2020 will be remembered as a year of disruption. Now that organisations have developed innovative digital transformation to navigate a more volatile economic landscape. Technology is ramping up the financial industry with trends like the API economy, digitization, and collaboration, proving fundamental to brand preservation and growth. And, fintechs are the great enabler of technology.
We talked to several Fintech Companies about how financial industry is shifting to digital and what are some trends which are going to define the new normal. In this interview, Jatin Bhasin, VP Product , Capital Float, tells us how Fintechs will be a game changer with the application of emerging technologies in 2021.
DQ: How are you witnessing cloud and big data analytics playing a role for growing fintech in 2021?
Jatin: Fintechs have largely been cloud-friendly companies. With the advent of Cloud solutions such as AWS, GCP, Azure and the possibility of hosting a private or public could system, many traditional financial institutions have started to migrate a sizable portion of their data to digital formats.
One of the main advantages for financial institutions using Cloud is storing and keeping track of large data sets that are used for verification of transactions. This makes them agile and fast-paced. This also opens up their reach to various different markets however remote they may be (regardless of their location).
In terms of Big Data Analytics, every fintech company collects gigabytes of user interactions data in structured or unstructured forms on a daily basis. This information is used to provide personalized offers to consumers and helps in fraud management using fraud detection algorithms.
In 2021, we believe the fintech industry will continue to grow stronger with the efficient adaptation of Cloud centric models in order to provide consumer oriented services with reduced operational costs.
DQ: What is the role for AI/ML and IoT in fintech for 2021?
Jatin: In 2021 the financial industry is looking at getting back on its feet post the pandemic. With AI/ML fintech organizations stand to benefit with uniquely crafted digital services and experiences. AI has enabled us to build innovative technologies such as self-learning chat bots to guide customers through every step.
IoT has made the world more connected than ever and this is true even for the financial sector with digital banks. Some other clear advantages would be around providing real-time market indications which was not the case with the earlier tech stacks in use. ML has been updated to effectively interpret and recommend actions based on real-time data streams benefitting customer needs. This would lead to tangible benefits for end users, such as increased loan approval rates, faster approvals, etc.
DQ: How do you see RPA playing a role in fintech for 2021?
Jatin: Robotic process automation (RPA) is known to simplify labor intensive processes. RPA is designed to mimic certain mundane human actions and increase the speed of processes. Its implementation and compatibility has minimized the efforts of Fintechs in terms of logging information manually. Technological applications like eNACH has significantly reduced tedious paper-based processes.
In 2021, such technologies will help automate low-value efforts including data collection and processing, shifting human focus onto high-value activities such as data analysis and modeling in order to enhance productivity. Data points such as GST, Aadhar, UPI and POS terminals may be sourced to provide insight and opportunities to fintechs and help in matters such as risk analysis, speed of decision making, data access, etc.
DQ: What is the role for Defi or decentralized finance and what will be the impact for blockchain on fintech for 2021?
Jatin: Blockchain does not just help with the transformation to a digitized system but has also contributed to the newly emerging decentralized finance system (Defi). Blockchain technology is definitely a trend that is set to be more prominent in the BFSI space.
Unlike being originally used for crypto-currencies, Blockchain is now being used for authenticating lenders, consumers and transactions, and also plays a major role in preventing unauthorized access and cybercriminals from trying to poach financial transaction information. Cross chain technology in Blockchain brought scalability and stability through Defi in 2020. Defi allowed individuals access to financial services such as borrowing, lending and investing.
Defi applications work through the distribution of functions. Individuals using these applications are responsible for any unsanctioned action as every computer, server or IP makes its own decisions that results in the final behavior.
A Defi system using Blockchain to provide smart contracts automatically verifies and processes financial transactions.
DQ: Will there be growth in digital-only banks in 2021?
Jatin : If many of the traditional banks were to be built from scratch today, they would likely not have followed a brick-&-mortar model of operations, but would’ve rather moved to creating a more robust digital infrastructure to reach their customers across India.
Digital only banking services have begun to become a norm of the 21st century, mostly as the structure of banking has changed, be it to make transfers, avail credit, insurance or any other financial service/activity. Digital banking services are available to their customers at the click of a button which was not the case a few years ago.
Digitization of banking services are a boon not only to consumers in terms of accessibility but also help banks in saving money on various fronts which has helped them invest in creating more technology oriented and user friendly digital platforms.
DQ: How do you see Reg-Tech taking off?
Jatin: RegTech is more than just a buzzword today. It has been contributing towards providing advanced technological solutions in order to be on par with the ever increasing demands of regulatory compliance. Financial institutions have also started partnering with RegTech companies to strengthen their identification verification and background checks, financial crime surveillance and fintech risk management.
In India, several fintech companies are regulated by the Reserve Bank of India (RBI) and RegTech companies aim to embed compliance in fintech while working along with regulators and arbitrage technologies.
On the other hand, regulators can also benefit from RegTech companies by using their artificial intelligence and other technologies to streamline resources, understand rogue consumer behavior etc. to prioritize and maintain market stability.
DQ: Will there be growing space for open banking?
Jatin: Open banking originally started in the UK and is seen to be growing in the Indian market. Fintech organizations seek information stored within certain banks and having an open banking system will help source relevant information through verified channels.
In 2021, open standard of banking is likely to be created using API, Fintechs would be able to use data from banks using secure protocols built on sharing models via API.