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

April 17, 2017

Banking - Riding onto Augmented Reality journey

We all know Pokémon Go! The game was downloaded more than 100 million times in the first month of its launch and reported $10 million earning per day with its popularity. This introduction of augmented reality into gaming, added a whole new chapter in the gaming industry. It made players get up from their couches and explore new places in their surroundings. I witnessed this shift when my son explored an unknown temple nearby to grab the Pokémon and also saw some colleagues using staircase regularly to find the hidden Pokémon.

Virtual reality (VR) is a simulation, giving viewer the impression of a real scene with interactions. However, AR is integration of real-world information with advanced technology enhancements. It brings the digital interactions closer to the real-world by adding graphics, sound, and smell as perceived by the viewer in real world.

World's leading Global Investment firm has reported that VR / AR market across industries will reach $80 billion by 2025. Gartner has listed AR / VR in top 10 strategic technology trends for 2017.

AR has brought in superior customer engagement and there are many ways in which it can benefit banking industry. Mobile is the most favorite channel for financial transactions. Today's customers need personalized services and AR can truly enhance the customer experience by making the customer journey simple and interesting. Banks are investing into AR and trying to adopt innovative solutions to provide enriched customer experience and stand out in highly competitive world.

Let us outline key use cases applicable to banking and financial industry.

Location-based services

Mobiles have become more advanced with built-in sensors to work with AR applications. The handheld AR solutions utilize image linked map (ILM) interface to provide a stylized map for user interactions. Banks have started using these solutions to provide discounted offers, nearest ATM / branch locations, dinning offers, shopping centers, and many other options. These are displayed not just as GPS location on map but with real-time pictures along with detailed information about place, distance, directions, etc. Below are some of the examples where location-based services are provided with AR applications:
1. The oldest and leading foreign bank in China has launched an AR app called 'Breeze Living' on iPhone. It provides location-based services such as discount coupons.
2. The leading private-sector bank in India has introduced AR in its mobile application 'Near me'. It lists all the dining destinations, shopping centers, ATMs, branches, and many other things.

Virtual banking

Banking industry is undergoing a massive change, mainly due to emergence of changed customer expectations driven by technology. End-to-end digital banking is the key to great customer experience. AR app user can just scan his account number and with all displayed options, he can manage his account, make payments, and explore new products. User can hold his mobile camera on a product image and AR brings in the complete brochure alive!! With AR in place, the customer can even expect his personal banker virtually available in his living room, helping in finance management.

Banks in different regions have started adopting AR applications.
1. One of the leading bank in Australia has launched an interesting AR app for iOS devices, making account management possible. Customers can check their card balance, make payments, find the closest bank or ATM branches, etc.
2. Industry leader bank in Poland has enabled AR feature on their mobile app. Customer can point the phone camera at the banner on their website and avail augmented 360-degree product information and avail attractive interest rates!!
3. UAE's largest bank has launched the first virtual bank branch in the world using VR / AR features on new Apple Watch banking application.

Emerging banks or fintechs can adopt AR banking techniques, rather than setting up traditional brick-and-mortar branches . These banks will provide enhanced experience to customers and save the operational cost as well.

Mortgage and lending services

Banks can adopt the AR solutions to provide rich experience to potential lending or mortgage customers. Combined with location-based services, AR solution can help in property searches, listing down all details of property, view properties and display special offers when a device is pointed at it. This can further be enhanced for personal lending services.
Mortgage and lending services with AR applications are provided by the banks across all geographies:
1. Leading Australian mortgage provider has developed iPhone apps which are used for making property search decisions by giving property listings and detailed information on particular properties.
2. UK's largest provider of residential mortgages has advanced property listing with their AR application.
3. One of top financial institution in Spain is offering similar property AR application.

Stockbroking

Tech-savvy millennials are the key banking customers. Banks are focusing on them, engaging them more in their financial interactions and ready to provide loyalty benefits. Stockbroking contains huge amount of predictive and historical data. AR solutions can be used to gamify and create realistic world for customers to trade in, zoom in-out the data sets, and easily analyze the patterns.
Below mentioned trading service corporations are providing the stockbroking service with AR / VR application in the different regions:
1. The traders of multinational financial services leader are using virtual Holographic workstations with Microsoft HoloLens. These are augmented to complement existing trading environments, making trading experience interactive and interesting.
2. StockCity on Oculus Rift is introduced by an innovation firm of global financial trading corporation. It allows investors to visualize their investment portfolio as a collection of buildings. The AR aspect creates highly engaged trading experience.

Product training and education

AR / VR has the potential to convert lengthy boring training / education material into interesting gaming content. This can transform the way customers learn about new financial products and services. The virtual trainer can take several avatars explaining different perspectives about product / service. It can as well bring in cost saving by cutting down traveling cost for meetings and trainings.

Few banks have adopted AR / VR application for training on their new products. They are:
1. Switzerland's central bank launched an AR app during the release of new bill. The users can point the camera at the new bill and discover all the information about it.
2. Australia's leading multinational bank has announced first VR / AR learning system aiming at primary school children to teach them financial literacy.
Augmented reality provides new channel for financial service providers to deliver financial content in a novel and easily consumable visual format. Banks and financial service providers should think of AR as an opportunity to innovate and also transform customer experience for millennials and future generations.

Who wouldn't like performing financial transactions in an augmented business or monopoly game where bank notes float across your coffee table?

Banking - Riding onto Augmented Reality journey

We all know Pokémon Go! The game was downloaded more than 100 million times in the first month of its launch and reported $10 million earning per day with its popularity. This introduction of augmented reality into gaming, added a whole new chapter in the gaming industry. It made players get up from their couches and explore new places in their surroundings. I witnessed this shift when my son explored an unknown temple nearby to grab the Pokémon and also saw some colleagues using staircase regularly to find the hidden Pokémon.

Virtual reality (VR) is a simulation, giving viewer the impression of a real scene with interactions. However, AR is integration of real-world information with advanced technology enhancements. It brings the digital interactions closer to the real-world by adding graphics, sound, and smell as perceived by the viewer in real world.

World's leading Global Investment firm has reported that VR / AR market across industries will reach $80 billion by 2025. Gartner has listed AR / VR in top 10 strategic technology trends for 2017.

AR has brought in superior customer engagement and there are many ways in which it can benefit banking industry. Mobile is the most favorite channel for financial transactions. Today's customers need personalized services and AR can truly enhance the customer experience by making the customer journey simple and interesting. Banks are investing into AR and trying to adopt innovative solutions to provide enriched customer experience and stand out in highly competitive world.

Let us outline key use cases applicable to banking and financial industry.

Location-based services

Mobiles have become more advanced with built-in sensors to work with AR applications. The handheld AR solutions utilize image linked map (ILM) interface to provide a stylized map for user interactions. Banks have started using these solutions to provide discounted offers, nearest ATM / branch locations, dinning offers, shopping centers, and many other options. These are displayed not just as GPS location on map but with real-time pictures along with detailed information about place, distance, directions, etc. Below are some of the examples where location-based services are provided with AR applications:
1. The oldest and leading foreign bank in China has launched an AR app called 'Breeze Living' on iPhone. It provides location-based services such as discount coupons.
2. The leading private-sector bank in India has introduced AR in its mobile application 'Near me'. It lists all the dining destinations, shopping centers, ATMs, branches, and many other things.

Virtual banking

Banking industry is undergoing a massive change, mainly due to emergence of changed customer expectations driven by technology. End-to-end digital banking is the key to great customer experience. AR app user can just scan his account number and with all displayed options, he can manage his account, make payments, and explore new products. User can hold his mobile camera on a product image and AR brings in the complete brochure alive!! With AR in place, the customer can even expect his personal banker virtually available in his living room, helping in finance management.

Banks in different regions have started adopting AR applications.
1. One of the leading bank in Australia has launched an interesting AR app for iOS devices, making account management possible. Customers can check their card balance, make payments, find the closest bank or ATM branches, etc.
2. Industry leader bank in Poland has enabled AR feature on their mobile app. Customer can point the phone camera at the banner on their website and avail augmented 360-degree product information and avail attractive interest rates!!
3. UAE's largest bank has launched the first virtual bank branch in the world using VR / AR features on new Apple Watch banking application.

Emerging banks or fintechs can adopt AR banking techniques, rather than setting up traditional brick-and-mortar branches . These banks will provide enhanced experience to customers and save the operational cost as well.

Mortgage and lending services

Banks can adopt the AR solutions to provide rich experience to potential lending or mortgage customers. Combined with location-based services, AR solution can help in property searches, listing down all details of property, view properties and display special offers when a device is pointed at it. This can further be enhanced for personal lending services.
Mortgage and lending services with AR applications are provided by the banks across all geographies:
1. Leading Australian mortgage provider has developed iPhone apps which are used for making property search decisions by giving property listings and detailed information on particular properties.
2. UK's largest provider of residential mortgages has advanced property listing with their AR application.
3. One of top financial institution in Spain is offering similar property AR application.

Stockbroking

Tech-savvy millennials are the key banking customers. Banks are focusing on them, engaging them more in their financial interactions and ready to provide loyalty benefits. Stockbroking contains huge amount of predictive and historical data. AR solutions can be used to gamify and create realistic world for customers to trade in, zoom in-out the data sets, and easily analyze the patterns.
Below mentioned trading service corporations are providing the stockbroking service with AR / VR application in the different regions:
1. The traders of multinational financial services leader are using virtual Holographic workstations with Microsoft HoloLens. These are augmented to complement existing trading environments, making trading experience interactive and interesting.
2. StockCity on Oculus Rift is introduced by an innovation firm of global financial trading corporation. It allows investors to visualize their investment portfolio as a collection of buildings. The AR aspect creates highly engaged trading experience.

Product training and education

AR / VR has the potential to convert lengthy boring training / education material into interesting gaming content. This can transform the way customers learn about new financial products and services. The virtual trainer can take several avatars explaining different perspectives about product / service. It can as well bring in cost saving by cutting down traveling cost for meetings and trainings.

Few banks have adopted AR / VR application for training on their new products. They are:
1. Switzerland's central bank launched an AR app during the release of new bill. The users can point the camera at the new bill and discover all the information about it.
2. Australia's leading multinational bank has announced first VR / AR learning system aiming at primary school children to teach them financial literacy.
Augmented reality provides new channel for financial service providers to deliver financial content in a novel and easily consumable visual format. Banks and financial service providers should think of AR as an opportunity to innovate and also transform customer experience for millennials and future generations.

Who wouldn't like performing financial transactions in an augmented business or monopoly game where bank notes float across your coffee table?

April 5, 2017

Innovation in payments -- Payments enabled smart screens

In today's world, technology surrounds everyone in one or the other way, so it might not be completely incorrect to say that it is technology that is making us 'smart.'

Almost everyone has heard of smart phones, smart cities, and smart homes. The cell phone and PC connections to the Internet have been there for many years now, but today we see many other physical devices connected to the Internet; this is known as the Internet of things (IoT). Improved wireless technology, increased usage of smartphones, low-cost sensors, and such trends are fueling the way IoT brings disruptions across various domains.

Today, most consumers have shifted to online platforms because of the ease and convenience offered. IoT can be leveraged to entice the consumers back into the shopping streets.

The screens in malls, streets, airports, and others playing the usual advertisements fail to engage today's consumers, so there is a need to engage better. But how? The answer is 'connected screens.'

These screens engage customers via near-field communication (NFC) and can be installed in stores, street joints, shopping centers, metro stations, airports, etc. These screens have the potential to become a new point of sale (POS) 24/7, so market players are trying to provide a mix of payments and connected screens. This definitely will be a smooth experience for customers. While waiting for a bus or a train, they can get interested in a promotion or offer on the screen, walk to the screen, select the product, and make the payment via contactless cards or mobile wallets, which is smarter, quicker, simpler, and as secure as in any physical store. Payments-enabled connected screens allow the consumers to pay for goods and services easily.

There are many instances available in the industry which have showcased and tested the usage of payments-enabled connected screens. At Gatwick airport, Tesco had launched interactive screens (based on barcodes), where the travelers could shop for products and get the same delivered at their door step when they are back. Along similar lines, charitable organizations have collected charity from people through connected screens that allowed people to make donations instantly by tapping their NFC card or connected devices on the screen.

The growth of IoT, contactless payments (NFC), and increased emphasis on customer engagement are empowering the adoption and deployment of connected technologies. Payments-enabled connected screens are just one area. We should be all set for a wide-scale deployment across the world in the coming two years.

March 31, 2017

Real opportunities in artificial intelligence

- By Kuljit Singh and Saurabh Jain

One of the most interesting parts of our fun-filled annual get-together was the gems of wisdom imparted by our senior management. Most emphasis was laid on how the financial services industry is captivated by artificial intelligence (AI). It was stated categorically that AI is and will remain at the top of our agenda for some time to come.

My earliest memory of robots with intelligence, and in this case with lots of muscle, is that of the movie, Terminator's part one. It is fascinating to understand that what was shown as fiction in the movie, in terms of the Terminator gathering myriad data and processing it to take its decision in real time, has now become a reality and fad.

Financial services firms are using AI in the forms of real-times analytics, predictive analytics, machine learning, deep learning, image and video analytics, graph analytics, bots, RPA, and more to improve their understanding of customers and also to improve their services and processes. If we look around, AI is becoming ubiquitous and is touching all domains and functions within financial services, like, fraud analytics in consumer banking, real-time analytics in corporate banking for loan approvals, real-time analytics in capital markets for monitoring trade, etc. Similarly, biometrics is used in consumer and corporate banking for identification, in capital markets for identifying trading patterns, and more.

One of the recent examples which gave us inklings of banking interests in AI is Santander's announcement that it would be using voice recognition via its mobile app to provide secured transactions. RBS bank's AI customer service assistant, Luvo, which interacts with its staff, is on trial. RBS plans on using it to serve customers in the future. Swedbank's Nina, a web assistant, and many such banks are already using or are in the process of using AI for various aspects of banking.

The focus is now moving from basic robots to humanoid robots with human emotions, like Pepper, the robot developed by Softbank, which is powered by IBM Watson. Mizuho Financial Group started using Pepper to address customer inquiries in 2015 itself. Not to be left behind, Mitsubishi UFJ Financial has also trialed a humanoid robot named Nao.

With such sharp focus and widespread acceptance of AI, it is imperative for technology companies to up their games to be able to service the demands of financial services clients. As AI moves deeper into the organizations, the opportunity is getting bigger for vendors to help select, deploy, and maintain this new AI ecosystem.

As in Terminator, where the famous antagonist spoke in an impersonal and robotic voice with no human touch, the same malady also ails the current robots. And to find the cure to these and other issues is going to present challenges and opportunities, which would keep banks as well as vendors busy for some time to come.

March 28, 2017

Is 2017 the year of regtechs?

- By Naveen PV and Varun Narang

Regulation was just a word before 2008, then it became 'the word' and for financial services -- the world. The subprime crisis of 2008 led to an over-regulated environment in financial services. The likes of Volcker, Dodd-Frank, and stress tests became buzz words, and millions of dollars were spent on ensuring compliance with the regulations.

Since the financial crisis, major US banks spent billions of dollars on compliance and added substantial strengths to their compliance departments. Financial institutions (FIs) began capturing, storing, and analyzing more data in-house, data reporting saw a substantial uptick, and new approaches to handle risk were introduced. 

At this juncture, the intervention of technology became really critical to handle the massive growth of reporting requirements. This subsequently led to the marriage of regulation and technology, leading to regtech (regulatory technology). Regtech came to the help of the financial services industry by automating compliance tasks and reducing the operational risks associated with meeting compliance requirements.

The effect of regtech on regulations is almost as extraordinary as fintech's impact on banks. It addresses risk and compliance obligations in a very cost-effective way by using algorithms and analytics to generate real-time information. Regtech also triggers innovation in the compliance space by identifying and adopting emerging technologies which have the potential to help firms manage regulatory compliance in an efficient way.

Few areas where regtech is affecting substantial change are anti-fraud measures, anti-money laundering (AML), Know Your Customer, regulatory reporting tools, compliance analytics, and such. For example, AML checks can now be streamlined using new approaches, social media and biometrics can be used effortlessly for customer due diligence, and producing a suspicious activity report can be a click away for banks.

Few interesting regtech companies are: Suade, a technology consultant for regulatory concerns; AlgoDynamix, a risk analytics company that detects disruptive events; Silverfinch, a data distribution hub that connects asset managers and insurers through a fund data utility; Corlytics, a provider of compliance risk analysis for financial institutions; Trulioo, an identity verification company; IdentityMind Global, an on-demand platform providing risk management and anti-fraud services; and such. A few governments are also making efforts to promote regtechs. Britain's Financial Conduct Authority provides clarifications on the compliance steps to follow and has also partnered with various FIs, academics, and accelerator platforms. Regtech companies are making complex work simple, making firms more flexible, and helping them reduce the regulatory costs.

2017 was tipped to be a great year for regtechs. However, the sector may face some issues due to the proposed policies of the new US president, which is targeted at de-regulation of the financial sector. The decrease in the number of regulations and their complexities would impact the prospects of regtechs, at least for some of the late entrants into the game. Regtechs have been focusing on digitization and automation of manual reporting and compliance processes during most of its existence. But looking at the imminent changes which may occur in the US regulatory world, to stay relevant, regtechs should broaden their scope of activities and move towards helping the financial services segment to monitor and enforce compliance with the regulations in near real-time. Nevertheless, regtechs will continue to have a profound influence on how banks and financial services firms comply with regulations in the future.

March 27, 2017

Transforming financial services using IoT

The divide between the physical and digital world is thinning as if these worlds are merging into one. As per Gartner, by the end of this year, there will be ~8.4 billion connected things (commonly referred to as Internet of Things or IoT) in the world, recording, and processing data continuously. To put this large number into perspective, as per McKinsey, IoT may generate US$11 trillion in economic activity by 2025 and has the potential to change the world as we know it.

As the name suggests, Internet of Things is the interconnection of computing devices embedded in things and is mostly associated with the engineering or manufacturing sector like building connected cars or safer aircrafts.
IoT has the potential to transform intangible services like financial services, though indirectly, using tangible things.

The most obvious benefit which comes immediately to mind is the availability of better and more data regarding users' assets. The other benefits are improved customer experience and operational performance, effective product / stock pricing, development of usage-based insurance, effective underwriting, etc.

IoT can be used in all the sub-sectors of financial services like insurance, customer relationship management (CRM), data management, investments, banking, and such. Auto insurers have started installing IoT devices in customers' cars, which help to choose better policies and effective premium rates. Investment bankers can invest in easily measurable things like weather, therefore pricing derivatives better.

High-frequency traders can invest their money a few seconds before the rest. Retail banks can get actionable insights from home appliances data and provide timely credit to customers. Business banking can provide less risky loans to SMEs by predicting how many appliances will need maintenance.

Recently, IBM established global office for its 'Watson IoT' business, having ~6000 associates and clients world-wide. Japanese bank, Mizuho, has started research and development (R&D) on the creation of a platform for secure payments using IoT devices such as smart home kits, connected cars, and wearables. Australia's Commonwealth Bank, experimented with an inter-bank trade transaction combining Internet of Things with blockchain. BNP Paribas' German digital arm, Consorsbank, has formed a team to develop new financial services such as investment advice using IoT. A European bank is piloting on a 'healthy savings account.' The bank will track customers' fitness levels through a wearable device and offer higher rates to those who burn more calories.

Insurers and bankers are already waking up to this massive opportunity and sensitizing their employees to modify and align their offerings with smart devices. From an IT vendor's perspective, they can start by forming a separate team focused on IoT. They can also start tying up with industrial consortiums, academia, and IoT platforms like Amazon, GE, Microsoft, and such to be prepared to surf this game-changing tide.

March 16, 2017

Disruption wave in trade and supply chain finance

Couple of years back, Anand and I were discussing few digital disruptions in the financial world that have made a phenomenal impact on the banking sector. We have alternate payment channels that challenge the traditional brick and mortars - immediate payment services (IMPS) transactions, renewed contextual mashups, dashboards, to name a few. Then he threw a question at me - Is there any such disruption happening in the trade and supply chain finance world? Can we eliminate / diminish the monopoly of SWIFT by providing an alternate, safe, secure, cost-effective, and transparent channel? Trade finance is infamous for its process inefficiencies and notorious for cost escalation. Also, not that charming while comparing with retail banking segments. I could not read his mind clearly to derive a conclusion but he knew exactly what he was talking about. Now, two years later, the world is talking about that disruption. Most of the Ivy League banks have either partnered with a consortium to develop this channel or developing in-house model.

The players involved are so excited about this innovation, and what more, SWIFT has predictably sensed the danger of their existence, hence started developing a prototype to make it exclusive for them.

You would have guessed it already, it is none other than blockchain technology. The history of distributed ledger evolved from 90s, however the distinct development has begun from 2008-09 onwards when the ever mysterious Satoshi Nakamoto presented the bitcoin idea based on distributed ledger theory. The world has seen a systematic evolvement of blockchain technology after that, and banks are now keen to add more use cases to improve their operational efficiency. A recent survey done by distributed ledger professionals revealed that majority of banks do not want to miss this blockchain disruption, even if it may challenge some of their successful business models.

Blockchain provides a transparent framework for all relevant parties to communicate transparently. The documents are stored arithmetically to make it available for all. Matching and approvals can be automated unless for exceptions. This makes the whole process significantly faster and secure.
Blockchain driven Trade Finance  use cases, any example?


What is disruptive in this? Just an advanced mode of transmission, isn't it?
That is quite interesting to be justified! Let us understand more, what is fascinating beyond cost optimization and speed factors:

1. Significant change in current business model - Risk-free deals provide better negotiation power to both importers and exporters. Predictability of funds, document management, and shipping are significantly improved. Option of discounting, bills rediscounting, purchases, etc., can be relooked
2. New business models may emerge - Even a technology company (let's say fintech here) can facilitate entire trade transactions since the process is much simplified but digital driven (already modeled this in payment segment and now they can expand their business line). Banks really have to wonder, who moved their cheese!
3. Moving in parallel with retail transactions due to its near real-time behavior - This excitement will definitely bring in more incremental disruptions in the  future
4. The sheer change in technology may force some of the talent to be redundant - Take for instance, we can avoid the expertise in message type (MT) format as the process is now much simplified across the life cycle. A renewed talent philosophy may emerge amidst the chaos!
5.Advance analytics - It can play a vital role in defining the predictability and pitfalls by analyzing the transaction pattern. Isn't that quite exciting?

Are we ready to be part of this positive disruption?
1.The existing business use cases should be simplified to leverage the advantages that blockchain offers. E.g., an average life cycle of a typical trade transaction may take around 20 - 25 days to complete, whereas a distributed ledger network will help the trade to complete in few hours, potentially.
2.Banking Industry Architecture Network (BIAN) standards should be in place to strengthen process inclusion and innovation. We cannot wait for another three decades to have the next set of disruption! Let the experts across the globe participate in this refreshing change management process. It is the era of open source, the best will survive only through a cohesive-distributed platform wherein corporates, fintechs, SWIFT, and the beautiful minds across the world coexist.
3.Revamp of International Standard Banking Practice (ISBP) and International Chamber of Commerce (ICC) rules?  For e.g., banks may take 5 - 7 days to respond once they receive document after verification. In this case, benchmark for bank response would be few hours (or more real-time perhaps!) if everything is acceptable. Existing rules and practices may have to customize.
4.SWIFT is definitely facing an existential crisis. Remember, what happened to Kodak and Nokia in the smartphone era? The likes of Tesla are challenging the 'better car next time' theory of traditional car companies, and the same is happening to SWIFT in the financial world. SWIFT, with more than 8,000 banks in their network originally designed from pre- Internet era, is still surviving even after 40 years without much changes to their protocols. It always provides a better version than a disruptive version and is getting challenged by blockchain. They have come up with a prototype that can create exclusive blocks for the members, but has its own limitations due to initial higher cost of investment and continued exclusivity by SWIFT.
5.Blockchain as a service (BaaS) is a great step to resolve this uniqueness issue and cost optimization. Implementing BIAN standards will be an added advantage here.

Technology companies should leverage the current disruption wave to amplify its business opportunities. These are time bounded opportunities; Winners and early adopters will take it all, others may just wipe off from the scene. Future is bright for those who constantly challenge the conventions. Blockchain is indeed doing this, and is here to stay for long.

March 7, 2017

Digital twins: Manufacturing embraced them, Will banks follow suit?

- by Shivani Aggarwal and Irene Varghese

The little kid in you and me always wondered if a magic lamp could bring a Jin who could get us everything we wanted. Not just that, we primarily wanted a Jin to help in writing exams so that the results were always 100 percent accurate, and the list went on. The need for outstanding results and unending desires never gets over, instead it grows as we grow. Years later, in today's tech-savvy world, the Jin looks to be coming alive in the form of a twin! Yes, a twin that can simulate real-world conditions, people, and assets; and is aptly called the 'digital twin.'

Digital twins are virtual products which are replications of physical products, systems, and processes that are indistinguishable from their real counterparts. In simple terms, they are high-end connectors between physical and digital worlds. These digital twins give flexibility to users to make changes and figure out the impact without modifying the actual model. This, in turn, enhances the physical assets performance, eventually increasing the operational efficiency of the business.

Tapping into this potential opportunity, digital twins are being widely used in manufacturing. For instance, they are being widely used to detect assembly line malfunctions in the virtual world much before they occur in reality, condense product development time and costs profusely, and develop feedback loops of customers, thereby transforming the business to a great extent. Recently, General Electric was in the news for deploying digital twin technology in analyzing data of big machines such as aircraft engines, locomotives, and gas turbines. They are not only making headway in manufacturing, but also in other industries such as pharmaceuticals, healthcare, and so on.

The financial services industry, which has been a hotbed for technological innovations, should consider leveraging digital twins mainly for two reasons. Firstly, financial services industry is customer-oriented and relies highly on customer satisfaction. Secondly, the banking industry will be further transformed in the coming years with the increased adoption of beacons, smart watches, wearable's, connected cars, and other connected devices. So, a technology like digital twins will help banks in analyzing tons of data collected from various devices. It can help in deep analysis of customers, and study their behavior, desires, and demand; and accordingly offer products and services.

Specifically in the banking sector, the application of digital twins can be manifold - using them to better understand banking operations, get closer to real-world customers, and finally to renovate banking business as whole. In fact, banks can deploy digital twins of key clientele to monitor their comforts and inclinations based on their archived inputs, purchase records, historic usage patterns of products, and services. If banks embrace digital twins now, they will be able to benefit by understanding their customers better, enhancing their products, and in the end, identifying the best business stream, which would have a cutting edge over competitors.

Digital twins are one of the hottest trends for 2017, as predicted by top-rated analyst firms. It is believed that many companies would be investing heavily in these models within the next few years. Raw data is all around, while insightful data gets generated with digital twins around. If companies fail to leverage them, then they will be left behind in this tech-savvy world!

February 23, 2017

Tips and trends for insurance and brokerage firms in 2017 to get away from high risk

The World Economic Forum, an international non-profit foundation, published The Global Risks Report for 2017. The report is based on the global risk perception survey (GRPS), and was unveiled at an event hosted by Marsh & McLennan and Zurich Insurance.

The report highlights a core problem that nations have to address -- the increasing disparities in income and wealth worldwide. This calls for a focus on accelerating economic evolution and reforming capitalism. The citizen's burden of contributing to social security will have to be transferred to government and businesses. It also points out that old age is on the rise, jobs are being disrupted, and the financial sector growth has been weak for over nine years. Life insurance is a must for financial protection and there has to be a paradigm shift in the way the protection is planned and calculated.

In the near future, increasing polarization and intensifying national sentiments are set to cause an imbalance in the society. Countries are looking at safeguarding national interests, and not the world at large. With political surprises or shocks, civil disturbances, and terrorist attacks; each country is inward focused. This has led to lack of multinational cooperation, discriminating G20 trade policy measures, rise in refugees, and international migration.

Managing technological change 

Artificial intelligence (AI), robotics, biotech, new computing technologies, and nano technology will revolutionize the way risk is assessed. Though there is fear of losing jobs, technology players need to emphasize on how talent can be re-utilized to upgrade skill sets of employees to manage the modern enterprise. Enterprises will start investing toward building expertise and nurturing ideas for new solutions. Such efforts will also be powered by disruptions happening in geoengineering, space technology, blockchain, Internet of Things (IoT), and 3D printing. 
Today, we are able to influence insurers and risk takers through our capability to calculate risk accurately. Soon, the high accuracy of risk assessment, powered by big data and IoT technologies, will alter the risk categories being covered. Insurance and risk writing industry is set to redefine the kinds of plans and services. Let us take an example of self-driving cars: In this case, the risk will pass on to the software partner from the manufacturer and data ownership could be debatable. Cyber insurance and security services are the trends to watch out for and with blockchain, there is no room for fraud.

Finally, here are some suggestions for risk writers: Risk management is key for organizations and you need to invest to mitigate risk, optimize tech deployment, deepen relationships, and nurture reputation within and outside the organization. The risk management approach has to be holistic and you need to take control of happenings like Brexit and US elections, and plan ahead. You have to grasp the profile, identify the sources of risk, run scenario analysis, simulate, and assess financial and reputation impact and find a solution to remediate. The risk strategy and business strategy are to be interlinked and cascaded to organization / risk manager.

On the other hand, here is an opportunity for an insurer:  You need to pay attention to risk, engage with customers, and find options to mitigate. Insurers need to on-board the risk and create a value proposition to mitigate  risk through knowledge and skill sharing. Biggest watch point this year is the geo-political risk and the insurance companies need to be prepared to assess the willingness and cooperation of countries and not disturb the economy of the world.

February 3, 2017

Open APIs in banking are here to stay!

By Souna Uthappa and Naveen PV

Open banking has been ground for some time now and is slowly getting adopted into mainstream banking. Digital disruption and the rise of fintechs have played a major role in propelling the momentum of open application programming interfaces (APIs) in the financial services industry. Financial institutions (FIs) have understood that collaborating with other players in the sector will strengthen the overall ecosystem and is in the best interest of customers. Open APIs are helping FIs to innovate and bring new products and services to market faster with the help of external developers. 

Many of the large US and European banks and FIs have actively started experimenting with open APIs by making parts of their proprietary software available to outside developers. Most of the banks, which have boarded the open API band wagon are seeing it as an opportunity to securely and rapidly enhance, broaden, and differentiate their service offerings. They typically deploy and operate the API stack behind its firewall ensuring a level of security, which is a key area of concern for all.

The benefits of open APIs in banking are manifold which include innovation, greater collaboration, efficiency, speed, cost reduction, wider reach, competition, value creation, compliance, better customer choices and services, and so on. All these are beneficial to the banks, customers, and the economy as a whole. Open APIs also act as a trigger for fintech innovation by giving the much needed opportunity for upcoming technology startups to work on proprietary software shared by leading banks and financial institutions. Open APIs are giving more choice and utility for banking customers via useful applications developed by the external developers, which is in turn creating new revenue streams for banks and FIs. Open API projects also work toward creating standardized APIs for the industry benefiting all the concerned parties, including financial institutions, application development community, and ultimately the banking customers.

Banks like BBVA Compass, Citi, Saxo Bank, Fidor Bank, and Starling have been embracing open APIs for the advantages it offers. For instance, Citi bank launched the global API developer hub, which helps it to connect with the developers enabling them to present new solutions for the customers at a faster pace. Saxo bank through its open API allows its customers, partners, and external developers to access its trading infrastructure that helps them with better trading experience for the customers and also helps in identifying new revenue generating areas. Starling bank is coming up with the marketplace platform, wherein the products and services offered by other providers can merge with the bank's interfaces, thereby providing an integrated user experience to its customers. Ulster Bank has been conducting hackathons, wherein anyone can create new apps and services and explore their test APIs.

Increasing competition and customer expectations are pushing banks to differentiate their products and services more than ever. Hence, open APIs are here to stay, and are bound to find more takers in the coming days as it is a win-win situation for all the parties involved.