The Internet has had far-reaching consequences in every industry and the banking, financial services, and insurance (BFSI) sector is no exception. Online banking has largely replaced traditional banking, except in remote areas where a reliable Internet connection is an issue. Banking is increasingly becoming digital and financial institutions are being forced to rethink the way they conduct business. Globally, financial institutions are beginning to recognize that to remain relevant to customers who live in an ever-connected world, true digital transformation is required.
Technology-savvy customers expect more out of their banks today. Financial institutions are responding by gradually making a shift towards digital channels, which will enable 24×7 transactions, personalized services and products, and real-time insights.
Israel’s leading bank, Bank Leumi, launched a mobile-only bank called Pepper in early 2017. Rakefet Russak-Aminoach, CEO of Bank Leumi, said, “When we set out on our journey to launch a new mobile-based digital bank, we not only wanted to challenge our own IT go-to-market model, but also to revolutionize the banking industry in Israel and globally.”
Pepper enables its customers to perform all banking operations entirely using their phone. No account management fees are charged, and customers have access to savings accounts, current accounts, lending products, and a P2P payments app. The digital bank’s core processes are run on Temenos’ Core Banking platform. The technology allows Pepper to know its customers and tailor-make content relevant to them. Thus, the digital bank can offer a personalized banking experience to each of its customers.
Pepper also uses VMWare’s cloud infrastructure to maintain consistent operations. VMWare offers the necessary software foundation that delivers a common operating environment covering on-premise data centers and leading public or managed clouds for operating Pepper.
Closer to home, Kotak Mahindra Bank launched 811, a fully digital banking ecosystem, in 2017. Kotak 811 offers zero-balance savings accounts and does not charge for any digital transactions. The bank also offers interest up to 6 percent p.a. on savings account balances. Notably, 811 has integrated the Aadhaar-based OTP authentication process for account opening. Customers need only PAN numbers and Aadhaar numbers to operate their accounts. Kotak 811 is also integrated with Bharat QR Code and is UPI-enabled.
IoT-enabled banking devices
We are already familiar with an IoT-enabled device that has revolutionized banking—the automated teller machine (ATM)—by removing the need to wait in long queues to see a teller at a bank. New IoT technology is being used to enhance the banking experience. DBS/POSB customers in Singapore can now use live streaming video teller machines (VTM) at any time of the day for various services. Customer service officers are available live via webcams to assist customers if they need help at the VTM. Other services like change of particulars, handling balance enquiries, and immediate dispensing of Internet banking security tokens and debit cards are also offered.
Last year, Citibank decided to test the use of beacon technology in its Smart Banking branches in New York City. Via beacons, the bank can send location-based customized messages to its customers, such as information about special promotions or certain banking events in the specific branch or area. More and more people are conducting banking operations through their smartphones. Thus, beacon technology can help banks collect information about their users and their purchasing behavior.
In 2017, Dena Bank introduced RFID-enabled banking cards for clients in select branches, which enabled branch/relationship managers to identify valued customers as soon as they stepped into the bank. Complete information about the customer is displayed on the manager’s desktop once the client enters the bank. Data about the customer and his/her transactions is captured and fed into an analytics system, which evaluates how long the customer had to wait before being assisted and how long his/her transactions took to be completed.
Artificial Intelligence and Cognitive Technologies
Artificial intelligence (AI) technologies are no longer the stuff of the future. ICICI bank has brought software robots into the mainstream, deploying them to perform over 200 business processes. According to the bank, the robots have reduced response time to customers by up to 60 percent and have increased accuracy by 100 percent. The robots work across trade and forex, agri-business, treasury and human resources management, and retail banking operations, performing more than 10 lakh transactions per day. The CEO, Chanda Kochhar, was quick to clarify that the software robots made repetitive processes efficient and did not cause loss of jobs at the bank.
AI technology is also helping banks tighten their security measures. In 2016, Barclays introduced “voice-recognition technology” for telephone banking customers that would obviate the need for passwords and security questions. The bank claims that the technology is more secure than passwords because over a hundred characteristics of voices are captured, including pronunciation, accent, and cadence. These markers do not change even if the customer has a cold and it is impossible for fraudsters to copy all the markers of a voice, thus making it as unique as a fingerprint. The technology also has the ability to recognize recordings, thus preventing fraud. In the same year, ICICI bank announced that it had launched voice recognition technology that identified callers by analyzing more than 100 characteristics such as speed, pronunciation, accent, and voice modulation.
Chatbots have been in use as assistants or replacements for live agents in call centers or to assist website visitors in navigating web pages. Advances in cognitive technologies have now enabled chatbots to become more intelligent and perform more complex operations.
Bengaluru-based company, Senseforth AI Research, built an AI- and NLP-based banking chatbot called “EVA (Electronic Virtual Assistant)” for HDFC bank last year. The chatbot has an accuracy level of 85 percent and an uptime of 99.9 percent. It is continuously learning and improving itself with every conversation that it undertakes with customers. EVA offers customers information about branch IFSC codes, fees and charges for various services and products, product details, and application processes much faster than a live agent.
Since then, conversational banking has become popular with insurance companies launching chatbots as well. Apollo Munich Health Insurance has Travel Ninja, Bajaj Allianz General Insurance Co has Boing, and ICICI Lombard has MyRA. The State Bank of India has launched the SBI Intelligent Assistant as well.
Natural Language Generation
Banks spend up to 40 percent of their time on documentation, such as loan agreements, investment portfolios, and executive summaries. Natural-language generation (NLG) technology can translate insights from data into prose. Structured performance data can be fed into an NLG engine to produce management reports automatically.
HDFC bank uses the PHRAZOR platform, developed by vPhrase, to automatically generate branch manager performance reports. It has helped to improve organizational productivity and build better ties with customers. Deloitte uses NLG to generate their internal weekly flash reports and business unit reports. As a result, the process requires only one full-time analysts as opposed to eight. The remaining analysts are redeployed to higher-value activities.
U.S. financial services firms use NLG technology to generate the narrative sections of Suspicious Activity Reports (SAR) as part of federal compliance requirements.
Although it is still too early for virtual reality (VR) to be widely adopted into banking, the technology does have the potential to revolutionize customer relations. Customers may be able to speak with a virtual banking officer from the comfort of their homes, who will present simulations based on real-time inputs.
BNP Paribas, a French bank, launched a VR-based app last year for retail banking, which offers customers virtual access to their banking activity. The real estate arm of the bank has also developed a “teleportation capsule” called the POD, in partnership with Vectuel & RF Studio, a French startup. This technology allows customers desirous of buying property to step inside a building under construction and view it in 3D as well as in 360 degrees.
Citibank uses VR technology to enhance its marketing activities. It offers its customers a series of live VR concerts using VR headsets in partnership with NextVR and Live Nation.
Wells Fargo has established a facility called Digital Labs where developers use VR headsets, video conferencing, and high-definition touch screens while working on integrating VR into financial services.
It is evident that the future of banking, financial services, and insurance is digital. Some innovations have been more widely adopted by the industry than others, but all these trends are moving towards a contactless, yet closer relationship between company and customer.