# Banking tech is all about digital disruptions and financial services | Tech News (HT Tech)

> New-age customers tend to take a dim view of traditional banking. Instead of filling forms at a branch, they would rather approach their bank via a responsive, feature-rich Android or iOS app that understands their needs and offers contextually relevant products and services.

# Banking tech is all about digital disruptions and financial services

## New-age customers tend to take a dim view of traditional banking. Instead of filling forms at a branch, they would rather approach their bank via a responsive, feature-rich Android or iOS app that understands their needs and offers contextually relevant products and services.

Aug 21 2022, 18:32 IST

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![Legacy banking is under assault from the fintech sector.](https://images.hindustantimes.com/tech/img/2021/07/03/1600x900/wallet-2125548_1920_1625308878293_1625308889791.jpg)

Legacy banking is under assault from the fintech sector. (Pixabay)

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### By HT TECH

It is often said that a bank is a technology firm in disguise. The relentless rise of fintech startups in recent years clearly suggests that the more a traditional bank can think and act like a fleet-footed technology firm, the greater are its prospects of surviving and thriving in the future. The rise of neo-banking is ushering in an era of digital, branchless banking. In this brave new world, the target customers are millennials and members of Gen Z, their banks of choice are smart apps running on a smartphone, and those smart apps are powered by disruptive technologies such as Artificial Intelligence and Blockchain. This article explores technologically disrupted scenarios that signal the arrival of a new normal in financial services.

New-age customers tend to take a dim view of traditional banking. Instead of filling forms at a branch, they would rather approach their bank via a responsive, feature-rich Android or iOS app that understands their needs and offers contextually relevant products and services. This is why legacy banking is under assault from the fintech sector. One way for traditional banks to protect their turf is to invest heavily in enhancing customer experience through real-time natural language processing technologies such as Conversational AI. HDFC Bank offers an Android-based conversational bot called EVA, which can answer the day-to-day queries of the bank’s customers via natural language interactions, accurately and quickly. EVA can also glean valuable insights into customer trends and behavioral patterns, which can be used to construct customized offerings for customers.

Where there is money, there is also fraud. Consider credit card transactions and online payments. With more than 1 billion credit card transactions per day worldwide, nearly $25 billion was lost in 2018 alone due to fraud. Any technical solution to this complex problem presents a double-edged sword. Take a very aggressive posture against fraud, and there are too many false-decline transactions, which creates unhappy customers. Take a very benign posture, and there are too many credit cards hit by fraud, which erodes customer trust. Large credit card companies such as American Express and MasterCard invest heavily in Machine Learning and Deep Learning algorithms to carefully balance their aggressive-or-benign posture by constantly learning about fraudulent behaviors, fine-tuning their fraud analytics and prediction models, and determining in real-time whether an ongoing credit card transaction is above or below an acceptable risk threshold.

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In traditional banking, borrowing and lending are fraught with friction. For borrowers, it conjures up unpleasant images of mind-numbing paperwork, opaqueness, delay, and uncertainty. For lenders, it means an internal tussle between someone trying to sell a loan and someone trying to minimize the risk of default. Today, consumer lending is going through a revolution thanks to digital lenders. The ability to cut human underwriters out of the loop and use the power of AI and automation to determine whom to lend, how much to lend, and at what rate to lend, all in a matter of minutes, has opened up a new market for hyper-personal lending. For example, Simpl offers a Buy Now Pay Later solution that enables consumers who have no credit cards to make online purchases on monthly credit. Reminiscent of the old-world khata in the neighborhood kirana store, it makes intra-month consumer borrowing frictionless for large segments of the population.

It may come as a shock to many that more than 70 million people, or 1% of the world population, are refugees or have been forcibly displaced from their homelands due to persecution. Financial inclusion is a huge challenge even for legitimate citizens in every country, but it assumes a truly ominous dimension for refugees that have lost their identities altogether. The World Food Program, operated by the United Nations for 100,000+ Syrian refugees in Jordan, has used Blockchain technology to create fully trusted digital identities. This trusted digital identity framework is used to provide food safety, cashless services, and direct cash transfers to the refugee community. The use of Blockchain technology can not only improve the quality of life and dignity of refugees, it can also eliminate fund leakages and corruption historically associated with such programs.

China, Sweden, and certain Caribbean and Middle Eastern nations are pioneering central bank digital currencies (CBDC). China was the first major economy to announce DCEP (Digital Currency Electronic Payment), a fully digital currency available via a mobile wallet app, pegged 1:1 with the fiat currency RMB, and designed to eventually replace M0. Built using Blockchain and Distributed Ledger Technologies, CBDCs are capable of overcoming the limitations of paper money. For most economies, printing and managing paper money is frictional and erodes 1-2% of GDP. Moreover, CBDCs can boost tax revenues by reducing tax evasion and money laundering, in effect raising financial compliance and national security. CBDCs can also provide central banks powerful insights into the purchasing patterns of citizens. In the long run, CBDCs may make cross-border payments fast and painless, and may also lead to DCEP becoming an alternative global reserve currency.

As millennials and members of Gen Z enter a period of affluence, as smartphones become ubiquitous, and as deep technologies such as Artificial Intelligence and Blockchain turn more affordable, every provider of financial services must fully embrace the digital revolution. In a colorful interview for the 1996 PBS documentary Triumph of the Nerds, Steve Jobs had said that Apple’s major competitive advantage was that its primary competitor had ‘absolutely no taste’. What Jobs was trying to say was that new-age computer users preferred elegant computer interfaces to merely functional ones. In a similar sense, new-age banking customers may no longer be satisfied with the functional interfaces and prosaic experiences offered by traditional banks. Digital disruptions have irreversibly altered the taste buds of consumers. There is no going back.

This article has been written by Santanu Paul, CEO and MD of TalentSprint, and Vishal Kanvaty, Chief of Innovation of NPCI

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04 Jul, 07:50 IST

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