The wave of digital disruption in financial services | HCL Blogs

The wave of digital disruption in financial services

The wave of digital disruption in financial services
November 23, 2017

Though Banking as a service is the newest FinTech trend everyone is talking about, we all at least that much aware how the banking industry operated worldwide i.e. financial transactions/offerings. Earlier it was branch-based and mainframe-supported operations, that focused on the efficiency of processing transactions in person, at ATMs, on the phone and with plastic money (debit cards). Relatively recently, the impact of digital technology has moved banking transactions out of the branch and on to mobile devices, with advanced data analytics allowing for personalized delivery of services. The pace of digital change is about to accelerate exponentially, however, with the integration of AI, robotics, blockchain, open banking APIs and the internet of things. The smarter use of data, combination of non-financial and financial solutions, and new, real-time delivery alternatives could significantly change the entire structure of banking.

At its core, cognitive technology enables us to understand and correlate complex data related to IT incidents across our IT infrastructure and predict where we may see issues next. We can then resolve these issues before they impact our customers and therefore avoid poor customer experience.

AI and cognitive computing are spreading rapidly across the financial services industry. Some Scandinavian bank is using AI software to speed up its customer service and in the UK’s leading bank is trialing AI technology to monitor advice given to its customers.

  • AI and Machine Learning: According to an estimate of BI Intelligence, there are at the moment 7 billion IoT devices, but the number is going to quickly climb to 22.5 billion by 2021. This scenario is expected to create the so called “Bank of Things” that relies on the collection customers’ data from any of their devices in order to offer different services to them.
  • The Blockchain Will Remain “Hot”: Blockchain is a digital ledger of transactions that gained prominence as the software underpinning the digital currency bitcoin. The technology, being developed in the public and private sectors, has gained attention globally for its ability to permanently record and track assets or transactions across all industries. Blockchain technology is being used by many firms for secure document transfer and to reduce settlement costs.
  • Open Banking APIs: Several traditional banking organizations are partnering with non-traditional providers to offer expanded banking services. Alerts and notifications are being automated with RPA.
  • Internet of Things: Mobile device geolocation is increasingly being used for enhanced credit/debit card security, with firms also testing the use of voice-first digital assistants to conduct transactions.

Despite this we do have to remember that AI is overestimated in the ‘Skynet’ sense and underestimated in the automation sense. Artificial intelligence is a general term that represents a set of technologies, which individually but often collectively have very wide applications. NLP (Natural Language Processing), machine learning (data analysis or correlation/regression analysis), reinforcement learning, robotics, autonomous vehicle etc. are all developing rapidly.

IT support role in such financial transformation:

If an organization has chosen to open up internal application programming interfaces (APIs), the IT service desk could find that IT support tickets are being submitted not just by humans, but also by machines using the external API.

But New models of business = new security issues mean more opportunity against given challenges

  • Privacy issues become bigger
  • Cyber threat gets more serious
  • Different legal basis shall be considered to ensure data ownership
  • Data can be “stolen” through the data portability right

Building the ‘Bank of the Future’

Cognitive technologies can be an important lever to pull to improve customer experience in the financial industry, provided that companies carefully scan solutions on the market to find providers that offer mature products and a solid delivery model.

The impact of new digital technologies will be felt across the entire banking value chain, impacting the competitive structure and the ways people bank. Winners will be those firms that can bring together the new digital technologies in a way similar to what consumers experience from non-financial firms. To remain relevant and attractive against forthcoming challenges following will be the key areas:

  • The Digital Customer Journey: A digital-first, proactive, personalized experience is key to putting your customer on a journey that leads to a successful purchase and long-term loyalty. Using expanded data and traditional and non-traditional solution sets to manage experiences contextually and across channel touchpoints.
  • Open Banking: Open Banking has created new avenues for innovation and growth in the digital banking world. Banks are leveraging this opportunity and looking at newer and smarter business models that can move them towards market leadership. Delivering highly custom solutions from across banking ecosystem through open APIs will explore the following
    • Connectivity
    • Regulation
    • Competitiveness
    • Customer expectations
  • Provider of Platform-Based Offerings: The most significant trend of recent year will be the “platformification” of banking, where both existing banks and startups begin a strategic shift towards becoming banking platforms, much like how Amazon is a platform in retail. A plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other, and create and exchange value.
  • A Next Generation Artificial Intelligence: Knowledge computing engines and visual interaction engines, developing large-scale organic data knowledge discovery. Researching neural network processors, as well as high-energy efficiency, reconfigurable brain-inspired computing chips. Researching architectures suitable for AI hybrid architectures.

Open Banking has created new avenues for innovation and growth in the digital banking world.

One of the keys to delivering in the new digital banking ecosystem will be the elimination of internal silos. Not only is this required for improved data analytics, but is important when trying to deliver customer- as opposed to product-centric solutions. It is important to combine the best of internal capabilities with the best of what is offered outside the bank, which is only possible with an integrated perspective. Despite the shift to digital technologies, a human touch will still be highly desirable for consumers.