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Banking in the Fourth Industrial Revolution

February 28, 2018 - Shweta Shivaraja Product Manager, Infosys Finacle

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In 2016, Klaus Schwab, the Executive Chairman of the World Economic Forum wrote that we are currently experiencing the fourth industrial revolution. According to him, this revolution is “unlike anything that human kind has experienced before” 1 in its “scale, scope, and complexity”1. The fourth industrial revolution is characterized by an amalgamation of physical, biological borders and technology. The impact of the fourth industrial revolution will be felt across our way of life, and will have broad impact on every industry.
For example, the automotive industry has been facing changes due to technology evolution – from changing views on ownership – platforms like UBER providing easier options to ride without ownership to changing views on operation – autonomous driving changing our views on driverless cars. While some of it sounds like science fiction, there is concrete work being done on this front. Several car makers (new entrants and traditional) are focusing on driverless technology – ranging from assisting a driver to fully autonomous cars which don’t require a driver. In fact, earlier this year, Nissan revealed their research on “Brain to Vehicle” technology, which reads the user’s brain signals to make driving decisions – proving the point that physical, biological and technological worlds are increasingly interconnecting.
The impact is being felt in banking as well – banking industry is perhaps one of the industries that has seen leading indicators of this revolution. Digitization of banking services and processes is gaining ground, not only in enabling smoother customer journey but also in fine tuning internal processes. Future of banking will be truly digital – like the fully autonomous cars. It will be integrated in the day to day activities of the consumer, not requiring a separate interface for banking.
A typical customer journey would be seamless, completely integrated, and intuitive. For example,

  • Product Search – Banking products will be embedded in larger processes. The focus would be to become a part of a larger ecosystem, as customers will not be looking for banking products specifically. For example, a large purchase will automatically trigger a loan. This is already being done, but in its nascent form.
  • Onboard – Customer onboarding will be done via federated identity, garnering information from multiple sources rather than asking the customer to provide the details.
  • Authenticate – Security and authentication will be ensured by using AI technology. For example, based on analysis of devices used and behavior of customer. This too is being done today, but mostly in experimental stage.
  • Deepening of Relationship – This would be driven by advanced analytics, AI, where customers’ needs are anticipated. The aim of product suggestions would be to help customers achieve their goals and aspirations.

The common thread running across the various stages is that human involvement will be minimal, with technology enabling most of the processes. While the above example is retail focused, corporate customer service and product offerings will also reshape in the fourth industrial revolution. For example, IoT information for tracking of shipment can be integrated with trade finance which can automate the trade finance process.
The same will be extended to the banks internal processes as well. Activities like product design & distribution, marketing, customer management, operations etc will be automated – technology will augment humans in some cases and will completely replace in others.
Fintechs and neo-banks are already down this path, using technology effectively – their extensive use of APIs, advanced analytics, AI, IoT etc enables them to provide better products and services to their end customers, at a fraction of the time and cost of the traditional banks.
The ball is now in the banks’ court, to use the technologies available in their processes in order to turn the tides to their advantage or to step into the future without the tools to survive.
Sources:
https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

Shweta Shivaraja

Product Manager, Infosys Finacle

Shweta has over 12 years of experience in information technology and banking. She currently works with the Finacle Product Strategy Team. She is passionate about studying the key trends shaping the banking sector, and helps define the roadmap and product strategy for products in the Finacle suite.

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