Finance, Financial Inclusion, FinTech, TechFin, Technical Updates

TechFin or FinTech

Vandana Kaul / 17/05/2018

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

Finance, Financial Inclusion, FinTech, FinTech Trends, Mergers & Acquisitions

Bank – FinTech Merger Importance and repercussions

Vandana Kaul / 05/04/2018

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

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

Open Banking – Is it comforting to customers or not?

Vandana Kaul / 12/01/2018

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