Commentaries and insightful analyses on the world of finance, technology and IT.

January 19, 2016

Payment Industry: Bridging the Breaches with Biometrics

-by Kuljit Singh and Varun Narang

What could be the natural course of action for an industry grappling with multiple demons, such as hacking, theft, infringement, and transgressions? The solution lies not in prayers, but in technology; especially one that is difficult to violate. Almost like a quintessential blessing, the rise of biometric could be the solution that the payments industry truly needs to tide this crisis over. The solution seem promising and over time it is likely to overcome its current shortcomings to be able to bridge the breaches and if it is able to do so, it would be significant step in making payment channels more secure.

Experts say that 65 percent of mobile commerce transactions, expected to generate US$36.4 billion in revenue by 2020, will come through the use of mobile biometrics. This is incentive enough for everyone to take biometrics seriously; and it is being taken so by many players already. Examples of this include MasterCard, which is testing facial recognition technology to authorize transactions; and ecommerce giant Alibaba, which is exploring the idea of capturing selfies for payment.  Meanwhile, Samsung is also combining fingerprint, voice, and iris-recognition; to make its proprietary payments service - Samsung Pay - safer and more convenient. Apple too has launched fingerprint-authorization for payments made through Apple Pay and purchases made through iTunes.

Biometrics is being looked at quite favorably by industry giants, and is thus expected to become the next-big-thing in payments. However, issues concerning compliance with security and law, behavior, and technology refinement, need to be addressed before its ubiquitous adoption.

While biometric solutions provide numerous benefits, they can also get hazardous when misused. Therefore, it is important to monitor closely, because the consequences accompanying such contraventions could prove catastrophic - not only to the consumer, but to the entire industry. The fundamental concern being that when biometric data gets compromised, it is difficult to fix; and unlike stolen cards, it cannot be changed!

Thus, while staying cognizant of the associated risks, the payments industry should continue working with biometrics technology. Their objective should be to make it more robust and bring to light the best possible solution - both for merchants, as well as consumers - to thwart the nefarious designs of hackers.

December 22, 2015

Tennis and big data: A partnership to watch

I vividly remember that memorable quarter final match of US Open between Andre Agassi and Pete Sampras in 2001. The match, which went down in history as a classic, lasted three and a half hours and saw Sampras serving 25 aces to Agassi's 18. When the match finally ended, some three and a half hours later with Sampras winning, the players got a standing ovation at midnight from a stadium full of die-hard fans.

Recently I had the privilege of attending this edition of the ATP tournament in London for which Infosys was one of the proud sponsors. What amazed me this time, in contrast to 2001, was the sheer amount of data.

• For example, did you know that this year at the ATP tournament, Roger Federer saved 64 per cent of all break points, while Novak Djokovic's saves stood at 60 per cent?

• Also that Federer holds the record for most second-serve points won (55 per cent) followed closely by Djokovic (54 per cent).

• And yet in the keenly contested finals, Djokovic managed to win a mind-blowing 84 per cent of his second-serve points.

Fascinating isn't it? How such insights bring out the multiflorous facets of what the lay person might assume to be a simple game. Sports fans are religious about details and statistics. We consider them our holy grail; knowing and remembering who faced off whom, when and the percentage of wins against each other, information that sets a true fan apart.

What makes this data even more special to me is this has been crunched by us using Infosys Information Platform (IIP). IIP has given a new perspective to the game of tennis. It has enabled ATP to leverage its data capabilities to provide fans, players and analysts with interesting facts and stats about the game they love. With the tie-up ATP hopes to take advantage of Infosys's data analytics capabilities while Infosys aims to leverage 40 years' worth of ATP data to provide deep analysis.

All the clients I spoke to were appreciative of these data points, however most surprising was the fact that players wanted a piece of the data as well. They were keen to use it in training for analysing detailed information on their performances and dive deeper into data driven patterns of the sport.

IIP provides immense data analytics capability. With IIP 2,40,000 records and 12 million data points can be analysed in real time and provided to the viewers so that they have a more enjoyable watching experience. With the customized platform being flexible for deployment over cloud (because of Hadoop and Apache Spark), users across media spectrum will get uninterrupted access to data wherever they are.

For fans fortunate enough to watch the match live at venues, special apps allowed for personalised offers, instant replays and the ability to connect with friends attending. Virtual reality and live data streaming added a new level of enjoyment for those catching the match on screens. With the attention span of audience growing shorter, the idea was to provide as much information as possible to enhance user experience and engage more fans to join in the match excitement. What the world saw this year at ATP was only the tip of IIP capability and we are confident that over years we have the potential to become the preferred platform for analysing vast amount of data and helping effectively predict outcomes.

As Mr Murthy rightly said, "In god we trust, for all others bring data". And we are truly on the path of bringing accurate and reliable data insights to the world.


December 21, 2015

Mobile Wallet: The catalyst for a cashless economy and financial inclusion

Technology innovations over the last few decades paved the way for plastic money, which brought easy portability of money along with security. It also helped governments to deal with the challenge of money laundering by providing an effective and consistent trail of all the transactions. However, the benefits of plastic money could only be reaped by people who were included in the banking system or the banking network. As it happens, banks cannot reach out to every person or be participants in every financial activity, and this points us to a longstanding problem - a significant portion of the world's population is still unbanked and survives on paper money. The percentage of unbanked population is especially high in most African and South Asian countries. This makes it difficult for the governments in these regions to draw an effective economic policy, to extend financial benefits to its citizens, or even curb financial irregularities for that matter. A possible solution to these problems could be the mobile wallet - a recent technology that can pave the way for a cashless economy and lead to global financial inclusion.

The internet and mobile phones have a far better penetration in all parts of the world when compared to any banking system. This makes the mobile wallet a more relevant choice from among the new-age technologies that can take banking to the unbanked population of the world.

This is because one requires neither a bank account, nor any credit checks to possess a mobile wallet. They offer support for multiple channels, such as SMS, WAP browser, mobile apps, and GPS (Apple's Passbook automatically brings up coupons and tickets on the phone's screen based on the user's location). This technology overcomes the hassles associated even with low value transactions such as valet parking and tips given at restaurants. In fact, MiPayWay has begun testing a mobile payment system that allows tipping without cash.

Nordic countries are fast headed towards becoming truly cashless economies. The Mobile Pay app launched by Danske Bank in Denmark already has 1.8 million users in a nation of 5.6 million people.

Coming back to financial inclusion, M-Pesa presents to the industry a success story of a mobile payment solution that has now gathered millions of consumers in Kenya. Due to the lack of a banking network, lesser than 25% of the Kenyan rural population was included in the banking system. Even where there were banks, the lengthy credit check processes and the minimum balance requirements posed serious challenges to consumers. However, with a high mobile adoption rate and an attractive transaction fee structure, M-Pesa became a preferred service among consumers as well as businesses in Kenya. Today, almost 70 percent of the Kenyan adult population uses M-Pesa.

In India, one of fastest growing economies in the world, currency notes in circulation account for 12.3% of the gross domestic product (GDP), whereas globally, they account for 2.5% to 8%. Also, bank account penetration is just around 53%, which is lower than the world average. A study by IAMAI and KPMG suggests that the number of mobile internet users in India will cross the 300 million mark by 2017 - that's almost double of the 159 million users in 2014. India is one of the largest markets for smart phones and thus, the mobile wallet can prove to be a technology revolution that achieves what traditional banking has not been able to, so far.

Today, there is a race in the market among players from different industries offering mobile wallet solutions. This includes various institutions, such as banks, telecom companies, tech giants (such as Google and Apple), and even merchants, each with their own strengths and weaknesses. Where banks enjoy the trust of customers for being the all-time custodians of their money, tech companies are beating everyone on the innovation front. Additionally, other players are bringing rewards, offers, and other value propositions, based on the nature of their respective industries.

However, to realize the bigger picture of tapping the unbanked population and replacing paper money, we need to have mobile wallets form the basis of all financial activities, instead of restricting them to a particular industry, select products, specific transactions, or even the current generation of customers. A large number of people are still uncomfortable handling money matters electronically. This is either due to old habits or a lack of education and awareness on the matter. To increase the adoption of mobile wallets, end users' concerns around identity theft, hacking of devices, or loss of personal information during transactions need to be satisfactorily addressed. Different players enabling the mobile wallet ecosystem, such as banks, merchants, telecom service providers, device manufacturers, and payment processors, need to develop a common platform that serves all financial activities in a consistent and convenient manner.

Not just individuals, but also businesses need to move to mobile wallets. A common payment platform for all the merchants is the need of the hour. Various mobile wallet solutions, operating independently today in the market, should allow money movement or transfer between each other - in the same manner banks allowed customers to withdraw money from any ATM. Governments can also play an active role by associating perks and rewards with mobile wallet transactions. Given the fact that there is a significant cost associated with the handling of paper money, which is borne today by the governments, reducing the use of paper money can certainly lead to significant savings. In the end, governments need to pass these benefits on to the end users and merchants.

A truly cashless economy will have fewer frauds, consistent audit trails, more compliance, and an effective management of money movement. All this is achievable by effectively leveraging available technology to replace physical money with virtual money and thereby ensure safety and convenience for the end users.

December 17, 2015

Persistence of Paper in B2B Payment

-by Kuljit Singh and Maruvarkuzhali Subramanian

The ways of transferring money for a transaction have evolved along with the evolution of the world of payments. One would be inclined to believe that the use of paper checks, which have been the most popular non-cash payment method over centuries, are finally on the brink of extinction.

Such an understanding is partially correct because if we observe the consumer side of the entire payment ecosystem, the use of checks has declined drastically over the years due to the spectacular increase in the choices that consumers today have in the form of mobile and internet payments. However, where one's understanding of the decline of paper check goes amiss, is when one includes B2B payments into the equation.

Thus, if there has been a drastic decline in checks in P2P payments, the opposite is also true in the case of B2B payments, as businesses are writing more checks than ever before.

The statistics of a reputed association of financial professionals in the US says that 50% of B2B payments are made in the form of paper checks. Though this, in itself, is astounding but again it doesn't present the complete picture as the businesses considered in the above statistical number are big businesses with an annual revenue of more than US$1 billion. If we include the small businesses, the picture becomes grimmer, as experts claim that in such a scenario, the percentage use of paper checks would jump up to 90%.

In terms of numbers, a survey has found that 8 billion payments in the form of remittances are made by paper checks annually in the US. The overall damage of issuing and processing these 8 billion checks and 8 billion invoices cost US businesses around US$100 billion annually. And this does not consider the cost of check frauds.

So why do businesses willfully turn a blind eye to such huge losses, instead of going for more effective and cheaper options? Frankly, there aren't many options that can blend both the qualities stated above. ACH is marketed by banks for B2B payments, exclusively for larger clients. The large size of B2B payments makes the credit card fees exorbitant, and when it comes to wire transfers, though it is real-time, it is also unsafe, high-priced, and laborious.

Banks also offer bank pay solution, but only about 2% of businesses opt for this option in the US as it doesn't integrate into businesses' accounting or ERP systems. Thus, when businesses try to make payments to vendors through their ERP systems, such systems end up producing checks, as payments alternatives offered by banks, such as ACH, are poorly integrated with systems that are used by businesses. This deep divide is what is resulting in the issuing of paper checks for B2B payments.

The silver lining on this dark cloud is beginning to appear in the form of NACHA approving same-day ACH to move payments faster. This is a part of the Federal Reserve System's modernization push, which would result in a shorter clearing window, in addition to faster payments. With such efforts, the opportunities for fraud are also likely to diminish. Also, with the use of a new breed of simple and affordable solutions, the issues of integration and cost are likely to be resolved in the days to come.

November 23, 2015

Apply intelligence where it is needed the most

In my previous blog, we talked about letting the CAT out of the bag in order to make risk management more effective. The 'T' we talked about previously was 'transactions,' the other two being 'customers' and 'accounts.' With the increasing number of channels of monetary transfers - both bank-regulated as well unregulated, anonymous ones, such as Bitcoin - to scan each transaction, especially in a pre-facto scenario like anti-money laundering (where the decision making is required, prior to approving the fund transfer), becomes too daunting a task.

In a post-9/11 world, which brought financial institutions to focus on monitoring transactions in order to curb finances of terrorist organizations, the regulations and the know-how required to put them in place is still inadequate (Ref: American Bankers Association). However, good data sets can help address this. Considering the fact that it is not only a select few states funding such organizations, but also a list that includes legitimate charitable organizations and individuals as well, acting as fronts and providing monetary sustenance to them, the need for intelligent predictive and prescriptive analytics is evident.

The days of relying on plumbing are over. Banks today need intelligent and integrated platforms. A move towards big data and analytics is an obvious start, but the required ingredient here, is good data that is intelligent and that paves the way for the subsequent application of this inherent intelligence.

The technology architecture, and specifically the product suites of the modern world, allow strong and seamless integration capabilities through which, data can be sourced into a landing zone. For example, Hive can provide users limitless capability to slice and dice the data, build analytical dashboards, and develop management reports using sophisticated suites like Tableau and Microstrategy. This can be the foundation for further intelligent analytics. One way to achieve this is by establishing loopbacks at every step in the integrated chain, so that the data is enriched continuously, and made more meaningful.

One user group of such data is the operational front and the other the associated central organizations like FINCEN. The vision is to provide both these user groups with as much intelligent information as possible, in order to improve the decision making, risk scoring, and monetary tracking; by enhancing the rules and scenarios with the loopback mechanism.

All that has been achieved with the continuous efforts of the financial industry around the world needs to be implemented a bit more intelligently. The enemy in discussion here is smart enough to create fronts that look completely legitimate, and runs a dark world covertly and intelligently. The statistics teams that build scenarios to scan transactions, need more enriched, real-time data, with a loopback into the system, so that the scenarios become more foolproof, assign better risk scores, and generate lesser false positives.

The legitimate organizations involved in such transactions could be visualized throughout their relationship lineage with the bank, and could be chopped off, thereby reducing bank losses, as well as involvement, and consequent liabilities (if any).

There is a dire need to build effective and productive data farms, in banks, that can link CAT, across its internal banking relationships and provide the bigger picture for every entity. While the cost of such a system may be high, the rewards will be even higher. Good data will not only drive better business analytics and revenues, but also catch illegitimate fund placements, predict their behavior through pattern analysis, and prescribe a course of action; thus safeguarding itself and humanity at large.

November 12, 2015

It's time for the banking Goliaths to take note of the nonbanking Davids!

Within ~1.5 years of the launch of its mobile maps app, Google had erased over 80% of the top GPS companies' market capitalization. Similarly, in just over seven years since venturing into the music space, Apple became the world's largest music retailer. History is replete with examples of new entrants - backed by technological superiority and innovative business propositions - wiping out established companies in almost no time. With this in mind, can established banks today say with any certainty that this won't be repeated in their industry? Today, more and more nonbanking organizations are foraying into the banking sector. Startups like Stripe and Square have earned multi-billion dollar valuations. Today, around one-third of U.S. revenue for Starbucks is paid via its own loyalty cards.

Banks' nonbank competitors span nimble technology players, telecommunications companies, start-ups, retailers, fintech firms, peer-to-peer lenders, crowd-funding websites, internet/mobile service providers, and many others. The threat of traditional banks getting relegated to the limited back-office utilities roles by the nonbanks is quite real. If you are still unconvinced, the three news stories below from the past few months may help change your mind.

By Aug '15, Europe's largest peer-to-peer lending platform, Zopa, had facilitated over £1 billion in loans to over 200,000 people. In July '15, it had experienced over 120% YoY growth in its lending business. Zopa by now has over 2% share of the UK's unsecured personal loans market.

In Mar '15, the Chinese e-commerce giant Alibaba, announced that it is developing facial recognition technology to enable mobile shoppers to substitute their passwords with selfies. Today, China's financial sector is experiencing immense transformation owing to innovative business models from major internet companies like Alibaba that are rapidly adopting microfinance with a digital edge. Alibaba had launched in China - a third-party online payment platform involving no transaction fees.

In Mar '15, the Chinese smartphone manufacturer Xiaomi moved into the financial services arena by enabling an interest-bearing mobile wallet account. Within couple of months, it also launched an online money-market platform - Xiaomi Huoqibao. Today, online money-market accounts are experiencing high popularity in China - thanks to their heavy promotion by the tech industry entrants and also because they offer substantially higher interest rates than traditional banks.

Whether it's lending, payments, cards, wealth management, insurance, or any other banking functions (except deposits where there are regulatory constraints for nonbanks); the nonbanks are making rapid strides. The following are a few examples:

1.Payments: Google, LevelUp, Apple, PayPal, Sage, Starbucks, Square, Walmart, Alibaba, WorldRemit.
2.Lending: Funding Circle, On Deck Capital, Lending Club, Amazon, Kabbage.
3.Money/Wealth Management: Nutmeg, Moven, LootBank
4.Mortgages: Zillow, Quicken Loans, loanDepot
5.Invoice financing: Payplant, InvoiceFair

So what gives these nonbanking players a competitive edge over the traditional banks? In my view, there are three key factors:

1.Digital superiority: Non-banks have aggressively proceeded with digital innovation, ranging from leveraging real-time predictive analytics, open APIs and ecosystems, multi-channel portals, ultra- automated decision engines, cloud, IoT, geo-location and biometric capabilities, and more. Unlike traditional banks who have typically managed their systems via closed structures like proprietary data and communication networks, nonbanks have been aggressively leveraging their APIs and related ecosystems to ensure openness. Zillow and Apple, for example, have a large number of APIs that let their partners integrate into their digital platforms. Similarly, nonbank SME lenders such as Kabbage, Fundera, OnDeck, have digital access to external databases that have a vast amount of information on SMEs. These lenders are capable of real time risk profile assessment using traditional as well as alternative data sources e.g. Yelp reviews, Quick Books entries, etc. Their cloud-based credit scoring capabilities and lending decision engines are underpinned by predictive models that leverage thousands of data points. Further, many new entrants don't follow the limiting linear digitization strategies of traditional banks. For example, Atom bank in UK started with the mobile banking only and planned to add internet banking capabilities only later.

2.Superior customer experience: Many nonbank entrants are globally successful digital companies who are capable of providing superlative user experience. Nonbanks have been proactive in enabling needs-based, simple, and hassle-free solutions to customers. They are capable of servicing market segments that traditional banks have been reluctant to service due to high costs or for other reasons. LootBank's offering of mobile money management with prepaid cards for students, Amazon's lending to its merchants, Payplant's invoice finance servicing for app developers are a few such examples. Nonbanks are able to provide value-for-money to customers. For example, PayPal offers select merchants fixed rate loans which get paid as a percentage of their daily business sales on Paypal, obviating the need for minimum monthly payments. In its foreign exchange business, Transferwise has enabled formidable pricing strategy. Many nonbanks have also seamlessly integrated their product merchandizing, media content, payments/ordering services and other key financial features into their digital channels - all of which are backed by a real-time personalized customer experience provisioning. Biometric authentication, beacons usage, one-click payments, social media integration, to name just a few, also aid in enabling superior customer experience. CityFalcon has leveraged Twitter to provide investment insights to traders; PayPal and Moven have aggressively leveraged their superior digital technologies to acquire tech-savvy millennial customers. Thus, it is no wonder that PayPal is the number one online payment service in many countries.

3.Agility and speed: Unlike traditional banks, digital nonbanks are not subjected to stringent regulatory requirements. Consequently, they can capitalize on this by aggressively innovating. Thus, their continual and frequent innovation, high risk appetite and operational productivity, and sharp focus on value-addition are part of their mantra. They release new innovative service/product with remarkable efficiency and speed and respond to customer needs much faster than traditional banks. PayPal and Square, for example, allow their merchants to start accepting payments within one day (almost a week faster than most traditional banks). OnDeck Capital can decide in less than 24 hours, the credit worthiness of a business customer, and it takes only two weeks or less for fund disbursement (with good number of loans getting disbursed within 48 hours!). QuarterSpot allows business owners to apply for loans online in just a few minutes. Similarly, the balance transfer between the Yu'E Bao investment account and Alipay account can happen in just one click.

I believe it's high time that traditional banks take note of the lessons in the David versus Goliath legend! Don't you agree?

November 5, 2015

Financial services slowly swings towards connected things

The tale of the rabbit and tortoise is known to everyone because it has been told many a time. If we draw an analogy in the business world, financial services (FS) would be the tortoise when it comes to adopting digital technology when compared to other industries.

As with most digital technologies, FS has been slow to embrace the Internet of Things (IoT) whereas other industries have taken to it as a duck takes to water and appropriated a space for themselves in the IoT world.

IoT is simply real-time communication and sharing of information between devices connected to the Internet. Though the definition is simple, the impact that it carries is profound because the information thus collected would be used to predict needs, solve problems, and boost  efficiency with the use of big data, analytics, predictive modeling, and artificial intelligence (AI). Some examples are Apple Watch, Google glass, and Nike+.
Though the FS industry has been slow to move towards IoT, the emergence of technologies such as wearable and sensors have the industry's interest piqued. So much so, that FS is one of the top ten industries investing in sensors for devices.

Apple Pay is one of the most quoted examples of IoT in FS. Another example is telematics, which is used to communicate information about the location of a vehicle, crash notification, and such other vital information to the driver, insurer, and the concerned authorities.

The entire ecosystem, which is being created by these objects with sensors, is bringing in a fundamental change in the way financial institutions interact with customers. With the use of technologies such as big data, artificial intelligence, and analytics, these institutions are beginning to get more personalized data about their customers, which in turn, help them tailor and offer their products and services in a more personalized form to the customer.

Ads, webpages, and product recommendation based on customer data bring convenience, which in turn create better customer experiences. With smooth transactions and continuous customer engagements at many touch-points, the business model and revenues are likely to see a more positive impact. That said, the moment one hops on to an inter-connected digital world, the hounds from hell come chasing to target security and privacy loopholes. This gives cybersecurity a whole new dimension for all the stakeholders involved in this world of IoT. With digital vulnerabilities expanding exponentially, the challenge of keeping the space safe is going to keep all concerned on their toes. The financial industry, already under severe attack would have to be doubly cautious and more prepared to ward off this challenge.

So should the rabbit of our story win? Perhaps continuing slowly and surviving is a better option than getting into a mindless race where survival itself becomes doubtful. Out running is not a choice for our slow friend, he can use the tracks left by his faster partner to be more prepared of the possible way-lays that may lie to hunt him. So slow and steady may not win the race but certainly, survive for another race.

October 26, 2015

EMV in the US: 'Swipe' Out, 'Dip' In

Losses originating purely from the use of magnetic or 'swipe' cards are pegged at $8.6 billion per year and many experts believe this figure could touch $10 billion or higher this year. Given this background, businesses shouldn't need much convincing to move to a more secure alternative. However, considering the figures above are that of US and it is the last major economy to move to EMV, that is,  chip cards that need to be 'dipped' into a machine for transaction, it seems to have taken  a lot more convincing than one would have deemed necessary. Better late than never, the US officially adopted EMV on Oct 1, 2015. It is a welcome decision as the US is home to about a quarter of all of the world's credit card transactions.

What took the US so long? If we look back, there have been two main causes that led markets towards EMV - the first being the objective to combat increasing card fraud, and the second, the lack of a robust telephony network. The latter presented the need for a system that could operate offline, such that the card and the terminal are able to allow settlements, without the constraints of the bank's system.

In the yesteryears, America was immune to both those factors. Fraud was more prominent in other markets and connectivity was better in the US than in most other places. However, over time, as other markets began to plug the holes in their defenses, fraudsters shifted their attention to the path that did not only offer the least resistance, but was also very lucrative - the US market. Thus, the US went from being impregnable, to most vulnerable.

Now that it is here, one aspect that is being largely discussed is the 'liability shift.' This essentially means that in case of a fraud, the party with the lesser technology would have to bear the brunt of the liability. From the 'carrot and stick' analogy, the liability is the 'stick', being used to encourage parties to adopt new technology and bring more harmony into the market through better coordination. This has made both the issuers and the merchants invest in the migration, simultaneously. If one migrates and the other doesn't, it would just lead to fraudulent activities shifting within the ecosystem, thus making the entire exercise inefficacious.

The associated costs and consumer adoption are two of the biggest impediments in the transition to EMV. The terminals that read chip cards can cost up to $1000 apiece, which may force smaller players to decide against adoption. However, issuers, such as American Express, have pledged financial aid to help smaller businesses defray the costs. Meanwhile, Square, a Silicon Valley startup, has announced that it is working on developing more affordable chip readers. Sooner these effort bear fruit that reaches the smaller businesses, the better it would be for the cause of secure transactions.

Additionally, there is the problem of customer behavior. However, they can be encouraged to move to new cards through demonstrations and offering certain benefits.

Yet another, but much bigger elephant in the US stores is Apple Pay that requires around 220,000 retail stores to add NFC capable terminals. For these merchants - having already adopted the Apple Pay terminal - the adoption of EMV terminal would be counterintuitive.

In spite of these challenges, EMV has started making headways in the US. But that doesn't mean it is the end - in fact, it is the beginning of a new struggle as fraudsters are likely to move to ecommerce and omnichannel merchants. Merchants' solutions to ward off these challenges and fraudsters fighting to disrupt such efforts should make this battle worth watching.

October 20, 2015

The future of utilities

Industry utilities are emerging as a welcome innovation in the financial services value chain. Their core proposition of disintermediating non-core functions to allow banks to focus on pure business-generating activities is resonating with an industry coping with siege on multiple fronts. But the path to large-scale adoption is still beset with a few key challenges, like regulatory approval for instance.

Regulatory consensus on the value of utilities is still to emerge, especially when it comes to functions like compliance and risk management, which are still viewed as core responsibilities of banks. Then there is the allied concern of defining liability and accountability in this new disintermediated model. It is clear that the pace of utilities evolution will be a function of the industry's ability to engage and collaborate with the regulatory community.

Concurrently, utilities will have to back up their proposition with strategies and structures that account for the practical concerns that still prevail. The focus will have to be on demonstrating that they can balance risk and value through well-governed organizations built on collaborative partnerships, clearly defined roles and responsibilities, and compliance with contemporary principles of security and privacy.

The primary task will be to develop a detailed implementation and operationalization roadmap. At the level of strategy this must address issues like shared vision, governance, risk management / transfer, to name a few. Then there are the technical and functional considerations of defining a utility's scope of service, its product/service strategies and the structural frameworks that will ensure privacy and security.

The roadmap must also include a coherent technology strategy including the expected evolution, say, from an enterprise platform to full-fledged utility via private cloud and SaaS phases. Continuous innovation must be an ingrained functionality, with the roadmap clearly demonstrating how customer value can be enhanced by adopting robotic process automation, robot advisors, NLP-based tools, self-service portals, self-learning systems, thin-trades, open technology platforms for regulatory reporting, and more.

Finally, utilities should offer a business case to customers that emphasizes the real and extended benefits of adoption over and above immediate cost savings. The long-term view should not only highlight the possibilities for accelerating cost savings but also the opportunities to enable productive financial engineering and strategic enterprise outcomes. But the most critical driver of adoption will be the industry's ability to engage with and accommodate the requirements of all stakeholders - banks, product vendors, infrastructure players, technology partners and regulators.

October 14, 2015

'Ification' of Games: Fiction, Fad, or Fact?

The year was 2011 and when scientists were trying to solve the puzzle - find the structure of an enzyme that helps AIDS-like viruses reproduce, for decades - in walked a few online gamers and lo! Behold! In three short weeks, they achieved what eluded scientists for decades. In essence, gamers found the required structure through their gaming skills. This is the most acclaimed example to exemplify the virtues of Gamification.

It was in 2004 that 'ification' was suffixed to 'game' and Gamification has continued to gain currency ever since. It is fundamentally, the art and science of applying mechanics of games to non-game situations, to elicit certain desired behaviors from users. It is used in businesses to make the scenarios more fun, to increase engagement.

Companies are using Gamification to change user behavior, solve real-world problems, and extend brands. It is also being promoted as a tool to keep the employees engaged so that their skills can be enhanced. The ultimate desire is to have these skills drive innovation.
With the emanations and evolution of gesture control technologies, along with augmented reality, Gamification is predicted to become an everyday thing in the years to come.

Even now, whether or not we notice it, Gamification is becoming ubiquitous. Most of us have profiles on social media channels such as Yammer, LinkedIn, Facebook, and Twitter. On these sites, we are encouraged to complete our profile details; the progress is shared as a bar on our profile page. The profile bar is a virtual representation of how complete your profile is, to not only inform us about our profile, but also motivate us to complete the profile; in essence, induce the desired behavior.

Traditional 'push' communication impact has been dwindling in terms of motivating the customer to take note and act. With Gamification, engagement is increased, through the elements and excitement of games, which helps in carrying the organization's message to the customer.

The engagement that is produced with Gamification is not only effective, but also sustainable because gaming is addictive. As customers become players, putting their energy and time into achieving goals, such as winning reward points, they are more likely to stay longer, which in-turn increases the possibility of bringing in more engagement with the brand.

Some might be fighting the doubt that such contests and promotions have been a part and parcel of businesses since the time they came into existence - so why is there the need for Gamification? Is it not just a fancy term to existing practices? The answer to this is, no. It is not an old practice in the cloak of a new term. It is actually an organic next-step or evolution. While promotion tries to entice audience through bait to trigger a desired activity, for instance, "Open an account, and get a chance to win an iPhone", the goal of Gamification on the other hand, is to entrench the products and services in the lifestyle of consumers. 

Thus, Gamification, as a tool of customer engagement, has transcended the fiction and fad stage a long time ago and is now a fact of life; as it is the shared purpose on the part of businesses and customers. This shared purpose is the driving force that strengthens this trend - and as long as the purpose of remaining shared exists, this crescendo will continue.