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

July 25, 2016

Chat bots: So banking can be as easy as chatting

- By Kiran Kalmadi and Durga Prasad Balmuri

Imagine you are chatting with your friend Vikki about a new film, over a messaging app, when you suddenly realize that you need to transfer money to her and book yourself an Uber cab as you are heading out for dinner. In a regular scenario, you would log into your mobile banking app, authenticate yourself, enter the required payee details, and submit a request to initiate the transfer. You would then open the Uber app to book your ride. What would it be like though, if you could do all this without leaving the messenger? As it happens, that is now perfectly possible.

Enter 'chat bots'*. With a chat bot integrated into your messenger, all you need to do is type a simple message like "Send $100 to Vikki," to transfer money, and "Get me an Uber," to book a cab -- all right within the messenger.

Since the beginning of 2016, the focus on chat bots has increased significantly. The likes of Facebook, Google, Microsoft, and Apple are all investing in bots and looking at ways to integrate them into mainstream applications. Interestingly, the 'bot' jargon gained popularity when in April 2016, Facebook announced that it was opening up its 'Messenger' platform to third-party chat bots. This meant that people would be able to interact with bots in Messenger the way they talk to their friends -- all thanks to artificial intelligence (AI), natural language processing (NLP), and some human help. In fact, many banks have recently started showing a keen interest in chat bots.

Today, banks from across the globe are exploring chat bots as a means to answer FAQs, educate their consumers, send them personalized offers, and help them with everyday banking activities like making enquiries about balances, transferring money, paying bills, etc. While the Royal Bank of Scotland (RBS) already has 'Luvo,' an AI bot meant to answer customer queries, Bank of America and American Express (AmEx) are embracing Facebook Messenger's chat bots. Bank of America's bots will enable its customers to receive real-time alerts and important communication. The AmEx bot, meanwhile, is working on innovative ways of interacting with customers. Once a customer opts for AmEx bots, they will start receiving real-time notifications about their purchases, alongside personalized alerts like their card's benefits and purchase-related services. Just this month, Russia-based 'Tochka Bank,' of the Otkritie Financial Group, launched a Facebook Messenger bot for a whole range of financial services. The bot will help the bank's customers check their account balance, contact customer support, make payments, and help them find nearby ATMs via GPS.

Considering the variety of possible offerings, chat bots can not only be a convenient way for customers to interact with their banks, but can also help banks increase engagement levels and thereby improve loyalty. However, challenges like authentication issues and user errors mean that banks may initially use Messenger bots where authentication and funds are not involved -- like search, general enquiries, and education -- and with time, slowly graduate to live chats and alerts, and then finally include transactions that require authentication
This is just the beginning and the area is expected to see a lot more traction over the coming months. Until then, keep watching this space for further updates. Amidst all this, I forgot to ask Vikki - did you receive the $100 I transferred?

*Webopedia defines 'Chat bot' as being short for 'chat robot', a computer program that simulates human conversation, or chat, through artificial intelligence.

July 11, 2016

Smart machines: Will they disrupt the banking industry?

Decades ago, self-driving cars were nothing more than an unrealistic dream. But in today's tech-savvy world, this dream is now a reality ― with the concept of smart machines. Once considered in the same vein as our childhood super heroes, smart machines are now all set to rule our industries.

Smart machines are basically intellectual devices that use cutting-edge technology to displace human chores. These machines can make use of loads of facts and figures from various sources to offer new kinds of information and can analyze huge amounts of data and information to reach conclusions that human beings can't even begin to imagine!

Examples of smart machines include self-driving cars and cognitive computing systems that can process problems, make choices, and provide solutions without the need for human involvement. In fact, smart machines are poised to be the next digital disruptors across all sectors! They will revolutionize the way businesses are run and can be especially useful within the banking industry.

Smart machines can offer huge latent benefits to early adopters in the financial services sector, including better customer experience, higher productivity, and larger profits. Banks are now deploying smart machines across an array of jobs. In fact, many banks will replace the jobs humans used to do, while others will introduce services that were not possible earlier. Thus, it is crucial for IT decision-makers within banks to prioritize prospective investments into smart machines.

Applications of smart machine technology in the banking industry include smart vision systems, virtual customer assistants, smart advisors, smart security, virtual personal assistants, as well as smart infrastructure.

An animated avatar of a virtual customer assistant, which is smart enough to offer intelligent help to customers while creating a fun experience ― such as the flapping and drumming on the screen of a tablet or a smartphone ― is an example of the kind of smart machines that banks will look to invest in the near future. Similarly, the demand for smart vision systems is likely to increase dramatically for the purposes of identifying thefts, authenticating using laser ray technology, measuring consumer attention spans to predict customer actions, etc.

Smart infrastructure is another innovative area in which banks will soon be investing in. Smart detection technologies implanted in building infrastructures can help bank executives predict problems, make well-versed decisions for asset maintenance, and even use green technologies.

So by when will we be able to witness the impact of smart machines in the banking and financial industries? Well, it is expected that most banks will invest in smart machines and their supporting technologies over the next few years. However, an impact of this will be the removal of millions of banking jobs, specifically in the US and UK. However, to counter this and to sustain superiority over machines, bankers should look to move more complex roles like expert thinking, breakthrough ideation, and complex communications to us humans while leaving the more mundane banking chores to the smart machines.

June 13, 2016

Exit for Britain, uncertainty for banks

-by Kuljit Singh and Siddhartha Chanda

We are currently living at a time when global uncertainty has almost become a norm. From the financial crisis in the US to debt problems in Europe, geopolitical tensions in the Middle East, and the migration crisis in Central Europe, we have witnessed it all. The latest to create havoc in the financial market is Britain's referendum on leaving the EU, also known as "Brexit". The referendum, due on Jun 23 2016, has brought along with it uncertainty again - the consequences of Britain voting to leave EU.

Here's a snapshot of UK's presence in the European financial market - in cross border lending, the UK holds around 17% of international market share in comparison to 9% by France and Germany. The UK dominates in hedge fund assets which amounts to around 18% of the market share compared to 1% by France. In addition, it is now the biggest centre in the world for trading the euro.

In terms of numbers, a latest study suggests Brexit has the potential to disrupt 100,000 jobs by 2020 in the financial services industry. Losses are expected to occur to the tune of more than GBP 17 billion and it could reduce the sector's contribution to the national economy by up to GBP 12 billion. Some believe there would be 60% changes in the existing law, which means only one thing - trouble for the financial services sector in maintaining compliance and a possible gold rush for lawyers. Due to these changes in the rules and regulations both in EU and the UK, "RegTech" will be one of the most crucial area of focus for banks. They would need to come up with a comprehensive strategy to ward off the challenges coming from this revised regulatory overload.

Coming to capital markets, the UK is the lynchpin of whole structure of interconnected economy to an extent that more than 3/4th of all capital market business in EU27 is conducted out of the UK. Unsettling this structure could have a domino effect on all the players in the group.
One of the biggest benefits of being in the EU for financial institutions is the benefit of passporting. In simple terms, passporting is the right given to banks in a member state to carry on cross border business and sell services across Europe without obtaining a license. And this is one of reason why many third country banks have chosen to base themselves in London - to have access to the EU markets. Banks are able to access and operate across the EU under CRS or prudential passport which can be termed as a single banking license for the entire region. This leads to a reduction in the complexity and cost for their cross-border operations. Investment banks also work on a similar model under the Mifid passports and can service their clients across the EU. In the event of Britain exiting EU, banks and investment banks may have to find alternatives such as separately capitalized subsidiaries and separate broker dealers. This might challenge London's role as the venue of choice for global firms to conduct their European business.

At this juncture, nobody is sure about the outcome of the referendum. The economist's Brexit poll tracker suggests a marginal lead for the "remain" camp while some other individual polls show a major¬ity favoring a "leave" vote. Nevertheless, what it actually boils down to is that the voters will be choosing between a status quo and a complex process of negotiation and uncertainty.

May 26, 2016

Social trading is redefining trading

Thanks to bionic advisors, my investments (better read) as long-term wealth is taken care off! But who doesn't want some quick profits, higher returns? By now, you would have guessed that I am talking about stocks, stock trading, to be precise. Here's my stock trading story. Before putting my money in stocks, I decided to seek guidance from my colleagues who have been trading for decades now. Unfortunately, they weren't interested in sharing their strategies with a debutant trader. So I began researching on the Internet to understand the stock markets better and that's how I stumbled on an interesting new concept - social trading.

In a nutshell, social trading is a mechanism of bringing together traders across the globe into one big network and providing traders the option to leverage trading techniques and strategies of other traders. Unlike the old school of thought on trading where trading strategies were closely guarded secrets, this new trading concept allows traders to follow or even blindly copy trading strategies of top investors.
Social trading is being considered as the next big phenomenon in the capital market. The social trading platform is a vast ocean of information, available for free for any trader. The perpetual data flow enables traders to make profit out of trade even if they don't possess any erstwhile information or experience on trading. Thus, it seems to be the best choice for traders especially, novice traders. And it helps the top investors get some extra pounds by sharing their trading skills.

On realizing that social trading is the best option for me, I started looking for a viable social trading system. Interestingly, I found that fintechs are extremely active in the social trading space. Though investment banking had been sort of opaque to fintechs, the rising wave of social trading is seeing lot of traction from fintech firms such as ZuluTrader, eToro and StockTwits. Currently, ZuluTrader is the largest global social trading network with the highest number of traders and investors. StockTwits, on the other hand, is a social communication platform that uses tweets for trading while eToro aims to help novice investors. Other well- known players in this space are Ayondo, Tradeo, SignalTrader, and more.

I glanced through a few of these leading platforms and found that the instruments traded on these platforms are quite widespread, covering stocks, forex currency pairs, gold, silver, commodities, indices, oil, etc. These platforms are quite user friendly and most of them include a live feeds feature, giving higher visibility on the trading operations of all traders. After viewing the feeds, based on my choice and requirement, I could "follow" the top traders / investors. Then if convinced, I could blindly "copy" the trades of those leading investors - essentially, allocate a portion of my funds to the selected investor / trader and their trades gets automatically copied, making my life easier and richer. Interestingly, some of the solutions even enable the traders to get in touch with the topline investors directly to clarify their concerns.

Social networking worked and is thriving, will social trading see a future? Actually, a lot of action is already happening in the social trading arena - many firms, especially, fintechs are entering this dynamic and active space. Firms like Ayondo are spreading its wings to growing markets like Asia, local regulators across the globe are showing profound interest. All this indicates that social trading is bound to stay and would definitely be the resort for the tech-savvy millennial who prefers fast and smoother trading experience. However, the sustainability of the concept depends on how well the knowledge of traders can be applied or tweaked to the likes of the other traders.

May 23, 2016

Analytics is the oxygen that energizes new banks to scale new heights of modernization

Large, global banks process billions of transactions across service offerings to a plethora of customers across demographics, daily. In order to sustain effective operations, they must adopt cutting-edge analytics that churn the petabytes of rich information into valuable insights.

As of today, most global banks are processing these petabytes of transactional data through legacy and modern databases that get downgraded through years of mergers and acquisitions. Therefore, migrating complete legacy and distributed data towards a robust storage solution that addresses cur-rent challenges and future requirements, marks the first step towards modernization.

Having said that, banks also have to make sense of two data formats -- unstructured and un-leveraged format from legacy databases, and structured data from new tools in big data and analytics. Towards that, they must implement solutions that center on R, Python, SAS, or NoSQL driven analytics. Not only do these solutions integrate structured and unstructured information, but also process it like a fast moving Pac-Man! In fact, they produce unbelievable outcomes, occasionally influencing strategic outcomes and are mostly open source. At the same time, Blockchain technology is a new kid on the block! To maximize value from the opportunities that Blockchain presents, banks require top-class analytical and data processing capabilities.

Therefore, business analytics is an invaluable capability for organizations. It augments competitiveness of service offerings, market growth, and relevance from the current perspective. Simultaneously, cog-nitive / predictive analytics, which has been neglected for quite some time, is equally important to en-sure anti-money laundering (AML) / fraud detection. For a considerable amount of time, banks have overlooked the hazards of incomplete and missing information across Know Your Customer (KYC), Know Your Employee (KYE), Customer IDentification (CID), Customer Due Diligence (CDD), and En-hanced Due Diligence (EDD) processes, while driving competitiveness. Today, such negligence can prove costly and I can extend the point in discussion to Cash Management services which Banks ex-tend as a value-add for a small fee. In the current scenario, cash management teams must focus atten-tion towards cognitive / predictive analytics for AML / fraud detection. This is because these teams directly handle cash coming from external sources, which could be honest or obscure with a dark un-derbelly. Consequently, services that cater to cash collection, dropbox, vault, sweeps, zero balance accounts, and cash concentration are abused. This is because some of these overlap with the realms of private banking, which hide the true beneficiary behind the wraps of secret arrangements and agree-ments.

In my next blog, I will discuss about how applying R, Python, or SAS on the available 'structured' infor-mation combined with available 'unstructured or free' information will come handy towards harness-ing the power of fast and efficient analytics, using underlying legacy and modern silos.

April 21, 2016

Bionic Advisors: A Human & Technology Mash Up!

It's April - a new financial year; a time when terms like 'higher taxable income,' 'investments,' and 'Sections 80C, 80D, 80E,' keep buzzing in my head. Now, although tax planning is certainly on my cards, the 'when, where, and how' of investing is still unclear, thus driving me to seek financial advice. To avoid the hassles associated with traditional financial advisors, I initially thought of using automated advisors that are popularly known as robo-advisors; but, then I realized that these models will not provide personalized advice in important matters. That's when I found the perfect answer to my investment woes - 'bionic-advisors.' Yes, you read it right; not 'robo,' but 'bionic'.

'Bionic-advisors' make use of technology to enhance client relationships. They use a specialized, automated advice software to create reports that are used as a base for all client interactions, which happen either via web portals or mobile devices. Additionally, these advisors use automation in various areas, such as creating customized client reports, paperless onboarding processes, and rationalizing KYC processes. As a result, bionic-advisors save time and increase efficiency, allowing them to focus better on client interactions. Although bionic-advisors are very similar to robo-advisors -- especially in terms of cost effectiveness and transparency -- they still score over robo-advisors, thanks to the human element in the bionic model.

Individuals like me, who have certain financial goals, but still require personalized advice; will prefer bionic-advisors. They provide automated portfolios and reports that investors can use at any point of time and, most importantly, they give us access to  interact with financial advisors when we feel the need for them. Interestingly, more than low-net-worth individuals, it is the high-net-worth individuals (HNIs) who seem to benefit the most from bionic-advisors. Most HNIs want their preferences to be incorporated into their huge portfolios, and demand customized financial advice for their complex investments. Consequently, they prefer a bionic mix over other advisory models.

Off late, 'financial advice' has been going beyond the realm of investing and instead, has taken the shape of financial planning. The mere presence of automated advisors will not completely quench the evolving financial needs of today's investors - a fact that only strengthens the case for bionic-advisors. Firms like AdviseSure are already making headlines. Launched in 2015 in India, AdviceSure is a bionic-advisor, providing advisory services across multiple product categories, such as mutual funds, capital market, shares and stocks, systematic investment plans (SIPs), tax-saving schemes, national pension system (NPS), etc. And now, they are in talks with venture capitalists to raise funds worth US$5-8 million, which will be used for marketing their service and improving their technology in the future.

The bionic-advisory model is a lot like hot chocolate fudge sundae. Everybody loves vanilla ice cream, just as they love chocolate sauce; but it's when the two come together that the final product becomes truly delightful. The bionic-advisory model's USP is that it integrates automation with human interaction, thus ensuring the best advisory solutions for investors. In the end, it is the measure of delight that bionic-advisors will offer their investors, which will decide the model's sustainability in the long run.

April 13, 2016

Don't ignore SME Lending: Alternative Lenders are here

-by Kiran Kalmadi and Durga Prasad Balmuri

The next focus in the David Fintechs Vs Goliath Banks series is on SME lending. In 2014, 28 million small and medium-sized enterprises (SMEs) in America contributed to over 50% of the U.S. non-farm GDP. Yet, most of them find it very challenging to secure the capital required to either run their daily operations, or invest in business expansion; as small business lending is largely neglected in many countries.

At the same time, many banks have also seen a dip in their share of lending to small businesses over the past few years. For example, loans issued by the top, 10, U.S. banks dipped to US$44.7 billion in 2014 vis-à-vis US$72.5 billion in 2006. This could be attributed to the fact that banks find it unviable to cater to this segment due to a number of factors such as the small loan size, strict regulations, heavy paperwork, etc. These factors make lending expensive, considering the relatively low returns that they generate. In addition, banks also expect borrowers to perform well on three parameters - credit scores, collaterals, and cash flows - before extending loans; and not all SMEs can meet these criteria.

Luckily, every cloud has a silver lining and these challenges have catalyzed the growth of a new type of online non-bank lender or tech-based alternative lender. They disburse loans via online platforms using advanced, underwriting algorithms and new credit appraisal methodologies. Unlike traditional banks, these lenders refuse to depend on just the three parameters, and analyze additional parameters like bank transaction history, tax filings, credit card history, invoice volumes, etc., before disbursing loans. The insights gained from these additional data points greatly improve the chances of granting loans to SMEs. This way, platform-based companies can quickly underwrite loans of small-ticket sizes that banks find trouble servicing.

What's more, by leveraging technology, online platforms, and innovative risk assessment methodologies; most alternative lenders take only a few minutes to assess if an applicant qualifies for a loan. In other words, approval mostly happens on the same day and is ideal for most businesses that need regular financing and cannot wait for weeks every time they need funds.

Such customer-centric processes make alternative lenders like OnDeck, Kabbage, Fundation, Funding Circle, and many others; rockstars in the SME lending ecosystem. Stars who take on a lot of risks including unclear regulations and a higher probability of loans defaults. Under these circumstances, alternate lenders are reducing risks by charging higher interest rates that could reduce in the near future once they become more mainstream, secure funds at cheaper rates by partnering with banks, and establish firm roots in the lending space.

The bottom line remains that alternative lenders may turn out to be more favorable to SMEs than traditional banks. By offering a life-line to small business owners, they might soon start gnawing at the balance sheets of banks; implying that banks must come out of their comfort zone and act upon their inherent challenges faster than ever before.

April 5, 2016

Robotic Process Automation (RPA) in Financial Services (FS) - A Game changer?

-by Souna Uthappa and Naveen PV

Over the years, robotics has become a key driver of growth and efficiency across various industries such as manufacturing and hi-tech. The financial services (FS) sector, however, remained a step behind being cautious of automation, but thankfully, only for a while! It has recently taken baby steps and adopted robotic process Automation (RPA) to overcome the challenges of complex regulations, sluggish macro-economic factors, and the emergence of disruptive technologies.

Interestingly, the recent familiarization has unveiled more opportunities for RPA to have far-reaching impact on the FS sector -- beyond traditional process automation that focuses on automating individual tasks! The spotlight has now turned to a fundamental tenant of RPA called artificial intelligence (AI) that is being extensively used to capture, interpret, and analyze complex financial transactions and real-time interactions between various platforms and software applications.

The fact that new-age AI applications can carry out complex tasks, unassisted, by leveraging inherent problem-solving capabilities, is setting the stage for ground-breaking solutions in FS. Some areas where RPA can have tremendous impact include:

• Exception management
• Tasks involving high volumes of data
• Cross-system manual processing
• Data gathering and reporting
• Reconciliation activities
• Monthly account closure
• Bulk data updates
• Regulatory reporting
• Balance sheet reconciliation
• Capital markets
• Affidavit creation (loans)
• Audit trail creation
• Template maintenance
• Customer services
At this very moment, many firms are utilizing RPA to achieve short-term benefits such as cost reduction, agility, efficiency, accuracy, speed, greater performance, and quality. That's not all, many enterprises are also realizing long-term benefits such as re-deployment of resources for more strategic, value-added initiatives, while creating more agile organizations that can improve customer experience.

Yes, leaders are driving the RPA trend!

MasterCard, Visa, Lloyds Banking Group, Deutsche Bank, Merrill Lynch Wealth Management, ANZ Banking Group, and Barclays are some of the frontrunners in RPA adoption. For instance, when ANZ implemented RPA to fix time-consuming errors which occurred daily in one area of payments, they were able to reduce resources from 40 to 2 and redeployed them to other areas where they could make an impact.
Barclays also implemented RPA across a wide range of processes including accounts receivables, fraudulent account closure, loan application opening, 'right of setoff', etc. Consequently, they were able to save around 120 FTEs and reduce their bad debt provision by £175 million per annum.

The bottom line is that businesses have high expectations from RPA-related initiatives, especially where cost reduction through effective staff utilization and the right sizing of resources are major focus areas. Even though RPA adoption comes with inherent challenges such as misplaced expectations and resistance from employee unions, it is emerging as a major game changer, helping the industry to become more agile, smart and lean.

Credit Scoring: Ripe for Disruption

-by Kiran Kalmadi and Durga Prasad Balmuri

Continuing with our David Fintechs Vs Goliath Banks series, this blog focuses on another important disruption, i.e. Credit Scoring. With each passing day, the probability of our mailboxes being inundated with emails from various credit scoring start-ups is on the rise. E-mails advertising, 'Get a free credit check-up online', 'Get your credit score and analysis online'; and 'Unlock your credit potential' clog inboxes compelling us to activate spam filters! Having said that, these e-mails are also indicative of the rise of credit scoring start-ups. A new generation of Fintech start-ups like Credit Karma, Credithood, Kreditech, and Aire have begun to challenge industry behemoths like FICO, Experian, Equifax, etc.

Now, why credit scores? Credit scores are essential in many countries. No score or an insufficient credit score can affect a person's ability to buy a car (auto loan), purchase a home (home loan), rent a house (landlords check credit scores), or even gain romantic alliances (read the Federal Reserve study of Credit Scores and Committed Relationship)! This problem affects migrants, recent graduates (students), new entrepreneurs, etc. and it is widely estimated that there are 53 million Americans with no credit scores. Likewise, in many countries a good number of population do not have credit scores. Over the years, there have been many attempts to provide credit scores, but the issue continues as most of the solutions are based on historical transaction data of loans, credit cards, and mortgage payments. Thankfully, traditional credit scoring companies have also started calculating credit scores on few more additional metrics such as utilities payments, rent payments data, etc. However, there is also a strong need to better assess credit risk by creating accurate customers profiles and assessing their eligibility using multiple factors -- educational background, job profile, social profile, and more.

New-age scorers

The onset of on-demand services ushers in a requirement to assess an individual within few minutes. This assessment must determine if he/she should receive credit and at what rate. It's therefore predictable that new-age scorers are leveraging big data algorithms, automated processes, cloud computing, and analytics (consumer behavior analytics) to generate scores for those who have been ignored all these years. What's more, to calculate credit scores, these firms are also analyzing new and modern data sources such as education history (course studied, university name, postgraduate income, etc.), mobile phone statistics, monthly cash flows, cable bills, property records, employment background, online behavior and preferences (how active the user is online, sites visited frequently, product categories looked at), and history of bill payments. The bottom line is that this is an ongoing effort and new-age Fintech firms that have started on a clean slate are finding innovative ways to provide people accurate credit scores. For instance, Social Finance (SoFi) a lending startup, said that it is moving away from FICO scores and called this strategy a 'FICO Free Zone.'In the process, fintech firms  are bringing a lot of unbanked population to the mainstream. Simultaneously, the existing credit scoring systems in developing countries could transform as empowered customers and lenders will demand faster and more innovative scoring methodologies, thereby disrupting the market. Only time will tell if this is just a one-off case or whether it will evolve into a trend!

Stay tuned for more action.

P.S: For those interested in knowing what happened to our inbox inundation, our next task is to set up our spam filter!

April 4, 2016

Banks and fintechs: Conflict, confrontation and collaboration

-by Kuljit Singh and Varun Narang

Mahatma Gandhi once famously said, "First they ignore you, then they laugh at you, then they fight you, then you win." Who would have thought that these wise words from the hero of the Indian freedom struggle would reflect the attitude of banks towards fintechs? Having passed the first two stages of ignoring and mocking fintechs, they are now realizing that indeed, fintechs are a threat worth taking seriously, especially, when you consider the billions of dollars banks stand to lose if they continue turning a Nelson's eye to the challenge. According to a report by Goldman Sachs, financial services are at a risk of losing USD 4.7 trillion in revenue to these new tech-enabled or fintech entrants.

Now that the realization has dawned on banks about how real and present the threat is, they are beginning to buckle up to take the fight to not only defending their bastion, but also taking a more aggressive posture to beat fintechs in their own game. To this end, banks such as ABN, BBVA, Citigroup, Barclays, Deutsche Bank, and others are attempting to rewrite the rules of business by setting up innovation labs, accelerated programs, and venture capital funds to stimulate the technological experiment and match the customer services offered by fintechs.

Few cases in point are: Citibank is establishing a new fintech unit and is also testing an eye-scanning ATM. Goldman Sachs has formed a new venture for enterprise mobile technology. Morgan Stanley is investing in data warehouse solutions, mobile apps, BI and analytics tools, application development tools, PaaS, etc. ABN AMRO Bank is letting prospective customers sign up for a new account with their smartphone and face recognition. Barclays has signed deals with Blockchain startups and Deutsche Bank has launched a computerized investment advisory service called 'AnlageFinder'.

Though these are innovative approaches, they have some serious cons as well, which could make it hard to justify the energy and money put into them. This struggle could make many 'follow the herd' attitude banks to abandon their approach of innovation and nurture more practical and sustainable approaches.

Of all the approaches being adopted by banks, in our opinion, the most pragmatic and sustainable one is that of collaboration. It would be wise to follow the dictum, 'if you can't fight them, join them'. This is especially true in cases where the cost of innovation is prohibitive. This type of collaboration is happening not only between banks and fintechs but also among banks. An example of the former is investment by almost all major banks in start-ups and tie-ups with Apple, Android, and Samsung, etc. An example of the latter is the R3 where consortium which was formed when over 40 banks joined hands to encourage the development of blockchain usage in the financial system.

In conclusion, we are reminded of a famous quote by Mark Twain who said, "You can't depend on your eyes when your imagination is out of focus". Banks need to get their focus on the most critical component of this entire tussle with fintechs, i.e., customer services. Once that focus and goal becomes clear, their eyes will begin seeing the path that is most appropriate to reach the goal.