Next in tech

How technology is redefining financial services in 2018 and beyond

Technology-driven evolution of financial services

Technology has always been a key enabler for the financial services (FS) industry and has played an integral role in building internal efficiencies, enabling innovations in product design and significantly improving customer experience. The impact of technology on this industry, however, has seen a distinct shift—from enabler to positive disrupter.

Keeping up with the lightning-paced growth of tech

The rate of change and evolution of technology have reached unprecedented levels. In 2016, PwC published the ‘Tech breakthroughs megatrend’ report that covered the eight breakthrough technologies that were set to redefine business models across industries.Eighteen months since then, five of these eight technologies have already embroidered themselves into the FS fabric.

Breakthrough Technologies

The importance of matching this high speed of technology proliferation is becoming more apparent to organisation leaders across industries and geographies. Particularly in FS, CEOs of top players across the globe acknowledge the need for staying abreast with the speed of technological change, as well as investing sufficiently in technologies that safeguard the industry from the cyberthreats that come with such high-speed technology adoption:

Apart from designing new revenue streams, today, FS players are also expanding their core customer services. An integrated view of all these services will be the key differentiator to truly understand customers and meet their needs and desires in a contextual and timely manner. Designing the architecture to allow for seamless integrations and collaborations while simultaneously facilitating ease in data flow and analytical insights is what FS organisations are looking at.

The following sections explore ‘next in tech’ trends that are reshaping models and streams across the different FS sectors, and identify new opportunities for industry growth and customer delight.

Redefining conversations

Chatbots are disrupting various forms of customer engagement as they effectively meet customer needs for enhanced user experience through AI.With the augmentation of computing power, chatbots have evolved from being simple FAQ-answering tools to digital assistants. Led by an increase in the capabilities of AI and the usage of digital channels to deliver real-time, context-driven insights directly to consumers, chatbots can facilitate better decision making, advisory delivery and product sales.

The next logical step in the evolution of chatbots is voice-related AI. A number of technology leaders already provide sophisticated voice-based digital assistants that take AI and NLP to the next level. PwC’s Consumer Intelligence Series Report (Bot.Me) highlights the growing comfort of consumers with digital assistants: 42% of consumers, 72% of business executives and 53% of millennials are already using digital assistants.What’s more, business executives are looking at virtual personal assistants as key channels for consumer conversations and engagement.

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Next generation AI for fraud risk assessment

PwC’s 21st CEO Survey reported that 40% of CEOs across the world are extremely concerned about cyberthreats. From the back office to front-end application users, security needs to be embedded as the core strategy to build strong connected ecosystems, spanning boundaries and technology platforms.

Traditionally, companies followed the pre-defined ‘if X then do Y’ logic to flag suspicious users to the transaction processing engine and prevent them from completing transactions. The traditional methodology is not robust enough to handle data mining required to reveal risk predictive relationships. 

AI and ML technologies can significantly improve the efficacy of early warning signal models, providing organisations with better insights into which accounts are headed towards NPA status. Proactive strategies to focus on such high-probability cases would enable more efficient deployment of resources and reduce the inflow of NPAs.

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A greater positive social impact

Historically, financial inclusion efforts have been hindered by structural issues on both the supply and receiver side.

According to a survey by a rating agency, 76% of Indian adults are unable to understand key financial concepts. This figure is seven percentile points lower than the worldwide index.

However, there is a huge scope to achieve true transformation in financial inclusion in the country through next level of merchant acceptance, consumer awareness, P2P remittances, payment transformation, alternative lending, drone-based technologies, among others.

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Next level of back-office automation

Companies across industries are realising the business use cases of blockchain (distributed ledger technology or DLT), which is evident from the increased funding trends for this technology. The RBI and the government have acknowledged the immense benefits of blockchain technology in ushering in a digital economy, and, consequently, many FS players have started moving blockchain solutions out of the development labs and into the marketplace.

Another technology, RPA has found application in a number of internal FS processes, and FS firms have started to transition RPA options from experimental and exploratory exercises to relevant mainstream processes. While RPA technologies are capable of taking on low-value activities in a quick and efficient manner, the next phase is leveraging artificial intelligence to deliver intelligent process automation (IPA). IPA technologies will allow bots to not only automate standard processes, but also learn from prior decisions, deviations and patterns to improve decisions, thus further reducing the need for human oversight and increasing efficiency gains in internal processes. 

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Redefining the financial supply chain

With the proliferation of smart devices and the increased availability of information from such devices, banks are now leveraging such data access to evolve to a ‘banking of things’ (BoT) model.

One of the major learnings of the FinTech wave has been the value of collaboration and building an ecosystem of partners. The space is ripe for a transformation through the development of a seamless interoperable ecosystem for truly omnipresent and invisible banking. Omnipresent banking will no longer be just about fancy devices that are connected to the Internet. The concept will evolve to include multiple parties seamlessly working together to offer a hassle-free transaction environment.

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Sources:

1PwC. (2016). Tech breakthroughs megatrend. Retrieved from https://www.pwc.com/gx/en/issues/technology/tech-breakthroughs-megatrend.html (last accessed on 9 May 2018)

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Vivek Belgavi
Partner, India FinTech Leader, PwC India
Tel: +91 22 6669 1734
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