DeepTech in Finance: From Forensic to Preventive

The second edition of DQDeepTech had a session on the role of DeepTech in Fintech and how advanced technology helps it shift its strategy from forensic to preventive.

Jaya Vaidhyanathan, CEO, BCT Digital, said that we have always been looking at the finacial system with the preventive lens. After money leaves the bank, you have to go through a whole system, before you see the taxpayers money come back. You can also look at the beneficiary. You look at whether the company was subject to frequent audits, etc. There is lot of information that you can look at and see whether a problem can arise in future. If you were a lender, a sector could be under stress. There can be crop prices, steel prices, or raw materials, etc. You can adjust the coverage. Look at the system in terms of frauds and regular loans, and look at how do you adjust ratios and how you lend. Preventive measures and deep tech drive you in that direction.

Talking about emerging challenges, Yogesh Valunjkar, Director, DNS Bank, said the adoption of technology has been predominant. We have seen 360-degree changes over customer models, business requirements, etc. Tuning to these changes has been a challenge. A proper focus and well-set business goals are required to achieve this. We are creating lot of data. To get that data in one place was a nightmare. Now, we are using various methods to create digital data. This data is the biggest asset of every bank. We should identify that this is our biggest asset and business models should be built around it. We have lot of emerging technologies that can empower our team to leverage data that can get us better business results. 

The customer has the emergency of getting a loan. He has to adopt new technology that can quickly do due diligence, credit scoring, etc., and instantly provide the loan. The bank has to identify the credibility of the borrower, and improve the turnaround tine (TAT). Digital features are available, such as AI/ML, predictive, analytics, etc., to determine the customers' eligibility. Banks need to have data to disburse loan. 

Is the infrastructure ready? Valunjkar said there have been many changes in the infrastructure requirement. Six years ago, DBS Bank had 30-odd servers that have gone past 100. Today, service touch points are available 24x7x365. Definitely, there will be challenges, as the infrastucture is about people, process, and technology. Besides latest technology, we also need to have trained and skilled manpower. It can ensure the delivery model is as per regulatory expectations. We should focus on core business. Technology expectations are going to grow. There will be more innovations and investments coming in future, and also based on the man and money. 

Bankers core business is banking. We need to leverage the infrastructure better to uplift the business. We should go for the dynamic infrastructure provisioning model. There are many players providing dynamic infrastructure in cloud. That allows the flexibility to focus on the core business. We should leverage the infrastructure, such as hardware, software, and even resources, that are more faster and reliable, and also preferred by customers.

How do you adopt deep tech in finance? Ms. Jaya Vaidhyanathan, BCT Digital said it is how you can protect something, a fact learned by other sectors. Finance has also looked at other sectors to learn about cyber security. Power sector is said to be more open to cyber attacks. In finance, penalties are more as you are a custodian of trust. Transparency is better understood in credit and debit, in finance. We have been ahead in transparency. It is more about transparency to the user. We also need to do more about recovery of bad assets. Security is tied to privacy and lot of regulation. 

Valunjkar agreed that we need to extend transparency to end customers. We need to extend this to the customer, be it a loan or KYC for a business. We should use technology to extend transparency. Decision making and workflows can also be transparent. That can resolve many conflicts that may arise. We can get better business outcomes. In terms of security, in the coming years, customers will ask about the security framework available. SEBI and RBI have already laid down the framework to follow. We need to see the kind of frameworks that we need to deploy and get help, and do frequent audits. There is a blend of transparency and security that can be extended to customers. The leadership has to manage these things and move forward.

Talking about role of deeptech in business decisions, Ashish A, Founder and CEO, Bru Finance, said we use blockchain to solve problems for the banking industry and also bring financial inclusion to farmers. Farmers deposit crops, and based on that we give them a loan. We are using three types of deep tech in our solution. Primary is the blockchain platform. We also use IoT solution to get the information. We are using data such as warehouse location, etc. These deposits are very important for us. We also need to know the quality of the warehouse. We also have AI-based analysis.  So, blockchain is the core, supported by IoT and analytics.

Deeptech influences the upcoming models of finance. We look at two main things: decentralized finance and embedded finance. Decentralized finance is a no-brainer. Some sort of embedded finance is built into our solution. Warehouses are able to lend to farmers, without them going to bank. Embedded finance is changing the world. Those can be used to develop credit history. App data from cab companies and food delivery outlets are also getting embedded. 

In future, quantum computing will change the way fraud analytics is done. AR/VR is still in the metaverse. We will see some of the things getting implemented over the next few years. Metaverse is just starting, and people are selling land there. Gaming is a big industry. People buy new avatars, clothes, etc. We may be payments via the metaverse in future. Crypto is going to support that, and decentralized finance will be a part. That will create a new paradigm for the future.