Mobility, cloud, big data and AI trends are pushing financial services toward a transformation and that’s a good thing for services. During transformation, there will be some new challenges too, which are a matter of observation. These trends will face a tough test for financial sector because financial service is a serious business! Let’s take a look at some popular trends…
FinTech-The improvisation in financial services is driving attention, financial technology companies are broadening access to a range of services that can help people manage their spending, save more money, and make investments in long-term financial security. The National Digital Research Centre in Dublin, Ireland, defines FinTech as “innovation in financial services”. The FinTech companies are extracting the most profitable portions of the banking sector, there are good investment opportunities for companies that can identify and develop innovative technologies to help financial institutions improve the customer experience and technology operations. In Silicon Valley, FinTech firms are growing fast. They attracted $12 billion of investment in 2014, up from $4 billion the year before. FinTech businesses based in London, including Funding Circle, Azimo, WorldRemit and Currency Cloud, raised $472m (£302m) between January and July 2015.
Few days back, the World Economic Forum issued a 176-page report titled “The Future of Financial Services – How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed”. This report provides the first consolidated taxonomy for disruptive innovation in financial services, it received input from the top incumbents (senior executives from Deutsche Bank, Morgan Stanley, HSBC, UBS, Thomson Reuters and MasterCard took part) and the best known global start-ups (including Lending Club, Prosper, Square, Coinbase, Ripple and Simple). All up, more than 300 institutions participated in the research.
Here is a list of top FinTech Companies, it is good to see that TCS is positioned at number two in this ranking.
Advanced Analytics– Last month Accenture launched seven advanced analytics applications for the financial services industry, including banking and insurance companies. Advanced analytics applications help to drive more value and opportunities from existing data. In a recent study on big data from IBM Institute for Business Value in collaboration with Saïd Business School at the University of Oxford, they found that 71 percent of these banking and financial markets firms report that the use of information and analytics is creating a competitive advantage for their organizations.
Thomas H. Davenport, research director of the International Institute for Analytics and a pioneer of Analytics 3.0, views the evolution of analytics as a three-stage process:
Analytics version 1: This generation of analytics, born in the mid-1950s, incorporates basic business intelligence and key performance indicators (KPIs) to assess past performance. Analytics 1.0 allowed managers to examine data from production processes and customer interactions to improve the performance of their companies.
Analytics version 2: Analytics 2.0 was emphasized by the big-data boom of the mid-2000s, allowing businesses to use the power of predictive analytics and pull data from multiple sources outside of the organization.
Analytics version 3: This latest generation of analytics merges the descriptive and predictive qualities of previous technologies and adds an increased focus on prescriptive analytics, otherwise known as the use of models to specify optimal behaviours and actions based on data. Analytics 3.0 marks the point at which analytics are embedded as part of real-time decision-making and serves as a bank’s core of intelligence, allowing it to develop a more complete customer view than ever before.
Here is a list of popular financial analytics software…
Innovation– Innovation is an important element for the success of financial organization, in banking sector interest in innovation is increasing, which is a natural process and required to adapt digital transformation. According to the 6th Annual Innovation in Retail Banking Study published by Efma and Infosys, 84 percent of banks globally are increasing their innovation investment in 2014 compared to 2013. The banks are focusing on innovation strategy and increasing their innovation investment, some banks investing in startups and working with startup through innovation accelerator as well. As per a recent survey, channel innovation is the key area, 89% of banks worldwide saying they were increasing their investment in this category. This was followed by customer service, processes, products and sales and marketing. Main themes of innovation in banks are Automation, Mobility, Big Data, Social Channels and Gamification. Innovation is a process which demands patience for visible results.
Payment services- In urban population there is a growing trend of cashless wallet (digital wallet/e-wallet/virtual wallet etc.), these wallets are smartphone apps that hold your payment and loyalty card information. Let’s take a look at some popular apps…
Amex Express Checkout– Two days back American Express launched Amex Express Checkout, through which U.S. cardmembers can check out quickly online by using their AmericanExpress.com login. In the release, the company stated that, in conjunction with participating online merchants, cardmembers can use their Amex ID and password, and then American Express will auto fill checkout fields with card-specific details and account information. The company stressed in the release that the Amex Express Checkout is not a wallet and also does not mandate the creation of a new account.
ICICI Pockets– ICICI Bank has launched ‘Pockets’ — an app-based digital wallet which on installation, generates a virtual visa card that can be used for payments with any online merchant. The virtual card allows its acceptance with any online merchant as it works on the existing card-based payment platform. The limitation of non-bank wallets is that the issuer has to tie up with each merchant for acceptance of payment. Although opening the Pocket pre-paid account is instant and customers can use this account for most transactions, the customer does not automatically become a bank account holder. The bank offers a separate ‘zero balance’ account within 24 hours of the request after ‘know-your-customer’ documents are handed to a bank representative.
HDFC Bank’s Digital Wallet– HDFC has introduced their own digital wallet in India, which they have termed as “The future of mobile payments”. To make it easier for merchants to accept payments via digital wallet, HDFC has enabled Near Field Communication (NFC) based contact less payment facility as well.
Bitcoin – A payment system invented by Satoshi Nakamoto. The system is peer-to-peer; users can transact directly without needing an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses its own unit of account, also called bitcoin. Bitcoin is often called the first cryptocurrency.
Google Wallet – A mobile payment system developed by Google that allows itsusers to store debit cards, credit cards, loyalty cards and gift cards among other things, as well as redeeming sales promotions on their mobile phone. Google Wallet can use near field communication (NFC) to make secure payments fast and convenient by simply tapping the phone on any PayPass-enabled terminal at checkout.
Apple Pay – A mobile payment and digital wallet service by Apple that lets users make payments using the iPhone 6, iPhone 6 Plus, Apple Watch-compatible devices (iPhone 5 and later models), iPad Air 2 and iPad Mini 3. Apple Pay does not require Apple-specific contactless payment terminals and will work with Visa’s PayWave, MasterCard’s PayPass, and American Express’s ExpressPay terminals. The service has begun initially only for use in the US, with international roll-out ongoing.
Paypal Wallet – A very secure and comfortable service which lets you to send money to your friends, family members or merchant’s account. You can also view the past transaction history in details. PayPal App is available both for Android and iOS. PayPal also lets you to make your smartphone a swipe machine for credit cards.
Omnichannel Banking– Omnichannel is much more than just providing multiple ways (mobile banking, phone banking, ATM etc.) for customers to transact. It is about a seamless and consistent interaction between customers and their financial institutions across multiple channels. While multichannel is focused on transactions, omnichannel focuses on interactions. It is different from multichannel because customers enjoy a consistent experience across channels and can easily shift from one channel to other.
On other trends I have written articles earlier, you can click these links to read: