Category: FinTech

The term blockchain might sound familiar, ever since the rise of cryptocurrencies. It is a peer to peer distributed ledger technology that was primarily used as the underlying architecture for the cryptocurrencies. The significant advantage that attracts everyone to this tech is its ability to keep your data unrecognisable until it reaches the recipient, making it the safest system for data sharing. The financial sector has already started to make their progress through blockchain. Now the healthcare sector is using this new element of the tech world to grow.

Health records in a distributed environment

The blockchain is valued in healthcare primarily for its ability to privately, securely and comprehensively track the health records of a patient. Think about how the health records of a person are currently stored. It is a puzzle with its pieces spread amongst many providers. Your primary care doctor carries a part of it. Several pieces are held by other specialists you have ever visited. The remaining bits can be found in many wearable devices that track your health. The blockchain technology helps the experts to bring all these pieces together and make a brighter image of your health. When a blockchain based system is used, you can walk into your physician’s room with all your medical history located somewhere in the network. With your consent, the doctor can examine and edit your data. The follow-up doctor can access all these updated data later again with your permission.

Insurance claim evaluation and disbursements

A recently published research paper by IBM reveals that the currently used methods for storing and reconciling financial data in insurance companies are outdated and fragmented. Also, the data sharing in the insurance workflow is not smooth as it supposed to be. Many organisations are hesitant to share data due to multiple reasons, such as having to abide by laws and regulations (HIPAA). This reluctance in sharing data helps criminals to make false claims and get away with it. The blockchain technology can offer a remedy to this problem by enabling the secure sharing of data among insurers. It can minimise counterfeiting, double booking and contract alterations. What the technology allows for the insures to have a permanent and auditable record of claim activities while creating receipts at any stage of the claims process. Along with improvements in data sharing, automation of insurance process can be achieved through blockchain. With the aid of up to date shared health records and smart contracts, the automated process can avoid delays and reduce overhead cost.

Investment scenario across the healthcare landscape

” Global Blockchain in Healthcare Market- Analysis and Forecast, 2017-2025” by BIS shows that the blockchain in health care is roughly $177 million in 2018 and would be over $5.6 billion by 2025. The drive for blockchain in health care is going to be the urgent need to improve the interoperability and security of healthcare information system. By 2020, 70%of the organisations are expected to have research going on to get the technology onboard. With the success stories of early adopters like Estonia’s healthcare system, significant disruption is assumed in this field.

Money lending has been one of the oldest professions in human civilization. Typically, the loaned amount would attract an amount of interest, and the borrower would need to pay back the principal amount along with accrued interest, either in a single repayment or in several instalments. As financial institutions like banks began to design loans for different needs, the processes and paperwork began to get more streamlined, with standard qualifying criteria and repayment terms. Thereafter, we progressed to the concept of credit rating, a standardized score to ascertain the repayment capacity of the borrower. These scores were commonly available to all banks and any lender could easily assess the quality of a borrower from his credit score. Today lending has progressed beyond the earlier paradigm and has begun to incorporate several other aspects. Let us take a look at some of them.

Latest Technology

Both aspects of banking – loans and deposits – are today done more from the comfort of one’s home than by going to the bank physically. Internet banking makes all this possible with the use of a laptop or computer, or even on a smartphone. Specifically, with respect to loans, there are so many platforms now available, which make the work of the bank as well as the borrower much easier. May it be credit assessment of borrowers to the vetting of loan documents, every aspect of lending has begun getting automated. This allows the entire lending process to get completed much faster than earlier. There are apps now available which do the work of integrating lending technologies in one place. This can help the borrower keep track of his entire loan lifecycle, from the first intervention (at the time of comparing options) to the end (by tracking repayment schedules and finally generating closure certificates). From the point of view of the lender, useful analytics is now possible by using integrated data which can give an overview of all running and repaid loans for the same borrower.

Newer Avenues

Banks have progressed beyond the traditional types of customers and are now targeting financial inclusion with alternative lending. Financial inclusion refers to the process of bringing into the banking mainstream those segments of society who might not have the usual documents that the banking system generally asks of its customers. The size of the deposits and loans for this segment might be much smaller than those that banks and their customers are used to. Many banks are actually opting to set up credit franchisees in the hinterland instead of setting up branches. The persons becoming credit franchisees of banks in a particular region are usually people who have stayed in that region for a long time and know the creditworthiness (or lack of it) of people in that region. They are responsible for both credit assessment of borrowers as well as the repayment of the loans.

Making It Personal

As mentioned earlier, a surprisingly large number of people need nothing more than an internet connection on a smartphone to carry out all their banking transactions. The only thing that needs to be taken care of is the security of the phone so that the transactions are safely carried out. When a loan is to be taken, there are apps which compare different loans available and then also proceed to initiate the loan application to the particular bank chosen. This helps in personifying the digital lending experience.
This is what lending has evolved to today, and we eagerly await even more advances which will revolutionize the way banks lend to clients. Technology plays a dominant role in personalizing the user experience and most banks today have a virtual assistant that helps customers wade through the lending process and provide timely assistance and guidance.

The Adoption of Artificial Intelligence and Machine Learning in Fintech

There is hardly any aspect of business today that is untouched by technology. And when it comes to technology, the whole world is in raptures about Artificial Intelligence, using it in diverse ways, ranging from error minimization, pipeline generation, customer service, backend operations and so many more. For companies that provide computer programs and other applications for banks and financial institutions, Artificial Intelligence has opened up several avenues to sharpen their operations and offerings. There are several aspects of banking operations that can be optimized by AI applications, but let’s limit ourselves to three important ones and examine how artificial intelligence is impacting each of them – we will focus on Investment Advisory, Risk Management and Customer Service.

Investment Advisory

The first application of Machine Learning is in undertaking recurring transactions. Let’s take the example of a trading firm which buys and sells stocks for itself or on behalf of its clients. Its systems can be set up to place a buy order or a sell order when a particular stock reaches a predetermined price. This is a fairly straightforward transaction, but when Machine Learning components are introduced, what the system does is to plough through millions of such transactional data points to come up with a predictive algorithm. This would take into account the history of a particular stock and also the general response of stocks to certain external indicators like political or corporate events. As the system keeps crunching more and more data and continues to learn from data, it would possibly become easy for it to predict stock or fund movements in advance.

Risk Management and Fraud Prevention

The biggest advantage of applying Artificial Intelligence and Machine Learning to the prevention of fraud and the management of risk is that no human judgement or discretion is involved. This usually dilutes risk management and fraud detection. Let us look at fraud prevention first. Often frauds are perpetrated by a group of people working from multiple locations and carrying out multiple transactions on the same day, or even within a couple of hours. For a particular office or branch, the entire chain of transactions might be impossible to take cognizance of and make out a potential fraud build-up. But Machine Learning can detect such patterns based on the basis of a study of past frauds and flag off those transactions in time. Even if a big fraud is not being planned, regular vetting of transactions can also be done efficiently to free up employees for more productive tasks. Risk management for credit appraisal is a complex set of calculations from financial reports and other static data. Artificial Intelligence can add more depth to that assessment by factoring in real-time dynamic data.

Customer Service

Customer Service as a function started with customers having to walk into their branch to have their queries resolved. Then we moved on to phone-based query resolution setups, but many customers found it comfortable to speak to a voice rather than a human. The introduction of machine learning has meant that the phone service can become more effective and the customer doesn’t have to wait till a human comes on to the line. Patterns of earlier queries, access to large amounts of data, and the potential to carry out calculations and searches much faster have meant that Artificial Intelligence can actually provide useful answers most of the times, rather than a sterile standardized answer. This has been augmented by the introduction of digital assistants who are able to mimic a human customer service employee and come up with answers that are relevant and useful. We are fast moving towards the day when fintech will utilize artificial intelligence almost completely to handle customer service.

In the present day, Wealth Management is one of the most dominant sectors in the financial industry. Wealth Management businesses tend to have higher growth prospects and return on investments (ROI) ratios than most other retail financial businesses.
However, the Wealth Management industry is in the middle of a major shift; a new generation of investors have created the demand for modern standards on how wealth management services are delivered. The expectations and inclinations of these investors are shaped by advancement in technologies and their experience of the last financial crisis. Furthermore, rising costs of risk to investor’s funds and wealth management firms alike are making it harder for financial analysts to provide exclusive investment services for the clients.
Today, many Wealth Management firms are trying to determine how to engrain technology within their business models and use it as a tool in the financial services industry. Robo-advisory is one such emerging trend that has come to light in the field of wealth management.
The advantages of robot-advisory are that they provide affordable and reliable financial advice for all investors regardless of their net worth. While some may argue there is no role for robot-advisors in the Wealth Management industry, the truth is that we’ve reached a point where it’s impossible to live without it.
Ever since the widespread penetration of internet and digital devices, investors’ expectations have changed at a rapid pace. Convenience is now a top priority for all businesses. No one wants to waste time in physically visiting a place or talking on the phone to receive financial advice on a daily basis. This has resulted in not only more efficient and effective conduct of business, but also an increase in the number of investors willing to take risks for higher returns. That’s why most wealth management institutions are starting to adapt robot-advisory by altering the way they function.
Just like robot-advisors, another hot technological trend in the financial world is Blockchain. Numerous financial institutions including many major banks have already started exploring Blockchain’s potential in the wealth management industry.
The blockchain is a decentralized ledger which includes a safe and secure record of all cryptocurrency transactions that have been completed. It can be accessed by anyone regardless of the size of his transactions.
The idea behind Blockchain technology can provide a digital source of identity authentication allowing the unified exchange of documents between investors and wealth management institutions including banks. This is likely to bring a rise in automated investment services and reduction in working capital cost, all the while maintaining the privacy of data required by law.
Introduction of Blockchain is paving way for a surge of a cryptocurrency-based financial revolution that is already creating disruption in wealth management industry. The underlying process has also changed when technology replaced paperwork in back offices of wealth management institutions. Cryptocurrency basically is reordering the functioning of financial institutions in such ways we couldn’t envision until now. Although it will take some time for companies to fully entrust the benefits of cryptocurrency to investors, right now only a few can afford transparency as Blockchain technology evolves and is adopted by competitors.
The economy stands at a point where anyone can predict with logical certainty from cryptocurrency-based solutions. Currently, at the dawn of the Blockchain revolution, the major challenge for wealth management corporations is identifying and focusing on sectors which require innovative thinking to adapt to technological changes. If well-established wealth management businesses don’t modify their organizational models to address these setbacks, they may find themselves at a disadvantage in the industry.