Ecosystems #Reimagined – The Rise of the API Economy

APIs, the simple interfaces that facilitate the communication or exchange of data between software programs are the cornerstone of a truly digital enterprise. From frictionless and fast customer onboarding to the cultivation of richly diverse ecosystems to comprehensive automation and insight-driven decisions, APIs are essentially fueling the digital future of banking.
Regulations such as Open Banking and PSD2 and the pressure on banks’ interest income further bring APIs into sharper focus. In 2017, we predicted the future of banking to be driven by open APIs, applications, app stores, and the extended developer ecosystems built around banks’ APIs. Heading into 2018, we see the adoption of APIs in banking evolving in four key ways:

  • This year, APIs will increase in breadth as well as depth i.e. not only will we see more APIs allowing digital firms, FinTechs and other developers to build real world applications but also more APIs with production data. Most banks currently have APIs running in sandbox environment with dummy data. In 2018 banks will develop the necessary governance mechanism to take their APIs live with production data.
  • The action in the payments space will intensify, as chat service providers integrate payment APIs. In India, Whatsapp has approached SBI, HDFC and ICICI bank for a proof of concept1, and it’s only a matter of time before Whatsapp payment API is extended to a wider ecosystem. Similarly, Google is also integrating payment APIs in Chrome browser2. These developments will lead to an exponential increase in the number of transactions taking place on mobile devices, and a growing challenge before banks and financial service providers in 2018 will be to scale their systems to be able to address the huge transaction volumes of the API economy.
  • Banks will increase their collaboration with non-banking partners. They will not just be a provider of APIs, but also a consumer of APIs from other ecosystem players. The next generation of banking experience will not only be the result of an engaged developer community creating applications using bank APIs, but also banks using external APIs to enhance their offerings and expand their reach.
  • Banks will look to monetize their APIs. Some progressive banks are already earning fee based income from their APIs. RBL bank has a revenue sharing agreement with Moneytap, a Bengaluru based start-up, where the latter uses the bank’s APIs to offer loans to the young urban middle class. The company’s product called ‘credit line’ is a flexible borrowing option that allows customers to choose their plan and EMI. The free app evaluates a user’s credit and loan amount the user is eligible for in less than 10 minutes. The customer is charged a small fee at the time of approval, usual interest fees and processing fees every time the customer borrows. 2018 will see more such models taking shape.

Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Customer Journey #Reimagined – From Customer Centric to Customer Specific

Banking has come a long way from maximizing customer lifetime value to maximizing value at every life stage. In our trends forecast for 2017, we stated that the customer experience conversation has moved beyond 360-degree views and next best recommendations. Today banks are constantly striving to innovate to provide immersive experiences to their customers and customer experience clearly separates the winners from the laggards. In 2018, we see this trend accelerating. We believe reimagined customer journeys leveraging the host of modern technologies will help banks drive differentiation, to go a step further from maximizing value at every life stage to understanding the journey of individual customers at the same life stage.
Over decades, banking businesses transitioned from a product-centric approach to a customer-centric one, and then to a customer-specific model. In recent times, several developments have shifted the banking customer experience goalpost further. Digital onboarding, using eKYC, has made it convenient for customers to switch banks in search of a better experience and value. Open banking initiatives and regulations, such as PSD2 in Europe, or the Open Banking Initiative in the U.K., are likely to propel the competition further. In fact, open banking initiative like Unified Payment Interface in India is already making challenger banks like ‘DigiBank from DBS’ aggressively market themselves as the primary interface through which their customers should manage all their accounts.
Furthermore, we are talking about the beginning of a world of myriad touchpoints and multiple channels. These touch points could be AI-based chatbots or smart assistants or even smart machines; and channels could be bank-owned, partner-owned or third-party owned. Some industry estimates suggest that by 2020, non-banking channels will contribute to 90% of banking transactions. Moreover, customer transactions would not only be influenced but would also originate in one of these channels – from an application, an autonomous car or any connected device.
These journeys will be about delighting customers at the moment of truth whether it’s retail or corporate banking. For personalized and contextualized customer journeys for all its customers, a challenge before banks will also be to bring the customers at the first or second moment of truth to the zero moment of truth. And banks will need to train their staff to meaningfully engage with customers at the zero moment of truth, since this is where the maximum connect happens.
Reimagining customer journeys will be as important for corporate banking as for retail banking. For corporate customers, banks will offer APIs to integrate customer ERP systems with the bank’s systems and provide seamless banking from within the customers’ business processes. In 2018, banks will also tap into their massive data resources and leverage the power of AI for innovative services such as credit forecasting for their corporate customers.
2018 will be this and more. Banking will be integrated in channels and systems. It will be ubiquitous yet invisible. And this will be the closest banks have ever got to their customer.
To read more about this trend and to download the infographic, click here
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Possibilities #Reimagined – More Things to Bank on

By 2021, 50% of banking users worldwide will use a smartphone, PC, smartwatch or a tablet to access financial services, a 53% increase from the current figures. In India alone, the number of online banking users is estimated to reach 150 million in 2020 from current 45 million.
Banking inconspicuously integrated the web and mobile channels to the brick and mortar ones, and today omni-channel banking is table stakes. In the future, with more and more connected devices, banking will be consumed on a variety of new channels and form factors. For example, progressive banks have already begun tapping into their digital customers through fitness apps that can monitor a user’s activity and translate fitness level into interest rates, or reward users when they hit a certain goal.
The hyper connected world of tomorrow will have machines transacting on behalf of humans, and not just humans consuming services directly. In 2018, progressive banks will prepare for this future with services designed to talk to smart machines at the consumption end, i.e. at households, customer premises or customer assets. For example, a consumer may authorize a smart refrigerator to order grocery and charge the credit card, or configure a smart car to pay for fuel.
Banks have a sizeable role to play in this connected future. The increase in channels that banking is consumed on directly translates into an increase in data sources, and banks will harness these data sources for new experiences. Take the example of an industrial scenario such as trade finance. An exporter of perishable goods need not worry about the inventory getting damaged due to weather or temperature. The exporter will have the necessary information and insights real-time to make a decision and take appropriate action.
Banks will need to make this journey through the three stages of the IoT information value chain, namely access, insights and action.

  • Access – Banks will need to ensure they are available for their customers at all times on the channel of their choice, which could be a smart car, a voice assistant or any connected device. Moreover, banks will need to ensure access to data from a bank’s leased equipment or a customer’s mobile phone, and data from external sources.
  • Insights – Next, banks will need to aggregate and analyze relevant business insight out of the massive amounts of IoT-generated data streams.
  • Action – These data and insights should also evoke action as appropriate. An example is an autonomous car simply locking itself in case the owner defaults loan payments.

But banks must bear in mind that security is of utmost importance in this connected future. In this future of ‘banking on things’ banks will have access to huge volumes of customer data. They must make security an architectural principle for development and integration of these services.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Intelligence #Reimagined – AI Comes of Age

AI is displacing jobs across industries, but at the same time is creating an opportunity to elevate people into more challenging roles that allow them to maximize their potential. Gartner estimates AI will create 2.3 million jobs by 2020.
As organizations strive to strike the right balance between man and machine, here’s some AI action we expect will take place in banking in 2018.
Firstly, in 2018 banks will develop a more nuanced understanding of the technology and will begin to appreciate the key building blocks – a strong foundation of data and analytics, machine learning, deep learning, natural language processing and generation, and visual recognition.
Among the applied solutions of AI, cognitive RPA will continue to garner interest, as will machine learning and deep learning. Natural language-based applications – chat bots, smart assistants etc. – will also find their way into banks that don’t have them yet. Progressive banks have experimented with NLP and NLG, and these have found application in a significant number of use cases. In 2018, fast followers and late comers will also adopt these.
2018 is also the year when AI use cases will go beyond the established applications of fraud prevention, customer service and risk management. For example, in the era of PSD2 and open banking, when banks will have unprecedented access to customer information, AI could accurately forecast future spends based on a customer’s activity dating back several years. Having said that, cyber security will still be the foremost use case for AI in banks in 2018.
However, while embracing the potential of AI, banks must also beware of its pitfalls. For example, machine learning is widely used, but there is limited understanding of how a result is arrived at or why it forecasts one thing and not the other. What complicates this, is that banks will not be able to validate a credit decision for the length of the credit cycle – in many products this is a year at the least!
AI will usher banks to the next level of efficiency and personalization. The technology will prove to be a huge differentiator for banks that understand it well, invest early, and work towards leveraging their workforce efficiently in the age of AI.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Business #Reimagined – From Platforms for Business to the Business of Platforms

World’s top 15 public platform businesses account for $2.6 trillion in market capitalization. Some of the most successful modern businesses are platform companies such as Uber, Airbnb, Alibaba, Amazon, or even social media giants and chat services such as Facebook and WeChat. And some of these platform companies don’t operate in a single industry, but compete in several sectors. Alibaba is a retailer, but also a payment service provider. Amazon is an e-commerce giant, but also a company that dabbles in logistics and cloud services. WeChat has also made a move into the payments space with WeChat Pay. Looking at the diverse presence and high valuations of these digital natives, one wonders if platform is the mantra for success in the new (digital) normal.
Banks are no exception to this growing trend. In 2017 we predicted that a truly digital bank will resemble the digital models of highly successful platform businesses. Clearly, banks have refined their ecosystem strategy, and in 2018 we see the shift from a pipeline business to a platform business in banking gain momentum and pace. Following trends mark this shift that will play out faster this year:

  • Banks will expand their portfolio with complementary products from partners in the ecosystem such as insurance companies or fintechs. These products may include non-financial products.
  • Banks will act as aggregators of products selling a host of financial and non-financial offerings in a single marketplace, as opposed to being monolithic institutions selling products designed in-house and distributed through owned channels.
  • Third party channels will become integral to a bank’s distribution strategy. In addition to a bank’s own channels such as branches, mobile app, wearables, voice assistants etc. banks will use APIs to sell products and services through third party apps, fintechs and other partners or even other banks.

Next, banks will look to earn revenue from their platform or distribution business. They will devise ways to monetize their APIs, and will form partnerships to open up new avenues of growth. A case in point is German digital bank Fidor’s arrangement with communication service provider O2, where the latter has built a mobile only bank on the former’s platform. In addition to interest income, Bank Fidor earns shared revenue from transaction fees and from O2’s business growth. 2018 will see more such partnerships, as the platform model in banking evolves.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Networks #Reimagined – Blockchain for Banking and Beyond

PwC’s 2017 Global Digital IQ Survey says that 9 percent of financial services firms are substantially invested in blockchain. Research from Infosys Finacle and LTP concludes that the industry expects commercial blockchain adoption between 2018 and 2020, while Accenture predicts mainstreaming by 2025.
Although the technology is in its nascent stage, in 2018 we expect banks and financial institutions to adopt blockchain in a variety of use cases given its promising prospects.
In 2017, we saw banks and financial institutions cultivating ecosystems and experimenting with the technology in a multitude of pilot projects. In 2018, a number of new ecosystems will emerge and the existing ecosystems will mature and become richly diverse. These ecosystems will go beyond bank-and-bank partnerships to large networks comprising financial and non-financial entities, such as suppliers, regulators, trade associations, entities that are closely associated with banks, such as clearing and settlement houses and brokerages, and shipping and logistics companies. An IDC study predicts that by 2020, 20 percent of trade finance globally will incorporate blockchain/distributed ledger technology. As ecosystems expand and more and more members are added to the networks, these ecosystems will be extended to a variety of new use cases. For example, an ecosystem such as Finacle Trade Connect, originally set up to carry trade finance transactions, documentary credit etc., could well support syndicated lending or sector-specific commercial banking services in the future.
The second key development will be the shift in regulatory approach towards blockchain. We are witnessing interest from quasi-regulatory entities such as IDRBT (Institute for Development & Research in Banking Technology) and Lanka Clear networks that we have helped establish. Globally, regulators from the Bank of England to the Monetary Authority of Singapore and the Hong Kong Monetary Authority, are evolving standards to help their banks join and benefit from these ecosystems.
While most of the action in the space so far was driven by large and progressive banks, in 2018, leaders, early adopters and fast followers alike will participate in blockchain ecosystems making them more scalable and diverse. And with the necessary push from regulators, blockchain is set to become serious business in 2018.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Workforce #Reimagined – From the Right Talent for Strategy to the Right Strategy for Talent

The future banker will be very different from the traditional banking professional in ways more than one.
Automation is disrupting the banking workforce, and transformation of the workforce is increasingly becoming a topic of board room conversations. Nina, an intelligent virtual assistant delivers 78% first-contact customer query resolution at Swedbank. Nina can also identify the financial services best suited for customers’ needs. Another bank has programmed a robot to sense customer emotions and to speak 19 different languages. The robot can assist customers with different services at the bank. But to say that automation is only stealing and eliminating jobs is akin to saying that the invention of the wheel as a tool to traverse greater distances in shorter time robbed man of his capability to walk. Emerging digital technologies are taking over routine and repetitive jobs and are creating a demand for new professional skills and increased reliance on innately human capabilities such as critical thinking, empathy and problem solving.
The second factor contributing to the transformation of workforce is the new tech-savvy generation of bankers and customers. As bankers and banking customers become younger, new-age skills such as customer experience design, product design based on customer empathy and journeys, data science, and knowledge of AI will be in huge demand. Scrum masters, agility coaches, machine learning engineers and full stack architects will be an essential part of the talent pool. With the boundaries between business and technology breaking down in banking operations, banks will develop multidisciplinary teams and talent with an appreciation of different domains.
Thirdly, the progressive millennial talent is more inclined towards impacting a change and associating with a purpose, and has different priorities and interests than the previous generation. Recent research into the workplace choices of IT and engineering professionals found that there were no banks in the top 25, and only 2 in the next 25, indicating that the sector has not been so successful in tapping into the interests and aspirations of this talent. Therefore, in 2018, banks will need to effectively articulate their purpose. In addition to hiring the right talent, the new banking organization will need to accelerate learning and development to retain the right talent for business.
2018 will also witness the emergence of a hybrid talent pool where there will be full-time employees and part-time/ short-term recruits who will flow in and out of the system, and will need to be trained, on-boarded and absorbed on a case-to-case basis. The learning and training programs will also need to change given the diversity of education and experience of part-time workers.
To fully leverage the potential of the changing workforce, banks have a lot of work ahead of them.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Value #Reimagined – Cloud for Cost efficiency to Cloud for Business Enablement

Leading US commercial bank Capital One has publicly announced that it is leveraging AWS public cloud to reduce the number of data centers from eight in 2014 to three in 2018. DBS Singapore plans to move up to 50% of its compute workload to the cloud by 2018.
While cost efficiency remains a key driver for cloud adoption, enterprises and banks are now also realizing the benefits of increased agility, faster time to market for new solutions, and ease of automation in the cloud. In 2018, banks will look beyond cost efficiencies and increasingly see cloud as an enabler of business. The degree of adoption of cloud by large and progressive banks such as Capital One and DBS indicates the alleviation of apprehension around public cloud, and the willingness of banks to go beyond moving peripheral systems like HR and procurement to migrating their core systems onto cloud. The maturity of the cloud environment and the shift in regulatory approach towards cloud are the key tailwinds for the increased adoption of cloud in banks and enterprises. Technology leaders such as GAFA, and enterprise IT giants such as Oracle, IBM and Microsoft have had a huge role to play in this journey to the point of maturity it enjoys today. Secondly, traditionally hesitant regulators are now reducing barriers and providing guidelines for enterprises to adopt cloud. Cloud service providers such as AWS are also working with regulatory bodies across the world to help move the needle on cloud adoption among their member organizations. Banks are now looking to experiment with new public and private cloud arrangements.
What’s more, the changing face of banking in the world of APIs and fintechs stands to gain immensely with the flexibility to public cloud. Banks can accelerate their innovation efforts by moving their sandbox environment to public cloud, and can ensure seamless integration with FinTechs and third party APIs in the digital ecosystem.
Today the key question CIOs get asked is not if their bank is moving business to cloud, but how much workload they are moving to cloud. The level and magnitude of cloud adoption is increasingly becoming indicative of an enterprise or bank’s bottom line.
Cloud began as a transformative model in IT and has come a long way. It will be central to the adoption of emerging technologies and in an enterprise’s play in digital ecosystems at large in 2018 and beyond.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Security #Reimagined – It’s Everybody’s Business

Amidst growing digitization, concerns about protecting customer information and interest are intensifying. The confluence of technologies is opening up a world of new possibilities. But at the same time it is creating a need for increased checks and controls as fraudsters devise ways to exploit these very same technologies. This is the beginning of the age of AI versus AI.
In 2017, we said that enterprises would need to adopt a more pervasive, adaptive, and integral view of security. The cyber security breach at US credit agency Equifax in 2017, the Uber data breach mounted through the world’s largest open source developer community, and the Mirai botnet attack are just a few examples of the increasing sophistication of malicious attacks. Heading into 2018, we believe enterprises need to pull out all stops and combine the power of AI, machine learning, analytics, big data, biometrics and anti-fraud technologies to combat the multifaceted threats in this increasingly connected world. In case of new investments, enterprises must make security a part of the architectural design itself.
Regulatory push with existing and new regulations such as GDPR (General Data Protection Regulation) is bringing protection of investor interest and individual’s data into sharper focus. Complying with the new rules is not just a business priority for banks but also an IT priority and banks must strive to enable applications to secure themselves instead of relying on external remediation.
2018 is also the year when banking ecosystems will multiply and unprecedented amounts of data will be shared within and between ecosystems. Once the entire banking organization becomes entrenched in the business of sharing data, the business of protection cannot be vested in a single department or authority. Hence in the years to come, security will be everybody’s responsibility in the bank.
But as banks secure themselves against these threats they must not introduce friction in user experience. Security must work to protect customer’s interest without affecting the customer’s experience of interaction with the bank and its services. In 2018, banks may also look at offering identity management and related services to clients. And lastly, banks and enterprises must ensure that security aids their innovation efforts, does not hinder them.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018

Organization #Reimagined – Cultural Readiness fills the gap Between Business and Technology Readiness

2018 promises to be an exciting year. We’re particularly excited because we believe that we will begin to transcend the efficiency and experiential benefits of technology and see tangible benefits of technology in relationship creation and building.
In 2017, we stated that banks in the digital age would do well to transform their culture to one that is in total alignment with the customer. As we can see, organization transformation depends on the idea of embracing change, innovation, customer-centricity, and continuous learning. We believe that in 2018, organizations must embrace this culture of change, innovation, customer-centricity to sustain their businesses.
For a truly customer centric organization banks need to build multidisciplinary teams that cut across functional silos. Progressive banks are introducing programs to train their employees to view customer journeys, to enable them to see realities differently, and to help them connect the dots for creative solutions to deliver value to their customers as well as the end consumer.
To upskill and cross-skill their employees, banks are discarding the traditional class-room training programs in favor of unconventional ways. Axis Bank in India has launched Axis Bank Academies partnering with renowned institutes like INSEAD, CRISIL, ISOFE, encouraging its employees to identify areas of specialization that will help them become future ready as digital bankers. In 2018, banks will also look to train employees on relevant analytical skills to fill the gap between business and technology.
Banks have traditionally been known to avoid risks, but to keep up with the pace of innovation in the age of open APIs, platforms and ‘digital’, banks must move from a risk averse culture to one that values innovation and collaboration. At DBS, with hackathons to encourage greater collaboration with start-ups, digital skilling programs, and workshops for human centered design and agile methodology, the bank is building a culture to enable every employee to contribute to digital innovation without the fear of failure.
Lastly, in 2018 banks will revisit their KPIs to instill the new culture of learning, collaboration and innovation. With KPIs and rewards programs designed to cultivate the desired culture of customer centricity, innovation, change, collaboration, banks can successfully bridge the gap between technology and business readiness for the new world or re-imagined banking.
Read the full report here – #ReimagineBanking – 10 Strategic and Technology Trends to Watch Out for in 2018