Fintech Breakthrough In Indian Banks And Financial Services
Co-author - Dr. Manoj Joshi
What is Fintech?
Fintech is defined as a small entity (start-up) or a company offering the online application-oriented products aligning the Banking, Financial Services and Insurance (BFSI) domains using the industry 4.0disruptive innovation technologies. The offerings by fintech relate to the large range of categories in the field of alternate lending, payments, investment/wealth management, banktech, insurtech and personal finance expanding to BFSI domains. This revolution by fintech has created a league of enterprises, solving the problems of the banking and financial sector. AI development applicable in the BFSI domain is classified on the level of implementation, categorised as low, medium, high and very high.
Implementation, BFSI domains
Low AI: Asset & Liability Management.
Medium AI: Regulatory, Support Technology, Resource management, Selling Cross product support, Payment Gateway, Email, Relationship management, Wealth management.
High AI: Finance, Risk management, Human Resources, Sales pricing, Selling Products & services, Account management, Default Management, Mobile
Very High AI: Customer Insights, Internet, Branch, Contact centres, Dispute and frauds, Enquiry resolution
Large IT firms engage university supported incubation centres and corporate accelerators for multiplying reach. The concept of AI implementation in banking is gaining importance and the technologies like deep learning, machine learning, video analytics, NLP, neural network, computer vision and intelligent analytics have been evinced with capabilities impacting the banking domain.
- Deep learning: Learning-Robo-Advice in PMS
- Machine Learning: Perceiving-Customer Recommendation
- Video Analytics: Sense-Personal Banking
- Natural Language Processing (NLP): Act-AML, Fraud detection
- Neural Network: Plan & Communicate-Algorithm trading
- Computer Vision: Reason-KYC compliance
- Intelligent Automation: Knowledge, Call centre operations
AI innovations supported by commercial adoptions have been rewarded by accelerated funding through corporate funds, venture partners,Private equities (PE) and government supported funding programs.However, with respect to Venture catalyst (VC),funding has grown up to ten-folds in the past seven years.
AI Inclusion in Banking
The Banking application of AI in Retail and commercial banking analyzes the real time data or activities in the current market conditions.The precise estimates and detailed forecasting is based on the variables necessary for the fundamental analysis, as in the case of stock market trading. Some of the areas of development where high value of interactions, transactions are commonly seen are trading, client service, operations excellence, post analytics, reconciliations, remittances, transactions, reporting, tax, audit, and risk management with cyber and data security as a major constraint.
The applications of AI in retail branch banking can have extraordinary benefits like KYC check, face detection, documentation, crowd control to ensure enhanced customer satisfaction.However, in the case of commercial transactions; it can be initiated by means of conversational bots, giving accurate references by using recommendation engines. Fraud detection can also be controlled using machine learning algorithms and gaining customer trust.
The banks like Citibank, Goldman Sachs and American express have also employed AI services in preventing financial crimes like money laundering.The machine recognises the suspicious activities, helpingin optimising the cost of human investigation. The machine learning algorithms can analyse complex interactions using blockchains on a real time basis.
Banking Automation in India
AI has gained importance in the international market.Its inclusion in the services especially in the banking sector has reflected an inclination for AI controlled banking. ICICI bank uses an AI Chatbot named iPal that can handle six million queries on the bank portal with ninety percent accuracy, improving customer perception and faith. The ICICI Bank has initiated in leveraging technologies like AI and MLA.This AI based interaction has been implemented both in the front-end as well as back-end support banking processes, offering financial management solutions.
In India the AI adoption in the banking sector is at very nascent stage as compared to the global markets.AI application has crossed $5.5 billion in 2016, up from $4.5 billion in 2015 and the same has been increasing with a greater momentum.However, the Indian market is exploring the new AI trends through large companies, collaborating with the fintech startups to work on the proof of concept (POCs). In this way, the banks along with technology incubation centers support the large-scale entrepreneurial innovation by the fintech start-ups, boosting the vision of the union government of India On digital connectivity for inclusive growth of the economy.
Fintech as a new age entrepreneurial innovation has been an encouraging segment in India, gaining momentum in the BFSI sector post demonetization, placingit in the global charts. A survey conducted in 2018 stated that there were over 20,000 fintech start-ups across the world with investment opportunities worth $28 billion. Moreover, smartphone usage is likely to witness an increase from 56% in 2015 to over 80% by 2025, which forms the backbone of hand held technologies, engaging with fintech offerings. India has incorporated in its‘Start-up India policy 2016’, with corporate investment in AI driven Start-upsfor boostingAI based entrepreneurship.Sub sectors growing as an opportunity are mobile recharging, utility bills payments, deals, gift card, bookings of hotels, movie tickets, taxi, cab etc. enhancing financial penetration and literacy both. This shall lead to problem solving at minimum cost with accuracy for inclusive societal growth.
