two weeks after demonetization move, India’s key player in digital wallet industry Paytm CEO Vijay Shekhar Sharma said and I quote, “I Don’t Need to Sleep, I am Living a Dream.” Paytm saw an increase in traffic as much as 4x times, app downloads increasing by 200%  and an overall increase in transactions by 250%. Mobile-wallets-adoption-in-India The Indian government is emphasizing on making India digital, a major example of which is roping e-wallets to digitize rural economy. With the government realizing the potential of digital wallets in helping built out for last mile banking and taking major official steps for it, India is a promising hub. Treading along with the Government are the entrepreneurs and VC backed FinTech companies who have come up with solutions to help in reach built out for last mile banking, thanks to the feasibility and accessibility of digital wallets through the country. At present just about 300 million Indians have a Smartphone and 66% of Indian population still don’t have access to the internet. FYI:  (On a lighter note) India has nearly as many Smartphone users as the U.S. has people, and it’s about to get many millions more. This, however, is bound to change after the Digital India initiative of the Indian government with India being a sweet spot in terms of Smartphone market growth in the upcoming years. Another example of how digital wallets are helping make last mile banking a feasible reality is that of Zimbabwe, located in the African continent. Zimbabwe has shown tremendous growth in terms of mobile banking. In the year 2017, almost 96% of total banking transactions which amounted to a total of 98$ billion were carried out via digital methods such as e-wallets, net banking etc. Further data shows that out of around 18 million people of Zimbabwe, 6 million of them are registered on the leading digital wallet in their country i.e. EcoCash and about 1.5 million being highly active on it, total transactions carried out via this app reaches to 30 million per month. Oracle Statistics_Customer Paying Behaviour The above statistics clearly depict the changing scenario in ‘customer’s paying behavior’, as people are preferring to become cashless. In the UK, cash withdrawals reached the lowest number of transactions in 2016 after 2010 (which was after the economic depression). In the same year, plastic transactions overtook cash-based transactions. Supporting this ongoing ‘cashless’ trend less than half of the population (about 43%) thinks cash still will be used in 2022 about 54% think they will be using cash very less in the upcoming years 47% expect to use more mobile payments and digital wallets. The emerging and developing economies are successfully making the last mile banking a reality with the help of digital wallets due to the benefits and feasibility of it which allows even the poorest and scarcely located people to avail banking benefits. First, it was the plastic money that slowly started to banish cash from transactions, now it is the turn of digital wallets. With ATM’s further making banking within everyone’s reach, it’s still not possible to open an ATM within walking distance of everyone. Digital wallets solve this problem by being accessible to each and everyone at a whim. However, it’s not all apples and oranges, they have their own sets of downsides and challenges like: Fear of adoption among users due to transacting online Unearned Interest on money sitting in the wallet as opposed to a bank a/c Lack ‘brand recall’ among the rural population Inadequate merchant tie-ups As per the new upcoming scenario, mobile penetration is very high in urban as well as in rural areas. This tremendous penetration of the mobiles could be used to bring financial inclusion to the last mile. With almost every mobile carrier in India now offering its own digital wallet, you need not even

Finance, Financial Inclusion, FinTech, TechFin, Technical Updates

TechFin or FinTech

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Sometimes you need to look at things….from another point of view. This is exactly what you need to do when you have to decide between Fintech and TechFin as there is a very thin line which differentiates them from each other. It’s your pick between the innovator v/s the reigning. While, the Innovator is ‘Taking process to technology’, coined as term FinTech, the Incumbent is ‘Taking technology to process’, coined as term TechFin.   So, What’s so technical about FinTech and TechFin? Technically speaking, Fintech is a space where financial services are delivered through a better user experience using cutting edge technology. TechFin on the other hand is where a firm that has been delivering technology solutions, launches a new way to deliver Financial services. You need to comprehend  both to decide on your pick. The technology and finance are common between the two; the difference lays in the way you apply it.   This difference is much higher than just spelling them or writing them in two different ways: Fin-Tech or Tech-Fin   TechFin When the banks plan on utilizing technology to improvise or enhance existing financial processes and operations, their focus remains on how to use technology to bring superior efficiency and productivity from existing financial processes and operations. The same is done with the objective to magnify the existing experience and capabilities in financial services domain. The aspirations of transformation or disrupting the process are eliminated. The reason behind TechFin companies not looking towards disruption is the fact that their customers demand- Safety Reliability Stability Legacy No risk and minimal change Therefore, large retail commercial banks seldom make changes in their mobile apps, as a slight change in the app invites customer complaints and inconvenience. For their customer, change implies exposure to risk and any change is interpreted as offensive. Such banks avoid changes to skip the negative publicity from these incidents.         TechFin companies, therefore, stick to what Jack Ma coined them as – “Rebuilding system with technology”.         Jack Ma during the China Conference organized by the South China Morning Post emphasized and I quote, “Fintech takes the original financial system and improves its technology, TechFin is to rebuild the system with technology. What we want to do is to solve the problem of a lack of inclusiveness.” The best example of a TechFin company Ant Financial Services Group, an Alibaba affiliate company, in June 2017, launched “Fortune Accounts”, a new feature on its wealth management app- Ant Fortune. The platform which allows consumers to buy a huge range of investment products will now allow third-party financial institutions to set up an “Account Page” of their own. By doing so, they will directly reach consumers without the traditional way of competing on online supermarket format, and help customers get financial advice or promote their products. This is a classic case where the process of investing in financial products has been improvised using technology, helping financial institutions receive backend data of users to receive traffic on their company’s stores. Firms like Amazon (US), Apple (US), Facebook (US), Google (US), Microsoft (US), Samsung (Korea), Baidu and Tencent (China), Vodafone (UK, India and Africa), and Uber (US) all offer various forms of payment, lending and/or other financial services. The entry of these firms signals a shift from financial intermediary (FinTech) to data intermediary (TechFin). FinTech  FinTech, on the other hand, takes the financial process and transforms it utilizing technology to make its mark. Generally, start-ups use FinTech to create Apps, APIs, and analytics, grab diversity, to disrupt and evolve. For example, the existing products or services like – loans, savings, investments, payments or trading are redefined to profitability, speed, and prudence. They prefer transforming the process using technology, usually eliminating the middleman and intermediaries.     Taking the example of traditional and P2P lending, traditional lending will allow an investor to deposit funds and earn interest. A borrower can borrow money from banks, following a cumbersome documentation and approval process, which takes time and at times may face rejections. The approvals are based on pre-historic financial transactions.           A FinTech P2P platform allows the lender to directly lend money to the borrower and earn interest, while the borrower uses an online platform to receive instant approval and funds.   FinTech Vs TechFin FinTechs take the risk and have been welcomed by millennial and customers who are ready to explore and experience innovation. People who are ‘on the go’ and use the mobile platform embrace transformation. FinTechs are ready to disrupt existing processes and financial services ecosystems with use of emerging technology. The limitations of FinTechs are different as compared to TechFins. Unlike TechFins, who have the limitation of huge credit risk, FinTechs face the challenge of regulators. The global economic ecosystem has still not completely accepted the way FinTechs work. There are rules and regulations which they need to adhere to remain operational. Another most critical hazard which they are greatly exposed to is Safety. The chances of privacy risk and hacking always haunt them. To summarize the difference between the two, checkpoints are: TechFin Process first approach. The incumbent, usually large banks participate. Improvise the existing process Do not take the risk Customers prefer legacy and trust Enhance the proficiency of staff for the betterment of process using technology Huge credit risks   FinTech Technology first is the approach. Start-ups, usually participate Follow transformation in the process Do not hesitate in disrupting the existing process. Youngsters, millennial and professionals appreciate them. Eliminate the middleman for faster and superior experience. Limitations of privacy, safety, and regulators.   Closure There is no better way to summarize, the difference between the two, by quoting Jack Ma, the father who coined the term TechFin: “There are two big opportunities in the future financial industry. One is online banking, where all the financial institutions go online; the other is internet finance, which is purely led by outsiders.”   Though a lot of

Governance and Financial Inclusion
Financial Inclusion

HOW GOOD GOVERNANCE COULD HELP IN FINANCIAL INCLUSION

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Could adequate governance enhance access to financial services? While the short answer is yes, the long-form answer is the review of standards, processes, and act of governance, that could bring in a more profound level of financial inclusion.  We all know how growth and financial inclusion are directly proportional to each other, specifically in emerging economies both at macro and micro levels. Laying of concrete legal structures, managing social performance, responsible exits and managing risk crisis are few of the areas where good governance could help in enabling inclusion at all levels. Why Is Good Governance a Prerequisite to Financial Inclusion? Governance or decision makers are responsible for monitoring the policies, framework, processes and the entire structure of financial inclusion programmes. And to achieve that the policymakers need to plan carefully in detail that supports the long-term vision of inclusion. Just to envision a role of governance imagine yourself architecting a house for your family that consists of your elderly parents, teenage children, and spouse. All might have different needs – like your parents might not like high rise buildings and an adolescent boy wants his room to be spacious enough to play cricket and girl want her room to be painted in pink. How do you take care of each of the stuff? Now broaden your imagination and think this small house as big as the country like India, would it be possible for you to know the needs of each person? How vast is the effort, to build a structure, to implement policies, communicating with subsidiaries or correspondents, deploying solutions, collecting feedback and then reworking on failures. That’s the hardest part of governance, and to create a robust governance structure – one need to carefully pick the ingredients to integrate it with the framework and employ solutions that support the vision. Only well-functioning and proficiently governed financial institutions can deliver financial services to meet the rising needs of the economy. As mentioned by Deputy governor of RBI Dr. K.C. Chakrabarty, – through various measures initiated by the regulator/Government in the post-independent period resulted in impressive gains in rural outreach and volume of credit, the structure suffered from inherently weak governance. The achievements were ‘quantitatively impressive, but qualitatively weak.’ Due to the target-driven approach to social banking, the initiatives were not part of the business strategy of banks. The effort on the part of the banks was always aimed at somehow meeting the lending targets, mostly at subsidized rates of interest, or with the subsidy from the Government under various government directed schemes. Good Governance Approach to Financial Inclusion Financial Inclusion a process that ensures banking services to all individuals in a fair and transparent manner by regulated players. With good governance in place, new methods and means could be executed, regulation and authorized players would be dealing with people’s money. It would also lead to empowering individuals with financial literacy and knowledge, tailored services and products could be offered, and most importantly technology could be used to approach the remote areas. BANK LEADING THE WAY When a firm appointed/approved by governance serves different financial offerings and products, it helps in enabling financial inclusion. In most of the cases, Banks are those trusted entities that are recognized at the global level and have the power to facilitate inclusion. Banks can cross-subsidize across various product/services and offer the FI products most efficiently and cost-effectively. Just for example as per RBI – Banks have been advised to make available Basic Savings Bank Deposit Accounts (BSBDAs) for all individuals with zero minimum balance and facility of ATM card/ Debit card or self-certification of documents helping in relaxed KYC norms. All these are possible because of governance pushing and allowing the regulated players to approach individuals and access banking.  In fact, there is also a push for Banks to increase their brick and mortar presence and also adapt to modes such as Kiosks, off-site Rural ATMs, mobile vans, etc. IMPARTING KNOWLEDGE Inclusion and Banking are not just about opening a bank account, but “knowing the benefits banking offers.” For all of this governance takes up extra steps to educate people about finance and banking. Initiatives and programs are running by recognized institutions and RBI; just, for example, RBI has a booklet FAME (Financial Awareness Messages) that is available in 13 different languages for banks and other stakeholders to use. Another firm Ujjivan along with Parinaam Foundation has conducted classroom training teaching its participants about its participants on cash flow, income and expenditure budgeting, savings and savings options and debt management. Another initiative has been taken up by NSE [ National Stock Exchange]and SEBI[Securities and Exchange Board of India]  to impart financial knowledge to children with its programme. The resource covers sessions on Money matters, Budgeting, Investments, and Stock market. SUPPORTING WITH HARD GOVERNMENT STRUCTURES While planning to enable financial inclusion in a country like India, policies and execution need to handled at ground level. So how does the governance takes care of these? At Zero level we have Business correspondents, Agent bankers or Nonprofit organization, volunteers and most importantly banks that make the execution possible. With representation at panchayat, tehsil, village, district level, next level is the state level. The infrastructure at state level also known as the State Level Bankers Committee (SLBC) helps in resolving issues at zero level and even passing the policies, obligation, and laws from Apex/State to lower levels. Lastly, we have The Financial Stability and Development Council (FSDC) that has subgroup headed by RBI governor and RBI deputy governor that exclusively focus on financial inclusion and financial literacy. The group has a representation from other regulator groups to make policies and decision in favor of each segment of the society. Apart from this, there is another group headed by RBI Deputy Governor Financial Inclusion Advisory Committee (FIAC) that’s in place to gauge the performance of banks and to continuously review the various models adopted under Financial Inclusion OFFERING CUSTOMIZED RANGE OF PRODUCTS Better governance not only ensures

Finance, Financial Inclusion, FinTech, Fintegration

No bank is an Island – Fintegration is the key. Welcome to the era of Digital Banking

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The buzz around fintech has gained substantial attention of traditional financial institutions, startups, venture capitalists and regulators. Banks and regulators are hard-pressed to revisit their operating model and policies respectively to create a conducive environment of collaboration and dynamism amidst the participants in the fintech ecosystem. – FinTech in India, A Global Growth story by KPMG & NASSCOM  Financial Services and Technology:  The world today is witnessing the phenomenal unprecedented occurrence between FinTech and Banks – Fintegration Redefining FinTech Transformation – Fintegration As the saying goes-“Every coin has two faces”, The FinTechs and the traditional banks have their respective merits and their own limitations. To build on their common business interests and to eliminate their weaknesses, collaborating logically,  so that together they can explore potential needs of customers and deliver, is the ‘need of the hour’. “Banks that do things well are our allies, but banks that do things badly are our competitors. We are in the same sector and we should move forward together.” This statement by Alfonso Sainz de Baranda, from Ahorro.net, on how fintech startups should interact with the traditional financial institutions, clearly summarizes the ‘should be’ relations between the most traditional financial entities and fintech startups to have a  strategic and streamlined partnership –   Fintegration.     THEN & NOW : Why Collaborate? THEN: 2010-15 Scenario To better understand the rationale behind the collaboration of Fintech and traditional banks, referring to The Economist Intelligence Unit Survey 2015, also titled The Disruption of Banking, the survey reported the findings of more than 100 bankers and fintech executives across the globe. It stated the advantages and disadvantages of both sides and their impact on each other. The following were the key findings: Dominance Remains with Banks: While 33% of bankers predicted that in the next five years the era will be of  ‘FinTech+Bank’ , 46% FinTech executives confirmed that banks will continue to dominate.   FinTech lacks Legacy and Funds: 27% fintech respondents believe that they lack risk management experience, and 25% think that they do not have the necessary investment capital. The percentage of executives who believe that they have limited product line and lack legacy systems were 34% and 33% respectively. The absence of Strategic vision with Banks: 49% of bankers believe that banks lack clear and strategic vision for digital. Also, around 38% think that banks do not harness a culture where they can adjust to rapidly changing ecosystems. 42% agreed to danger of security breaches with banks as the main weakness. Both Sides Compliment each other: Amusingly, both fintech and banks have complementary strengths and weakness. NOW: 2017 Scenario To understand the rationale behind the collaboration of Fintech and banks, which is still going strong, let’s look at the “World FinTech Report 2018” survey, conducted by Capgemini. Highlighting successful Fintegrations, ING Bank and Scalable Capital, it suggested that: ‘An alliance between traditional financial institutions, like Bank and FinTechs has become the need of the hour. The blend of their respective competitive advantages and disadvantages perfectly complements each other.’ Further, the report states that FinTech growth has been exponential since 2010. The end of Q3 2017 saw them grow by engulfing more than 7,500 deals and raising USD 109.8 billion. Reinstating on the above point the report states that during the survey more than 55% FinTechs agreed that they would love the relationship as that will enhance- Visibility for them, Economies of Scale, Customer trust, and Distribution Infrastructure. In addition, more than 75% of FinTechs confessed collaboration with traditional financial firms as their primary business objective. The banks, also attracted to the technology wizards, support the alliance. The same is evident when Benoit Legrand, CEO, ING Ventures and Global Head FinTech (ING), said and I quote: “ING should be freeing up time for its clients. For example, with our partnership with Kabbage, we can now offer loans to Small Businesses in less than 10 minutes. This is a great illustration of how a bank and a FinTech can effectively partner” The perfect collaboration can be defined as the one which synergizes and reinforce their strengths and quash their weaknesses. It creates a single entity which can deliver results that they individually cannot. With the perfect combination of Bank’s Scalability, Risk Management, Regulations, Infrastructure, Brand recognition, Customer Trust, Investment Capital, Acquainted with Compliance, Acclaimed distribution network and Legacy system to name a few….. along with FinTech’s Innovation, Agility, Infrastructure built for digital, Innovative new products, Data Handling, Reduced cost and Speed to name a few….., we can build a strong collaborative partnership like never before. Win-Win for All With Fintegration,  it’s a win-win for all, from banks and FinTech firms to individual and corporate customers. The key benefits can be summarized as: a. Benefits to FinTech: They can scale their business and hence confirm a substantial ROI. Ramp up millions of customers with speed. They will receive investment capital to scale-up their business. Better the risk management. Widen their customer reach and penetration b. Benefits to Banks: Will have innovative products in their basket of services to offer to customers. Will deliver products which will certainly give superior customer experience. Launch newer customer-centric products. Reduce the transactional costs. Enhanced efficiency. Elimination of intermediaries. c. Benefits to Customers: High-levels of products, services, and solutions. Functionalities with high speeds. Reduced risk. Services and products in a secure ecosystem, and governed by authorities. Innovative products at their doorstep or directly into their hands or fingertips.   Fintegration across the Globe The collaboration between FinTechs and banks are not the talk of future, rather it’s the reality of today. Both are getting into partnerships and product integrations, direct investments and venture debts, VCs and fund-of-fund investments. There are successful Fintegrations like: BBVA Banco Bilbao Vizcaya Argentaria is a multinational Spanish bank and is the second largest in Spain. By the second half of 2016, BBVA launched its API market-place, which aims to offer other companies, startups, and developers to use eight of its APIs. Therefore, allowing integration of customer banking data with

Bank - FinTech Merger
Finance, Financial Inclusion, FinTech, FinTech Trends, Mergers & Acquisitions

Bank – FinTech Merger Importance and repercussions

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The financial services industry has entered 2018 with a focus on digitizing services to better meet customers’ needs. But do the banks understand that previously inefficient, paper-based processes and messy ‘not so friendly’ user interfaces are no longer going to be good enough in today’s technologically advanced environment? Banks are needed to connect digitally to succeed. With FinTech continuing to gain momentum, it’s just a matter of time, to see them fully integrated into business-as-usual banking. One of the world’s largest Deutsche bank calls for “a shift in mindset from one of competition to collaboration,” arguing that traditional banking providers and new innovators must work together in order to revolutionize the payments market and the wider financial sector for the benefit of all. They said it and I quote: “For both parties, a partnership should liberate them to focus on their core competencies and contribute these areas of expertise to the innovation process.” Fintech, no doubt, is the talk of the day amongst investors, financial service providers, entrepreneurs, and even big corporate houses. The phenomenal potential of creating innovative services and business model makes it disruptive in nature. Realizing the immense potential of the technology, “Banks” are looking to integrate with FinTech solutions. In short Bank+FinTech merger  is next on the cards in the coming years. Welcome to the Era of FinTech. FinTech Nudged All FinTech, the technological innovation in the financial arena, registered its birth as a back-end activity, and today is nudging everything across the globe. It has transformed, almost everything, in such a way that you are about to witness the impact of the “fourth industrial revolution”. More than anything, it has created its own “FinTech Ecosystem” by embracing  the following: Digital Payments Remittances Insurance Lending Financial and Wealth Management Retail Banking FinTech has impressed the Banking Sector and its customers, which is why the transformation in banking has touched a new height. The “2016 World Retail Banking Report” states that almost two-thirds of the retail banking customers across the world use FinTech products or services like cards & payments, loans, Investments, financial advice and mortgages. This is because of the UX standards they offer to their customers. 81% of the customers feel that FinTech offers faster services and extends a great experience. In addition, FinTech firms are fast catching up bank’s “niche parameter”- TRUST. The percent of customers who have complete or partial trust in FinTech firms is as high as 87.9% across the globe. FinTech-Globally Embraced Global acceptance of FinTech is evident from a recent comparative study by EY (formerly Ernst and Young) which reported FinTech adoption between 2015 and 2017 has increased across various countries like- Australia, France, Germany, China, and India. The figures indicate adoption of past (2015), present (2017), and future (as responded in the survey). The adoption of FinTech in these countries has climbed exponentially: Australia- From 13% in 2015             to       37% in 2017 France-     From 27% in 2015             to       40% in 2017 Germany- From 12% in 2015             to       35% in 2017 China –     From 69% in 2015             to       77% in 2017 India –       From 52% in 2015             to       80% in 2017 ‘Banking with FinTech’ attraction Like any other sector, Banks have started reacting to FinTech, and since 2015, FinTech Banks have started emerging. Banks and Financial inclusions have initiated startup programs to constitute FinTech companies. Across the globe, 43% banks created such startups. Another 20% set up VCs to fund FinTechs. There are obvious reasons behind banks being forced to or influenced by FinTechs. EY FinTech Adoption Index 2017 released in June 2017 indicates that the appetite of digitally active consumers has risen considerably, from just one in seven digitally active consumers in 2015 to one in three in 2017. The report also shows that in 2017, there are 84% consumers aware of the fintech facilities in comparison to just 62% in 2015. The same reports show that the fintech adoption rate is expected to reach an average of 52% globally from the current rate of 33% in 2017. Such growth in numbers could soon blur the boundaries between different financial services, laying down new standards for the industry during the process. To stay ahead of the curve, financial firms would benefit from the technical assistance from the fintech startups. Why FinTech Lures Banks Unlike traditional banking, FinTech reduces  structural cost and operational deficiencies. The communication between branches or P2P transactions happens in real-time environments. Real-time updates, proactive alerts and agile innovation are an integral part of an enhanced customer experience. When right technology is used, it can reduce the need for manpower and even the “Brick and Mortar” locations. FinTech provides simplicity of design and power of contextuality that consumers are increasingly expecting. Another customer expectation of ‘externally simple yet internally efficient’ service platform is forcing the banks to rethink their policy of ‘working alone in stumbling mode’ or ‘working and staying ‘in the game’ powerful mode. It also enhances  regulatory compliance and better service to customers. Fintech firms like Teknospire are delivering convenient and affordable services by providing sustainable solutions for digitization of financial ecosystem to market segments (unserved and underserved) by taking care of their need for microloans and grants to the last mile, that till today were thought as unprofitable zone for  banking organizations. User friendly, data focused seamless technology is bringing more personalized offerings. With the security aspect, well taken care of, with biometric advances, the virtual reality solutions are helping customers interact with the banks in innovative ways which were unheard of, with traditional banking. The fast and efficient products and services of FinTech have attracted Banks to offer P2B services. This is evident from the fact that many have started offering traditional in-bank services on mobile devices as well. This has helped them offer high levels of access to consumer, and hence, a better usability and User Experience (UX) standards. Advantages of the Alliance betweenFinTech and Banks With FinTech and Bank partnership, the ultimate

Finance, Financial Inclusion, FinTech, FinTech Trends

Why Fintech B2C and B2B solutions are more in vogue in Asia?

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Preamble The global Fintech trends show an investment of £25.6bn in 2015 rising to £27bn by 2016. The global Fintech investments doubled in the period ending Q2 ’17 and reached $8.4billion. Similarly, in the period ending Q4 ’17, the figure was $8.7billion across 307 deals with annual global Fintech investment touching $31billion in 2017. FINTECH ASIA Asia probably “knows the way, goes the way, and definitely shows the way” and hence, is leading the globe in Fintech, fast embracing the innovation, adoption, and attending the unaddressed Asian customer needs. Fintech has seen some incredible growth around the world. According to DBS CIO Neal Cross, and I quote : “Asia is the real “waking giant” on the scene. Late to the party but catching up fast.”         The fact that of the top ten leading Fintech companies in the world, five (Ant Financial, Qudian, Lufax, ZhongAn, and JD Finance) are from People’s Republic of China (Asia) is enough to justify the lead. Source : Top 10 FinTech Companies in 2017         Though the primary focal point of Fintech companies has been customer-based initiatives (B2C) and customer experience, it seems they have started believing in “ignore the noise and focus on the work”; hence, have shifted their focus to B2B solutions. In the period ending Q2’17, it is reported that out of the top 10 Fintech global deals, three are B2B-focused companies namely- CCH Tagetik ($321m), Pos Portal ($158m), and ITRS Group ($140.6m). Trends Which Keep Asia Leading the Fintech B2B and B2C Solutions Fintech investments Trends in Asia The legend “Only a king can attract a queen and only a queen can keep a King focused” stands true for Asian Fintech markets. The King of global Fintech- Asia has been attracting a lot of investments in the recent past which is evident from the Fintech trends in 2016, of the £27bn global investment £11.7bn was done in Asia, a whopping 44% share. Leading the region, China is estimated to have done an investment of $10bn in 2016 followed by India which did a Fintech investment of $1.1bn Fintech investment. Source : The Fintech Times May12,2017 Apart from these two major countries, other countries like Thailand, Cambodia, Myanmar, Malaysia, Indonesia, and the Philippines did a cumulative investment of $217mn in 2016. Singapore and Hong Kong clocked $800mn with $400mn each, which experts feel is a clear financial prediction of these countries becoming crucial Fintech Hubs in the near future. Latest Fintech Trends in Asia Asia, no doubt has become the largest hub for B2B and B2C Fintech solutions hub of the world and holds some of the largest Fintech companies like Ant Financial (US$60Bn), Lufax (US$18.5Bn), JD Finance (US$7Bn) and Qufenqi (US$5.9Bn). Incidentally, all the four unicorns are from the People’s Republic of China (PRC). There are obvious reasons behind Asia leading the Fintech race and the following Fintech Industry trends in the last few years suggest that Asia will see more movement in the Fintech space. Why Asia leading the Fintech race? Unbanked Populations It is said that 73% of the unbanked population of the world is in 25 countries, majorly in Asia. Since more than half of the world’s population is in Asia, Fintech firms have exploited the emerging needs or demands of the mass and have delivered innovative products and services like- Virtual wallets, Internet lending, e-commerce, P2P lending, payment gateways or mPOS. To match the pace of Fintech firms, traditional banks started adopting similar   products and services and ended up in digitalization of banks. VC-Funding     One of the major reasons for the Fintech industry of Asia experiencing an explosive growth and innovative products and services is strong Venture Capital funding. ‘Ambitious investors are turning their attention to opportunities in Asian emerging markets. It’s Asia, with its enticing mix of booming middle-class populations and rocketing Smartphone adoption, that arguably offers the greatest opportunity for returns on FinTech investments’, according to Michael Lints, venture partner at Singapore-based VC Golden Gate Ventures. In China, the gradual shift away from a manufacturing-centric economy towards a service and consumer-led economy, coupled with the support of the government through financial incentives, is helping in fostering the innovation and entrepreneurship in the region, which bodes well for the future of VCs. With the power of the internet increasingly breaking down geographic barriers, and the combination of high speed of internet, higher spending power and a freer adoption of technology means that fintech has an entire market of willing and able customers. Not only Asian countries are presenting opportunities for VC investment but also  seen is the  greater interest in companies that have businesses that are integrated with these regions, as they can tap into the abundant resources, as well as the enhanced logistics network that has been built over the years. Furthermore, in an era of decreasing interest rates, investors are considering alternative investment options, making VC funds an attractive choice. VCs are focusing on unbanked and underbanked sector of Indonesia, with its massive population becoming tech savvy and gaining increasing levels of disposable income. It is the world’s fourth most-populous nation, with Jakarta alone home to 10 million people. The World Bank reported the country’s GDP per capita to have exploded from just $560 in 2000 to $3,374 in 2015, while the Indonesian FinTech Association says fewer than 36% of adults have formal bank accounts. Not only B2B but also the massive B2C market open ups the lucrative era for VCs. According to Michael Lints, venture partner at Singapore-based VC Golden Gate Ventures, payments is  a major area of focus for business in the region. “A large number of startups are focusing on the B2C payments market because that’s where there is an open gap, especially when you look at the number of people that never use a bank for their payments. For them is has always been cash but now they are using smart phones. Making these devices a means of doing online payments is

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Financial Inclusion, FinTech, FinTech Trends, Open Banking, Technical Updates

Open Banking – Is it comforting to customers or not?

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Big changes are on the horizon. You may have seen or heard about Open Banking, PSD2, and CMA in the news over the past year. Or, you may be hearing about them for the first time right now. Fortunately, Open Banking is right here and it is going to stay. In the banking sector, the concept of “open” can seem contradictory. Banks traditionally have a “duty of care” to protect their assets rigorously, as required by regulators and customers. Traditional Banking is been the same for…just about forever. For the most part, the power dynamic between banks and their customers has stayed about the same. Whether you bank in person, over the phone, online or mobile, the relationship with banks hasn’t changed much alongside the technological advancements. You set up an account with your bank, they facilitate the ebb and flow of your money, and, as a result, they hold the data around that money. All of the histories around your purchases, loans, payments, debits, and credits rests with them. Now banking is about to undergo a major shift. With the ‘Open Banking’, (the outcome of the beautiful blending of Financial and Technology sectors), all of that is going to change. With…… Improving overall customer experience by engaging them and to attend to customer needs in a secure, agile, and future-proof method. New Revenue streams by increasing digital revenue from new channels. As rightly said by Kristin Moyer, Vice President of Research and Distinguished Analyst at Gartner and I quote……“Open Banking is about making everything for sale. It provides a new way to increase digital revenue for the banks that are willing to think differently about what it means to be a bank.” Sustainable service model for underserved markets. ………… open banking is definitely a welcoming change. BANKING: THEN & NOW In 1872, when first wire transfer happened nobody would have imagined how the entire scenario will change from wire transfer to ATM’s in the 1960s to telephone banking in 1980s.  1997 saw the rise of internet banking which paved the way to contactless payment in 2007 and mobile banking in 2010, but still, the traditional ways of banking continued. But NOW  Human-Centered Fintech is making way for personalization and open banking. What is Open banking? Open Banking is a financial services term as part of 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. Thus, “Open Banking is the possibility of creating new digital business and ecosystems through APIs provided by the banks. How does Open Banking work? 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. Source: by Wikimedia Commons 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 at its best. HOW BIG IS OPEN BANKING?? ….. well the picture says it all Source: https://goo.gl/VmjhSy WHO’S WHO ……ZOOMING ON OPEN BANKING Source: https://goo.gl/VmjhSy So, how does it help, and why does it matter to you? To answer these questions, let’s take a look at what open-banking brings to the digital market and on your FinTech plate.                                                      Source: europa Transparency of Data Companies connect with third-party APIs by developing apps which provide financial services for their customers and connect with banking sectors/firms for access to customer data and personal info. This transparency of data leads to the establishment of improved customer relations. Through open-banking services, you’ll be able to invest in financial products manage your money get detailed financial statements generated pay from one platform to the other (like how you use Paytm for paying your BESCOM bills or the Simpl/LazyPay wallet to pay for other services). Think open-banking, think big-picture. No back and forth dialogs, no payment hassles or dealings with banks. Direct peer-to-peer payments and transactions between customers and businesses. Period. Image Source: Medium.com Safety Benefits If safety wasn’t a priority, we’d all be worried. Open-banking doesn’t compromise on security and leverages Fintech services to adapt to growing security needs. With Agile technologies operating on robust platforms, open-banking is built on a platform of secure systems which means your personal data doesn’t leak to anonymous parties or get hijacked. Banks share personal data through APIs and intermediaries and connects developers with payment networks like VISA and MasterCard for the seamless exchange of money balances and financial information. Cybersecurity measures and anti-intrusion technologies come integrated with APIs, thus building upon layers of transactional security. Image Source: Zanders.EU Consumer-Centric Approach At the end of the day, we love our services and open-banking matches consumer expectations. From Uber’s APIs integrating Google Maps and payment gateways to companies using Big Data, Analytics, and FinTech services to leverage creative products and services, open-banking gives users total control over their financial exchanges. Customer engagement as is (left) and after PSD2 (right) Source: europa Data sharing in financial services tend to be the risk- and permission-based, with required audit trails, and subject to regulation and risk management. If done well, however, it can deliver increased security through enhanced know-your-customer capabilities, identity validation, and fraud detection. The current

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