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How Tech Disrupts Banking
The banking and financial service organizations are now foreseeing a paradigm shift of operations brought about by the fusion of technology into financial services. This has spawned a host of innovative initiatives revolving around fund transfers, investment advice, and know your customer (KYC) documentation, which is being replaced by technologically advanced systems.
As advanced fintech developments like blockchain technology, robo-advisory services, UPI 2.0 and Artificial Intelligence (AI) are integrated into regular financial operations, the banking sector is poised to transform both bankers and customers.
Blockchain technology is the decentralized linkage of records (or blocks) that are secured through cryptography that prevents hacking and data being compromised. The customers’ documentation and information saved digitally within the blockchain, becomes accessible by other institutions. This means that customers no longer need to provide KYC documents repeatedly. Banks are exploring the usage of blockchain in routine financial services to provide simultaneous access to multiple parties at once with minimal risk.
The algorithm behind this technology minimizes human dependency. Blockchain technology can also be used for the application of smart contracts and is even being considered for trading securities. This technology reduces the risk of errors and fraud and is also the best way to mitigate intermediary costs.
Unified Payments Interface (UPI) launched by the National Payments Corporation of India, in 2016, is soon being upgraded to UPI 2.0. Apart from supporting peer-to-peer payments, this smarter version of the interface will now support secure merchant transactions. Other features designed are bill payment options, biometric authentication, and Aadhar linked transfers. This will benefit consumers, merchants, and banks with better transaction processing.
Wealth management and investment advice provided by robo-advisors use mathematical algorithms that generate financial advice based on consumer preferences. This means that human intervention for customized investment advice is no longer required. To leverage this innovation, banks are now considering coming up with their robo-advisors to contribute towards professional asset management free from human error. The digital allocation and optimization of financial assets will result in time efficiency.
The application of artificial intelligence is beginning to disrupt the existing practices of financial industries. AI overcomes speed limitations by attributing human knowledge to digital technologies. AI contributes to better record identification, quicker transactions through data analysis and provides tailor-made services to customers based on their past preferences. This means that consumers will not have to provide their details every time they need banking services.
The Future of Banking
Collaborations among traditional banks, FinTech organizations, and digital lenders are the most sustainable path to long-term growth. The alliance will help replace redundant processes, manage fund requirements, and encourage a healthy financial ecosystem. Simultaneously, this will also lead to a drastic reduction of operational costs and a huge improvement of customer experience as well.