IBSi Blogs

The rapid growth of digital platforms is prevalent across the EU, where a variety of national and supranational regulators are having to pay much closer attention to the financial sector in which this new technology is being deployed.

by Manoj Mistry, Managing Director, IBOS Association

Digitalised banking networks are proliferating as traditional banking services are replaced by high levels of process automation and web-based services. Although such technological innovation in finance is not new, investment in new technologies has substantially increased in recent years and the pace of innovation is exponential.

Among the most notable areas of recent growth, there has been a significant rise in wealth management apps and digital platforms in Europe. Initially driven by younger users, who are more likely to be engaged with wealth apps, the enormous surge in interest has seen more than services for family wealth management as the profile of FinTech users gets older.

Typically, these apps are regulated by the Financial Conduct Authority (FCA) in the UK, and its counterparts in different EU member states. They use Open Banking: the sharing of financial information electronically, securely, and only under conditions to which the customers agree and approve. But inevitably, this surge in FinTech and digital platforms across the EU means that their future use will be driven as much by regulation as by technology.

In March 2018, the European Commission (EC) adopted an action plan on FinTech to ‘foster a more competitive and innovative European financial sector’. The action plan set out 19 steps that the EC intended to take to enable innovative business models to scale up at EU level, to support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector, and to increase cybersecurity and the integrity of the financial system.

This was followed by a digital finance package, which the EC adopted in September 2020. This includes a digital finance strategy, legislative proposals on crypto-assets and digital resilience, and a renewed retail payments strategy. Its overall goal is to create a competitive EU financial sector that ‘gives consumers access to innovative financial products, while ensuring consumer protection and financial stability’.

However, the digital finance strategy is only a staging post on the road to further regulation. In September 2021, the European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in EU.  Although the report outlined steps to enhance the monitoring of market developments, it stopped short of identifying any immediate need for specific legislative changes to be introduced.

But as EU regulators, such as the EBA, become far more active in identifying potential systemic risks posed to financial institutions and individual risks posed to their customers and clients, as well as to financial stability, they will have to regulate accordingly. In drafting legislation at an EU-wide level, and at a national level in each member state, consideration needs to go beyond affording consumers access and ensuring their protection, as well as maintaining financial stability. Regulators will also need to strike a careful balance between regulatory intervention and technological freedom.

In practice, this will of course necessitate creating regulations that are designed to increase transparency, mitigate risks and to guarantee sufficient protection. But while consumer protection must remain paramount, regulators must also ensure that new regulations do not frustrate or impede the pace of technological evolution.

The use of technology in financial services is highly competitive. Just as the EC’s proposed legislative initiatives to govern digital services and content in the EU, namely the Digital Services Act (DSA) and the Digital Markets Act (DMA), aim ‘to establish a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally’, the same must also apply in financial services regulation. The EBA must therefore ensure that new regulations do not hinder the capacity of digital platforms operating in the EU to compete effectively in global markets.

The sale of a kinetic 3-D video sculpture called HUMAN ONE earlier this month at Christie’s in New York was a milestone in the art world and not a bad day for the artist, Mike Winkelmann, better known as Beeple. The artwork sold for $29 million to a buyer in Switzerland, $14 million above the guide price.

by Adi Ben-Ari, Founder and CEO, Applied Blockchain 

What makes this piece different is that the video sculpture combines physical and digital technology. It came with an accompanying non-fungible token (NFT) representing the underlying digital assets. The artwork of an astronaut-type figure walking through an ever-changing backdrop draws on videos with an NFT on the Ethereum blockchain. The work was available for purchase using Ethereum.

The sale marks a coming of age of sorts for NFTs. To illustrate the speed at which this phenomenon has developed, even Beeple said he was unaware of NFTs a year ago. Since then, he’s sold around $100 million of digital NFT artworks – in March he sold a work entitled “Everydays: The First 5000 Days” for $69 million, the first of its kind.

NFTs are unique, digital certificates stored on a blockchain. They are a powerful tool to establish and demonstrate a type of ownership, particularly for digital assets which can be so readily copied. The non-fungible element reflects the uniqueness of each digital asset and the different values of each. Fungible assets include pounds, dollars, Bitcoin and other similar instruments that are identical and interchangeable. NFTs are generated using a “smart contract”, which is basically coding stored on a blockchain.

Digital art fuels public awareness of NFTs

What’s clear is that since NFTs entered public consciousness early in the year, they have seen a meteoric rise. Trading volume in the third quarter exceeded $10 billion, up 38,000% on the previous year. What’s more, artists, athletes and gaming developers are increasingly investing in blockchain technology to provide their audiences with unique digital assets, meaning that numerous NFT marketplaces are opening every month.

Cryptocurrencies have been around for over a decade – borne of the 2008 financial crisis – but only in the past three or four years have they started to become more mainstream. The NFT market has piggy-backed on that luring those investors who are seeking out the next new thing – the next big alternative asset class offering the potential for big returns. Blockchain is the engine for both instruments.

Blockchain records all transactions in a way that is indelible – records that are much harder to change or hack. As well, it is decentralised, meaning that control of security moves from a centralized entity, such as an individual or organisation, to a distributed network of people or entities. The technology demands transparency, accountability and puts the power into the hands of its users. That’s one of the appeals of NFTs.

One of the features of Ethereum is that it allows developers to implement so-called smart contracts. These smart contracts are essentially packets of code that may also define a digital asset and confirm that the asset as individually unique, traceable and verifiable. All NFTs have smart contracts attached to them.

Iron-clad indestructible proof of ownership

To date, NFTs have generally been linked with the art world. The value lies in the ability of the technology to prove its origin with absolute technical certainly. NFTs feature iron-clad, indestructible proof of ownership along with provenance that will last as long as the blockchain itself (forever?). In the future, every digital artwork is likely to have an associated NFT. The liquidity of an NFT certainty adds value – in the art world, that can be worth tens of millions.

An additional attraction of NFT marketplaces for artists is that they are cheaper. In the traditional art world, a gallery could easily take 30% or more of the takings on an art sale. NFT marketplaces typically charge less. This enables the artists to earn more, in particular on multiple and frequent secondary market sales, which matters because most are not as commercially successful as Beeple. NFTs also enable artists to connect directly with their customers as each purchase is documented on the blockchain and the creator is clear.

Collectors and investors are now scrambling to add such digital collectables to their portfolios, which is having a significant impact on the wider token and digital asset market. Digital collectables have driven many headlines, but the real-world application of NFT technology is even broader, extending across multiple sectors. Businesses, regulators, governments and authorities all, in different ways, stand to benefit if they are able to harness the potential of NFTs. In short, NFTs are not a fad.

So where next? The security and efficiency of smart contracts enable NFTs to be used as tickets for concerts, safeguards for digital identities or digitally tradeable representations of physical collectables and luxury items while those are in custody.

In the music industry, with the decline of physical sales and digital downloads, music artists often rely on income from streaming, which tends to reward intermediaries, such as the streaming platforms, and record labels disproportionately. NFT’s enable fans to engage directly with the artist through asset and financial transactions.

With collectable NFTs, artists gain the opportunity to establish a direct relationship with listeners and fans, enabling them to benefit financially. They also enable the payment of royalties to the original content creators – regardless of where or how the sale of NFT items occurs.

Other NFT applications are where the interest lies

One particularly valuable feature of NFTs is that they bring liquidity to previously illiquid assets. This happens through enabling ownership to change via digital platforms, especially those with global reach. Trading can be extremely efficient, requiring fewer intermediaries than traditional markets as a result of using digital guarantees. Innovative and efficient blockchain-based financing options in the form of DeFi (decentralised finance) are beginning to accept NFT’s as collateral for lending.

NFTs could also allow fractional ownership in assets such as property. This would mean property owners could unlock value from their properties and then raise funds without the assistance of multiple parties. Indeed, this approach could apply to the sale and exchange of businesses, or investments in sports star equity, whether in part or in their entirety.

Looking forward, blockchains need to become more interoperable with one another, so that an NFT minted on one blockchain is transferable to another blockchain. This is of growing importance, in a similar way that global mobile phone connectivity and then mobile app interoperability was such a big issue a few decades ago.

Applied Blockchain has built major NFT marketplaces for some of the world’s leading artists for both digital and physical art, as well as numerous other blockchain applications. NFTs offer a way to release inherent value and in doing so they create liquidity. It should be no wonder NFTs are generating such excitement across so many markets.

In today’s globalized environment, with regulatory demands and competition from FinTechs and others, institutions that cannot meet these challenges may not be viable in the long term.

by Nacho González, Blockchain Research Line Expert, Atos

Regulatory demands and competition from FinTechs, disruptors and others, especially in today’s globalized environment, are posing a long-term viability challenge to those institutions that cannot match these agile digitally focused organizations.

With the emergence of blockchain technology, a new revolution is underway: the industry is embarking on transformation, from operational processes to different business markets such as payment services, real estate, insurance, asset management, crowdfunding and lending to leverage the advantages it offers.

Blockchain is the first technology that offers a way to fully manage digital assets in a trusted, traceable, automated and predictable way. What distinguishes blockchain is that each ‘block’ is linked and secured using cryptography. Trust is distributed along the chain and relies on cryptography eliminating the need for a trusted third party to facilitate digital relationships and ledgers.

Enhancing digital finance processes

In the financial services ecosystem, the most significant business areas are clearing and settlement, trade finance, cross-border payments, insurance and anti-money laundering. This is where the Distributed Ledger Technologies (DLT) aspect of blockchain can be applied. In particular, we can point to the Australian Stock Exchange, which has since moved all of its financial asset management to a DLT platform.

Within clearing and settlement, we don’t currently have a common way forward regarding which stages of the lifecycle of a transaction (pre to post-trade, execution to settlement) can be encompassed by the blockchain. Looking at this practically, we continue to see holes such as information sharing with pre-existing legacy systems, compliance and regulatory concerns, along assets segregations. We need to address these issues before we can scale blockchain for such processes.

Yet in the financial processing industry, DLTs provide a compelling set of benefits:

• Traceability. Products and assets can be followed and scrutinized in live time. Once held in a ledger, the data is then immutable; access can be given by those who participate in the system/network, whilst preventing private information from being disseminated to any other sides. In addition, any additional asset data can be provided for use in various manners going with or going from the new owner.
• Clarity. Clear, easy to understand information regarding a transaction will help to encourage customer trust. Balancing transparency and privacy are integral features of blockchain. Identity is hidden within cryptography in the blockchain, therefore the connection of public key identities with individuals who use it is a hard connection to make. Combining this with the means of the data structure within a blockchain (in which a transaction is linked to a public key identity), allows for an unmatched level of transparency with privacy.
• Accountability. Within the chain of blocks, transactions are kept in sequence and indeterminably. This allows for accountability and auditability at every stage, not needing any outside players.
• Security. Every single transaction is verified by the network using cryptographic algorithms, assuring the authenticity and immutability of the information. The users have control over their own assets and transactions also using cryptography. Blockchain is therefore innately secure. Of course, there are theoretical scenarios where a blockchain can be counterfeit, for example modifying one single transaction in more than 51% of the network, but technical limitations make this scenario hypothetical, rather than a real threat to data integrity and immutability.
• Collaboration. DLTs enable each party to easily and securely share finance-related trade data. The level of collaboration (which information each party can share and who can access what) is determined by the configuration of the network/system, so this is a highly customizable solution easily adaptable to any regulatory, technical or functional requirement.
• Efficiency. Transactions are completed between involved parties with no intermediaries. Features like smart contracts provide automation of commercial actions, for example, cutting-edge initiatives such as Etch, an automated smart-contract based platform for wage management.

The beginning of the end of traditional banking?

Most key players in the industry have reacted to blockchain and are deploying DLT applications in their day-to-day operational processes and applying them to different services provided by institutions. These include JP Morgan Chase in the US (with its Blockchain Center of Excellence), Banco Santander in Spain (supporting initiatives such as RippleNet and Hyperledger or with We.trade trading platform deployment) or Mitsubishi UFJ in Japan (with the launch of a blockchain-based payments network).

The implementation and deployment of fully operational trusted and authorized interaction networks among corporations, B2B networks, service providers and financial institutions will be highly disruptive. This does not herald the end of the banking industry as we know it but blockchain, as part of widescale digital transformation, will add significant value. The question is whether traditional players are going to lead this transformation or new players will emerge.

A few years ago, it was fashionable to talk about ’emotional banking’, but this concept seems to have been quietly dropped. Perhaps we need to rethink the idea—the key is embedded payments and their role in ‘emotional finance’. Fintech has made the staid financial services industry infinitely more exciting, at least for those who watch the sector. But has this excitement filtered down to consumers?

By Alex Reddish, MD, Tribe Payments

People are driven by emotions, even when they don’t realise it. As consumers, gut instinct and personal preferences can play a huge part in our purchasing decisions.

The power of a brand can have far more influence on purchasing decisions than many other factors. If people feel warmly towards a brand, they are happier to engage with it. There are many reasons why Apple is one of the most successful companies in the world, but it’s undeniable that the brand is a big part of it. People see the Apple logo as a sign of quality and innovation and are happy to pay a premium for their goods. The iPod was not the first mp3 player, yet it became synonymous with the technology. Consumers (in general) love Apple. Who else could they learn to love?

Can people learn to love financial services?

A few fintech brands have made a particular effort to engage with their customers. Zopa posts regularly to Instagram with easy-to-follow, friendly advice on money matters. Business provider ANNA has developed a range of child-like illustrations and Klarna churns out a combination of zany creativity in its adverts and a steady stream of helpful tips in social media.

For all this, including the slick apps, welcoming graphic design and friendly customer service, financial service providers are still going to struggle to be as beloved as, say, Nintendo or Nike. People need to trust these providers. They need to know that they can have faith in their systems and services. Once this trust is built, can it really be developed into genuine brand affection…?

Embedded payments and the rebirth of emotional finance

Embedding payments means more convenience for customers. By making payments ultra-convenient and invisible, consumers are happier because everything happens with zero fuss or effort, and businesses get to reap the benefits. There’s also the opportunity for businesses to offer financial services that reinforce the relationship between the business and consumer, as well as delivering potential new revenue streams.

Embedded payments link merchants directly with their customers, enabling them to be part of that transaction or moment. These payments allow providers to build customer relationships at that point of need, helping build trust and develop a meaningful relationship.

But we shouldn’t see embedded payments as the endgame. It’s tempting to think that, once the payment is invisible, there is nothing more that can be done. There is the potential to create better links with customers—and perhaps even create the sort of emotional connection that other brands enjoy. This is emotional finance.

Creating better relationships is contingent on having a better understanding of the customer journey… but not the customer journey as we usually mean it. Rather than the customer’s journey through a payments system, we mean their journey through life. Priorities shift and change, and even minor decisions can mean big changes in spending. A new child, a new home, or even a new hobby can mean an abrupt shift in priorities–understanding these changing preferences and reacting to them can open the door to building better loyalty.

Right now, certain music streaming services offer deals for two people at the same address – but consumers have to proactively adopt these and link their accounts. What if a service could do this with a certain level of automation? What about other services that would be helpful to adapt without changing needs? The most common embedded payments example is paying automatically when taking an Uber or another taxi… but what about the other journeys (real and metaphorical) we take in our lives?

The key to this is, of course, data. Data means that we can create better services – more personalised, more convenient. But it’s not just about making sure we tap into the broadest range of data available. Timing is very much a factor, perhaps the most important. Instant access to data is required to make the fairest, most accurate decisions.

When we consider how much change we’ve all gone through in the last year or two, financial data that is 18 months old is likely to be very outdated, and the quality of customer data will degrade quickly over time. We need to work with the freshest data to make sure the end product is one that consumers will want.

Ultimately, consumers will pull us in the direction they want to go, no matter how much we think we can ‘push’ new products and services to them, adoption is down to the customer. Creating emotional finance – a connection through loyalty and context is key – embedding finance to make things convenient is not, on its own, enough.

The rise of innovative technologies has made it possible for challenger banks to shake up the market in the last decade. With customer needs changing and expectations increasing, there is a growing trend for smartphone banking; branchless, mobile-only banks with centralised services, ready to compete with established institutions.

by Vince Graziani, CEO, IDEX Biometrics ASA

The term challenger bank is used to describe any banking service provider looking to take on and win customers from the big corporate, or traditional banks. And now banks such as Monzo, Revolut, Chime and Papara, established in 2015, are maturing garnering praise and followers, putting established banks under increased pressure as they battle for the next generation of customers.

US-based start-up Chime is now valued at $14.5 billion and is IPO-ready. In the UK, Revolut— which has more than 14 million customers—is worth more than long-standing high street bank NatWest. Meanwhile Papara, a Turkish banking challenger has grown to eight million users, and is gearing up for European expansion in 2021, with Germany as its first growth market. Also in Europe, Swedish financial service challenger Rocker has received €48 million in equity funding just 18 months after launching. This presents some serious competition to traditional banks around the world.

 Monumental changes in consumer payment habits

Meanwhile, the pandemic has impacted the world’s financial habits. Today consumers are using less cash, making more contactless payments and want to keep a closer eye on spending patterns. As more people move their lives online, digital challengers have been well placed to take advantage of this trend.

According to Ipsos Mori’s personal banking report, challenger banks are cementing their position ahead of some of the biggest financial brands in customer service, showing that innovation and modern ideas are revolutionising the market.

For a new generation of tech-savvy customers, challenger banks also offer something a little more fashionable, with strong branding and messaging, meeting banking needs with a customer-friendly service that fits around them, not the other way round.

Can big banks catch up?

 Big banks have been playing catch up over the past few years. They were late to the game and have retroactively started backfilling their account offerings with spending trackers and notifications. But chasing the features of more agile, mobile-focused competitors isn’t enough to help them thrive in a changing banking world.

In particular, these challengers gain competitive advantage by creating new payment options that reflect customer demand for additional security and convenience. As studies show that payment cards will dominate the banking scene for at least the next decade, bank players need to revolutionise their own payment card offerings to respond to consumer needs.

New and emerging payment options

With consumers concerned about security, convenience and speedy payment options in an increasingly cashless world, big banks must embrace new biometric technology if they are to win their business.

A smart fingerprint authentication payment card already far exceeds the security of PIN authentication. This new generation of on-card fingerprint recognition technology has shown to be more than twice as secure[1] as traditional card payment transactions requiring a four-digit PIN.

Fingerprint data is held securely on the card, not in a shared database, meaning personal biometric data never leaves the card and cannot be hacked, recreated or breached. By linking the user to their card via the unique properties of their fingerprint, banks and retailers can create a payment process that is safe, speedy and highly secure –while demonstrating innovative thinking and future proofing themselves.

Fingerprint authentication is also more inclusive. It removes barriers for those with literacy challenges or memory difficulties because biometric payment cards simply allow consumers to be their own authentication. They can be used in any corner of the world, even in the most remote locations with limited cloud connection.

Biometric cards can also be used to provide direct and unequivocal identification to help the financially excluded open bank accounts and improve their credit scores.

Why embracing new biometric innovation can help gain top-of-wallet status

With the economy slowly bouncing back to pre-Covid levels, fingerprint biometric payment cards offer a safe, secure, hygienic method of payment authentication, providing an additional layer of security and trust in a cashless world. The rising wave of fintech’s and challenger banks is forcing traditional banks to focus on product and service differentiation as they try to compete against more agile entities and retain brand loyalty. Therefore, it’s important now more than ever for banks to embrace new biometric technology to provide their customers with an enhanced customer experience and deliver essential security to their payments.

Biometric payment cards enable challengers as well as incumbents to compete for and gain top-of-wallet status, protect users from fraud and build trust with the consumers of tomorrow. With technology evolving at lightning speed, now is the time for the banking sector to embrace cutting edge innovation and win the fintech play.

[1] Independent field trials commissioned by IDEX Biometrics in 2021 demonstrate the likelihood that a fingerprint biometric payment card incorrectly accepts an unauthorized user was less than one in 20,000, compared to a one in 10,000 chance of correctly guessing a user’s four-digit PIN.

The rise of Banking-as-a-Service (BaaS) is a logical next step in fuelling efficiency across existing customer journeys. Rather than diverting buyers to separate channels to complete online purchases, for instance, brands that have already built strong brand recognition can instead cross-sell financial services like credit to already engaged consumers.

by Paddy Vishani, Strategic Partnerships Manager, Yobota

As a result of innovation and growth in embedded finance business models, non-financial brands can now extend credit and other banking services to their customers without having to obtain a regulatory licence – while offering the same protections that come with being a fully regulated bank.

According to PwC, the new revenue potential generated through open banking-enabled SME business and retail customer propositions in the UK was £500 million in 2018. By 2024, Insider Intelligence predicts that this figure will reach £1.9 billion.

Even though the opportunity is compelling, however, there are a few nuances to navigate as banks, BaaS providers and businesses consider forging long-term partnerships.

A winning BaaS partnership

White labelling in financial services is not a new concept; branded credit cards, for instance, have been used by businesses for many years to build customer loyalty. Yet the role of white labelling in the BaaS space is far more involved.

Through flexible plug-and-play application programming interfaces (APIs), banking platform services allow brands to directly tap into the infrastructure of their chosen bank. This means that core elements like risk management, compliance and servicing are all supported.

Importantly, leading BaaS providers will enable businesses to create differentiated offerings, giving businesses the ability not just to implement off-the-shelf banking solutions, but also to curate novel products. Beyond customising the user interface to reflect their brand, the modular architecture of banking platform services empowers businesses to customise, adjust and replace the core components they need at any given point in time. The importance of choosing the right provider thereby becomes apparent.

A BaaS platform must be able to do a number of things. Firstly, it must protect the bank by demonstrating that it can reliably ringfence the clients, their data, and all the processes which will be utilised by different businesses. Core banking vendors should have a proven track record in supporting regulated products, and ideally a leadership team consisting of both technology and banking specialists that are well-versed in regulatory requirements.

The platform must also be designed in a way that offers easy access to all the critical functions provided by the bank: the entry points (usually in the form of an API) must be optimally designed to give businesses the tools they need to realise their vision. The design and flexibility of the architecture are key: BaaS platforms must be extensible and scalable to meet future use cases as customer expectations evolve.

A key component of this is that the representation of financial products should be unbounded. Whether businesses are looking to introduce a variable APR that is dynamically linked to an individual’s credit score, or a savings account that pays interest into an environmental fund, an agile solution is needed to support the long-term evolution of banking products.

Embracing the art of the possible

Embedded banking is increasing the appetite for innovative, tech-driven solutions to solve common pain points across the customer journey. By solving the technical hurdles, BaaS providers like Yobota empower businesses to spin out user-centric offerings that they can run independently.

Sophisticated BaaS solutions should also be able to deliver granular insights into how end customers are interacting with products. Reporting APIs that generate real-time data will enable businesses to continually assess and adapt to industry trends and customer behaviours. Equipped with this knowledge, brands can curate experiences that are truly relevant to their customers’ needs.

The rise of BaaS will no doubt serve to inspire new products and fill unexplored niches in the market. The importance of strategic partnerships, however, cannot be overlooked as banks, providers and businesses set their sights on the new realm of possibilities.

The overall progress of a region depends on equal opportunities for everyone without any discrimination or preference. When women of a country are empowered, it drives economic growth and development and creates life lessons for young female entrepreneurs to drive their business ideas. Even though the government has come up with many initiatives to promote entrepreneurship in the country, there are a few hurdles for people (especially women) to put their ideas into action.

bu of Abhinav Sinha, Co-Founder, Eko

Lack of finance options is one of the most crucial roadblocks women entrepreneurs face in India. As the role of FinTech companies has expanded significantly in the past few years, one can expect that these firms will drive entrepreneurship among women in the country. There are different ways through which FinTech firms would enable young women entrepreneurs in their entrepreneurship journey.

Understanding the constraints in access to financial institutions

Financial inclusion is crucial for the entrepreneurship journey of any individual. The concept of financial inclusion refers to the accumulation of savings, accessing financial institutions to invest, and availing various services provided by such organizations. In respect of entrepreneurship, it is crucial to understand that having a business idea and executing the same on any level is a key to this process. Rather than thinking about being a start-up or a unicorn, the most crucial aspect is to get the idea going by initiating a business. However, despite having many ideas, women entrepreneurs fail to execute them at the micro-levels.

Besides being discriminated against gender, financial institutions often do not take women entrepreneurs seriously, and they fail to secure adequate funding to sustain their business ventures. This not only puts brakes on their operations but also poses a significant hurdle in their entrepreneurial journey. Here, FinTech companies can play a significant role in reaching the end-users without the need to have a comprehensive infrastructure (physical).

Hence, from availing of finance to getting investment tips, women entrepreneurs can connect with a FinTech company and start their journeys. Aside from motivating more women to jumpstart their entrepreneurial stints, closing the gender gap will increase 35% of GDP (approximately) and benefit the macroeconomics gains of a country in a significant manner.

Integration of FinTech, financial inclusion, and government initiatives

The government’s efforts in promoting entrepreneurship through easing finance availability are often underappreciated. Several initiatives have started with the introduction of UPI (Unified Payment Interface) along with PMJDY and the Direct Benefit Transfer scheme, due to which FinTech firms have reached almost all parts of the country. Apart from them, the government has set up INR 10,000 crore fund (as a VC) for the MSME sector, allocated INR 20,000 crore to launch a specialized bank (Mudra Bank) for the SME sector, and earmarked INR 1000 crore to empower the financial dreams of start-ups.

These initiatives remove the middleman and facilities person-to-merchant transactions (offline & digital), promoting financial inclusion. With the increased volumes of digital payments and easing the due diligence requirements, FinTech companies have ensured that women will be educated about government initiatives, and becoming a beneficiary of such schemes would no longer be a bureaucratic process.

Improved financial inclusion for women entrepreneurs

Different studies have suggested that the overall trend of savings and investments among women in India has improved with increased usage of mobile apps, wallets, and platforms. With a friendly regional interface, FinTech firms work closely with women entrepreneurs to reduce their reliance on text and western iconography.

Voice-based and banking-plus solutions like savings and health insurance allow people without technical competency to operate businesses (like Kirana stores) more effortlessly. In a way, FinTech companies are promoting micro-entrepreneurship by facilitating small and microfinance, more accessible credit, and quick resolution of their financial requirements and queries. The overall time required to avail such services has reduced considerably, and with UIDAI-supported platforms, women entrepreneurs can use mobile banking solutions (MFS) if integrated with microfinance institutions (MFIs).

Summing up

FinTech companies in India have a significant role in promoting women entrepreneurship at micro and macro levels. These firms understand the challenges female business owners face in executing their ideas. Hence, by providing finance and supporting government initiatives, these FinTech companies will ensure better financial inclusion and address the core business issues that women are often deprived of.

What do manufacturers of automobiles, personal computers, refrigerators, and tumble dryers have in common? They were all caught out by the global microchip shortage. The list of blindsided companies with a disrupted supply chain includes some of the most advanced, technological companies of our generation worth multiple billions. How could they not have the foresight to be prepared?

by Michael Boguslavsky, PhD – Head of AI, Tradeteq

2021 was supposed to be the year of recovery for global trade, but it hasn’t quite worked out that way for thousands of companies across the globe. A fire at a warehouse in Japan and severe winter weather in Texas both resulted in a temporary pause in the manufacturing of microchips. As it turns out, the timely delivery of these chips was essential to companies in more than 150 different industries.

Billions of dollars in profits have been wiped from balance sheets. Customers are frustrated by the delays and the ramifications are likely to be felt for another 12 months, at least. It couldn’t have come at a worse time with the global economy still reeling from Covid and will set back the recovery.

For example, tech giant Samsung announced that television and appliance production had been interrupted, while car manufacturers paused production because of a shortage of parts. Ford put the cost at a whopping $2.5 billion.

This demonstrates the extent to which the global supply chain, and therefore global trade, is interconnected. If companies on different sides of the globe know how reliant they are on each other, it begs the question: who could’ve predicted the havoc this would cause on the global supply chain, and how could they let it happen?

Hard questions and head-scratching in the c-suite

That wasn’t a rhetorical question. There is a lot of head-scratching going on in boardrooms all over the world. Chips are essential components of the everyday technology that consumers and businesses use – from household electrical devices to heavy-duty machinery. How on earth did this fly under the radar of dozens of multi-billion-dollar companies across different sectors?

The shortcomings are further highlighted by the fact that these companies have access to, or have developed, advanced and complex technology that would’ve been considered science fiction a few years ago.

Large global companies cannot blame a lack of resources. They have some of the best operational and risk management systems in place, which ultimately failed to recognise how a microchip shortage would affect their operations and help them prepare accordingly.

The reality is that many companies didn’t take steps to mitigate supply chain risks or respond quickly enough. This is a moment of self-reflection and humility for the global business community. It needs to learn the lessons from this debacle and put improved supply chain risk monitoring and communication protocols in place.

Integrating modern AI advances into the supply chain

Numerous systems today enable companies to track how their consumers engage with them in real-time. Companies can send payments to their partners thousands of miles away, in real-time, and communicate with people across the world as though they are in the same room. Surely the technology exists to monitor risks in their supply chains, more effectively?

An example of this is artificial intelligence technology which can monitor risks in the supply chain and take steps to identify and mitigate those risks before they become a systemic issue.

If, for example, a supplier has a cash flow problem, or weather patterns affect their ability to manufacture a product, or an incident takes place that affects companies of a similar size and profile, companies can receive an early-warning sign to investigate what happened, how it might affect them and respond quickly.

This ensures businesses are staying ahead of potential risks and systemic events, rather than reacting to them. It is an example of technology making the global trade and supply chain ecosystem more responsive, agile and efficient; it reduces operational risks and means companies avoid the ire of customers.

Future-proof your supply chain now

Global trade is interconnected, and companies are more reliant on one another than ever before, which is why the impact of the chip shortage has been and continues to be so significant. The last year has shown that many global events cannot be predicted or planned for, nor can their impact be completely avoided. Technology, however, and in particularly AI models, can be used to manage and mitigate the negative effects.

Technology has been one of the biggest drivers for change in global trade in recent years. It can be used to digitise and speed up how information is shared and improve communications across supply chains. The former CEO of General Electric, Jack Welch, once warned that companies should change before they have to – the past few months have given proof to that phrase.

When future incidents, similar to the global chip shortage, become case studies in business schools, colleges and universities, will your company be consigned to the history section or be acknowledged as a trailblazer that embraced technology? It’s a question that c-suite executives should address sooner rather than later, or it will be answered for them.

The pandemic escalated the creation of digital banking business ecosystems. In this article, Sanat Rao, CEO -Infosys Finacle, speaks about eight new and innovative digital business model archetypes that banks need to thrive in these ecosystems.

by Sanat Rao, Chief Executive Officer at Infosys Finacle

The conversation about digital business model innovation is not new, but it has never been more pressing. As CEOs grapple with their biggest challenge, namely, how to stay relevant amid rapid change and uncertainty, the legacy pipeline-based business model was often at the heart of the problem, and ecosystem-led business model, invariably, at the heart of the solution.

Digital technologies are unlocking opportunities to create, deliver, and realise value in new ways. By and large, the traditional universal bank is built on a pipeline model where the bank does everything, from manufacturing to selling to distributing, on its own, using in-house resources.  This vertically-integrated pipeline business model is breaking apart, giving way to fragmenting value chains and new business model opportunities.

Our latest research study on digital banking business model innovation, conducted in association with 11:FS, organized the new models into 8 distinct archetypes, which are briefly described below:

Digital-only banks: Digital-only banks deliver banking services entirely (or almost) through digital touchpoints. Their key competitive advantages are high-quality self-service experiences and much lower operating costs than traditional banks. While digital banks mostly target digital-native/ tech-savvy consumers and small businesses, some start with narrower segments and gradually expand their reach to other groups. Digital banks are mobile-first, with some online banking offerings; and even their customer service is digital-first, chatbots led with limited human support. There is a long list of such banks, among them, Marcus by Goldman Sachs, Liv. By Emirates NBD, Digibank, Monzo and Kakao Bank.

Digital financial advisors: The digital financial advisor model brings the private banking experience to a much larger customer base. With data proliferating rapidly and becoming highly accessible in the open banking economy, firms, such as Plum, Snoop and TMRW by UOB, are able to run it through AI algorithms to understand a customer’s financial situation and offer highly personalized, appropriate financial advice. The traditional relationship manager is replaced by a hybrid of self-service and personal assistance rendered by both humans and chatbots.

Finance marketplaces: Finance marketplaces enable customers to choose financial services from a variety of third-party suppliers in an open environment.  These marketplaces are accessed through websites and apps, and also developer portals and APIs. Examples include BankBazaar, Stripe, and Raisin. As the industry embraces open banking and open data paradigms, these marketplaces would increasingly democratize and facilitate easy access to the best products and services.

Non-finance marketplaces: Financial Institutions-led non-finance marketplaces – such as those from DBS Bank and Paytm – enable customers to choose a range of (non-financial) goods and services from suppliers in an open environment. For instance, DBS Marketplace is a one-stop portal to browse property listings, cars, book travel flights, book hotels, and compare utility providers, with financing options bundled along.

Banking as a service (BaaS): In this model, a bank offers complete banking processes around their financial products such as payments, loans or deposits as a service that third parties can embed into their products and services. BaaS enables integration of financial products seamlessly into the primary journeys of the customers such as getting instant auto loans at the dealer site. Typically delivered through well-defined APIs and business partnerships, BaaS is gaining significant traction across the globe. Banks of all sizes and persona such as BBVA, Goldman Sachs, Sutton Bank, ICICI Bank, and Solaris Bank are actively building their business using this approach. In addition, specialist BaaS intermediaries such as Galileo, Marqeta, and Setu, are also getting significant traction.

Banking industry utilities: Banking industry utilities specialize in delivering non-differentiating services by pooling resources, expertise, and capabilities to increase the efficiencies of all industry participants. The utilities offer a Business platform as a Service (BPaaS), combining technology, operations, and data. Examples include ClearBank – UK’s new clearing bank, Stater – The largest mortgage service provider of the Benelux that services 1.7 million mortgage and insurance loans for about 50 financial institutions in the Netherlands and Belgium

Banking curators: New-age digital banks following this model aim to offer best-of-breed products by combining basic accounts with financial advice and a curated set of third-party products on a single platform.  N26, Monzo and Starling Bank are all examples of banking curators.

Embedded finance: Companies with frequent engagement and deep customer understanding are embedding banking and payments into non-financial products and services. The interest for embedded finance is rising across industries. Digital technology giants, e-commerce companies, retailers, travel – companies from across the spectrum are actively embedding financial products in their user’s customer journeys. For instance, buy now pay later proposition at the time of checkout or offering cash-flow based credit products to suppliers in association with banks. Shopify offers a good example here. It offers a ‘Buy Now, Pay Later’ option for consumers, a business debit card for merchants, and plans to offer  business bank accounts with Stripe Treasury.

Like most businesses, banking is also going the way of the ecosystem. A scan of the landscape shows that few, if any, banks are succeeding by standing alone. But to thrive in an ecosystem, banks need to adopt new business models, such as those identified above.

It may seem like a paradox, but as the devices people use to bank get smaller and smaller, the amount of data involved in those services gets larger and larger. So, with all that data already increasing so dramatically, what’s going to power the future of FinTech as the number of transactions made each day reaches high into the billions? The answer is the mainframe!

by George DeCandio, CTO, Broadcom

I’ve spent decades working with leading organisations in the financial industry, and in that time I’ve seen a lot of impressive innovations that have reshaped the FinTech industry (and financial services in general). Take the advent of online banking in the 1990s, or the rise of blockchain and cryptocurrency in the 2000s, and the introduction of online payments like Apple Pay in the 2010s. It’s worthwhile to note that each of these innovations – and many others – would never have been possible without a host of significant technological advances taking root ‘behind the scenes;’ advances that enabled the tremendous amounts of financial data associated with those innovations to be handled efficiently, effectively and reliably.

As any financial industry CIO will tell you, big data calls for the Big Iron… the mainframe. You might be surprised to learn that over the past 5 years, as more and more transactions happened through apps and online, the amount of financial data processed on mainframes has actually gone up. That’s right. Up! While an account holder might use an iPhone to pay a bill, there’s almost a 100% chance that the transaction was powered behind the scenes by a mainframe.

It’s easy for people to see just the consumer-facing technology and apps as modern and cutting edge while regarding other systems in the same way they might their parents’ wardrobe – dated. I’ll admit I have a few shirts in my closet whose best days are now long behind them, but that’s not at all the case with the mainframe. These systems aren’t out of date. They’re very much cutting-edge technology, continually growing in capability and keeping pace with the world around them.

Mainframes are fast – really, really fast

Thanks to their speed, security, and flexibility, today’s mainframes can perform a blistering six billion transactions a day. If you want to know why no banks reported system failures during the pandemic despite all of the stress that has been put on the financial system, there’s your answer. And these systems will continue to be even more vital as the world moves into a digitally powered future.

Thankfully, most of the mainframes that are in use today – including the powerhouse IBM z15 – are actually new. I know … whenever a movie character mentions the mainframe, invariably there is a massive room-sized computer laden with pneumatic tubes and steam vents that looks like it belongs in a Jules Verne novel. But more than 90% of major banks in the US are using a mainframe that’s less than two years old. Instead of envisioning the deck of the Nautilus from Verne’s Twenty Thousand Leagues Under the Seas, it would be more accurate to picture today’s mainframes among the amazing equipment in Tony Stark’s lab from a Marvel Avengers movie.

Then we get to flexibility. Just about every app and tool that people use to send money (ranging from Apple Pay to Zelle to PayPal) depends on the mainframe. If you really think about it, none of us have bank accounts with Apple, meaning that when we use an iOS app to transfer or access funds there needs to be an integration with one or more banks. And all those touch points involve mainframes. Just because consumers don’t see it, doesn’t mean it’s not there.

The backbone of FinTech’s future

Not only is Big Iron (the affectionate term that mainframe aficionados use to describe these systems) driving FinTech tools that are in common use today, but it is ideally positioned for emerging technologies including digital currencies, digital wallets, payment gateways, peer-to-peer lending, and microfinancing. I recently rented a beach house for a weekend on Airbnb, and I know for a fact that there was a mainframe involved in the transaction. Even Bitcoin touches the mainframe, which is amazing to think about. Emerging FinTech models may seem like strange bedfellows with a bedrock technology like mainframe, but the reality is that if funds are involved, the mainframe is ideally positioned to be the reliable technology backbone to make it safe, fast, and secure.

Bridging these two worlds is a new generation of open-source approaches and standards, making it so that literally anyone who knows how to use a computer can use the mainframe. That’s why the Linux Foundation has a major initiative called the Open Mainframe Project that is specifically designed to drive mainframe innovation. This gives traditional financial institutions an opportunity to mine the talents of cutting-edge app and platform developers to roll out services that would have been unfathomable to think about even five years ago. It all comes back to APIs, which give forward-thinking technologists ways to access the mainframe without having to buy their own machines or build completely new infrastructures to take advantage of their power and flexibility.

When most people think about innovation in the financial sector, they think about disruptive products such as PayPal and Apple Wallet. But while those applications get all the glory, they are the 10% of the iceberg that everyone sees. If you look closer, what makes it all work is the venerable mainframe, which quietly keeps the entire FinTech world, and indeed the financial sector in general, afloat.