Fintech Is Much More Than Payments and It Has the Potential to Change the Way We Bank

27. February 2018.

Fintech startups developing ML and AI platforms can help banks detect fraud, reduce compliance, and improve efficiencies. Soon enough, AI will allow customers to do banking transactions over voice.

That fintech has exploded in India in the last two years is a foregone conclusion.

Sample this: more than 420 fintech startups have mushroomed since 2016, making India the world’s fastest-growing fintech ecosystem. US was the next with 305 new startups.

India led the world in terms of fintech funding as well, according to Lets Talk Payments (a global initiative tracking innovations in payments in Europe, Asia, and the US). Observers say each day brings with it a new Indian fintech story.

At Fintegrate Zone 2018 — the country’s biggest fintech conclave organised by Zone Startups India, a Mumbai-based startup accelerator — entrepreneurs, tech evangelists, legal advisories, and financial services professionals gathered to discuss, debate and analyse the industry’s future as more tech-led innovations come to define it.

Ajay Ramasubramaniam, Director, Zone Startups India, said: “Fintech firms and incumbents coming together is what will drive the industry forward. Everyone is looking at something strategic and valuable in the long run.”

As a result, the nature of capital flowing into the space is changing too. “Earlier, it was risk capital. Now, more strategic capital is flowing in, especially from Japanese and Chinese investors,” says a fintech observer.

Collaboration is the way to go

The “payments powershift” is also beginning to hit card networks as banks are collaborating to build common tech platforms.

Amit Goel, Co-founder and MD, Lets Talk Payments, said: “Banks are coming together in various capacities to build network/solutions to counter the threat of fintech. UPI has been fairly successful in driving mobile payments volumes away from wallets. The growth in UPI is largely led by third-party payment apps in partnership with the leading banks.”

But, while fintech is making news consistently, there is a lot of “noise” still. Amit says, “While it is great to learn new technologies and understand their implementation, it is also important to know their limitations.”

Indian banks, for instance, are experimenting a lot with new technologies such as deep learning, machine learning (ML), and natural language processing (NLP). But implementation is “not uniform” claim commentators (many of whom run firms that are working with these banks and NBFCs) at Fintegrate Zone 2018.

Moreover, banks are low on hiring tech talent pool. India is said to be mirroring a global trend in this case. On an average, less than one-fourth of large global banks’ workforce is employed in tech. It is even lower in Indian banks. Hence, gaps between policy and execution remain.

More technology, less banking

Fintech is not only about payments. It has the ability to impact core banking processes, make them more efficient and less expensive.

Arpit Ratan, Co-Founder of Signzy (that uses deep learning to simplify compliance and customer onboarding for banks), says, “Fintech can fundamentally change the way we bank. Banks are bogged down by regulations. They have to automate their human workforce to a machine workforce. Innovation in areas of compliance and regulations will have the maximum impact.”

In a separate chat with YourStory, Arpit reveals that his startup’s tech-enabled platform can bring down customer onboarding costs by 80 percent for banks. “Onboarding is the biggest piece that can be reformed with technology,” he states. Signzy counts 45 large banks and NBFCs among its clients.

AI in transactions

Until now, AI has largely been utilised in the conversation space. But its real power will be unleashed in transactions, reckon intech founders. Arpit says, “The real power of AI is to do specific tasks, and not just have conversations.”

In fact, AI assistants like Alexa are believed to be doing banking transactions on customers’ behalf. It can pay their credit card bills through a simple voice command.

Amit of Let’s Talk Payments, explains: “In March 2016, Capital One became the first global bank to leverage Amazon Echo’s IoT capabilities in its banking operations. Customers can use the Capital One skill app on Echo and perform various banking transactions using their voice.”

Fintech and risk management

Those gathered at Fintegrate Zone 2018 felt that advanced tech in banking could prevent cases like the ongoing PNB fraud involving billionaire-jeweller Nirav Modi.

Fraud management is one of the key focus areas for fintech startups developing AI and ML capabilities for banking. When real-time data flows through the system, it not only moves fast, but makes it easier to spot anomalies.

Sanjeev Kumar, ‎Research Director – ‎Burnmark (a fintech research firm), said, “The biggest use cases globally are in the areas of data protection and data privacy. Banks are using platforms developed by fintech firms to do digital audits. These firms have data feeds from across customer channels, and they can throw up early warning signals to check frauds.”

He added, “Banks are fast adapting to this and it can reduce their operating costs significantly.”

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