Welcome to Discussions with LKN, where LKN gets in to technology based discussions and share’s his expertise on several topics. I’m LKN. In this series of Podcasts, I will be talking about how industry 4.0 model is being implemented in financial sector and related fields. Let’s get started!

The Fourth Industrial Revolution has spread its wings over all industries to have a positive impact on them. 

The financial services sector is also one of the sectors that have used the power of industry 4.0 extensively. Banking, insurance, mortgages, foreign exchange, stocks, and many other financial sectors are growing due to the positive emphasis on digital innovation and financial process automation.

According to Neilson Research, mobile devices have become a new standard for banking activities. Developing regions such as Asia Pacific and Africa are becoming major drivers of mobile banking in the world. 

In the United States, more than 70% of stock trading decisions are based on computer algorithms, while only 10% of stock decisions are made by individual experts. This saves a considerable amount of financial advisory services. Technology-driven microcredit in Bangladesh has opened a new era of financial empowermentof the rural backward classes.

The new crypto banking system based on blockchain technology is about to radically change the financial sector.

There is a lot the industry 4.0 technologies are offering to the financial sector. Let’s have a look at some important technologies that are currently in action in financial sector. 

Topic 2: Explanation

IoT in Financial Sector 

Enhanced Transparency

Main idea:

Using IoT solutions, banks and financial institutions obtain real-time data about their clients and clients’ assets and helps in effective risk management. Some of the earliest examples are from the auto insurance industry.

Supporting Information:

The most progressive American car insurance providers use OBD devices and machine learning algorithms to study driver behavior and adjust insurance prices accordingly. The company has more than 1.7 trillion views and claims that its prices are based on “how good you drive – not your type of car”.

In addition, smart sensors help companies reduce building deployment costs by up to 30% and manage property based on actual pedestrian traffic and room occupancy data. 

The retail banks are improving the process of credit underwriting and target consumers despite of no credit history available by using biometrics and sensor data. 

Automation of trading and investment

Supporting idea:

Dr. John Bates, CMO of Intelligent Business Operations and Big Data at Software AG, says that the future of the financial services industry lies in real-time market surveillance and pricing systems that allow companies to monitor the activities of stock markets, social media and traders. enabling them to keep Communication platform and adjust their policies accordingly.

Brett King, CEO of Moven says that most payments and financial transactions will be fully automated in the near future using IoT technology.

Chris Skinner, chairman of the Financial Services Club, claims that the world’s leading financial institutions are currently building the Internet of Value – a global connected environment that facilitates M2M trading through bitcoins, mobile apps and smart sensors.

This all is and will become possible by implementing IoT technologies in the financial sector.

Transaction security

Main idea:

Smart gadget manufacturers offer a variety of tools to secure payment transactions. These include tokens, biometrics-based authentication programs and magnetic secure transmission technology integrated with MPOS terminals.

Supportive information:

Die Bold, an American financial and security services corporation, went even further and designed a smart ATM! If you want to withdraw some cash you just need to schedule a session through a mobile app, walk to the nearest ATM and chose one of the available verification options (NFC, QR Code Recognition or Iris Scanner). The transaction will be completed in just 10 seconds and is much more secure than traditional PIN authentication.

Thinking forward software developers use cardiac signatures (data collected through EKG sensors) as payment IDs!

Improved customer services

Main idea:

There are various ways to enhance consumer’s satisfaction with smart financial services solutions provided by IoT. For example, you can drag Barclays and connect your mobile app to your smart watch. 

Supportive Information:
Some retail banks like Westpac bank Australia use apps like beacons to meet their customers who pass through their office or come to visit. Beacon’s strategy is based on personal greetings, product offerings,customer activity and surveys.

With a completely new approach to loan collateral tracking, smart contracts and risk-free investment decisions, financial institutions can significantly reduce the cost of personal and business loans, thus boosting the global economy.

Big Data and Cloud in Financial sector

Cut Costs

Main idea:

Over the years, building, developing and operating a bank has been expensive. New data centers and servers were to be built, and staff were recruited and trained to operate them.

Unfortunately, these costs may prevent new entrants from providing much-needed competition to the monopoly of traditional high street banks.

But cloud computing means banks don’t have to invest much in dedicated hardware and software with limited shelf life, nor do they need manpower to maintain it.

Supportive information:

Instead, financial institutions can buy into the infrastructure of a secure, dedicated cloud service provider and focus on making more money in their business.

For example, a Melbourne-based retail bank named ME bank with 800 employees is managing $20 billion in assets and 280,000 customers nationwide.

As a digital bank, it wanted to move from its existing premise data center infrastructure to a more efficient system, and in the process reduce operating costs.

ME Bank enjoyed 75 % reduction in the expenditure of providing development and testing ecosystems for new services and applications by shifting their systems to cloud.

Improve Flexibility and Scalability

Cloud gives banks the ability to move their fast-growing processing caps up and down in line with the ever-changing global market and customer demands.

In today’s fast-paced world, with customer-centric digital banks gaining significant market share, the ability to work fast is key to staying competitive.

Working with the cloud is a very effective way to quickly achieve this scalability: 65% of organizations initially noted scalability as their primary reason for adopting cloud services, and many financial services organizations have already noticed this benefit.

Auka Norway, for example, is launching mobile payments that allow users to send and receive instant money, pay bills, view transactions and get instant credit.

Increase Efficiency

Cloud allows financial organizations manage their operations to avail better performance.

This is especially important for businesses operating in multiple markets with multiple target demographics, and they need to improve all aspects of their organization to maintain a high level of performance.

The key to this process is the ability to interpret and analyze market data. Financial services organizations effectively take advantage of their competitors in this process to have a look at the new inventions and developments from a particular market without any hindrance.

For example, PCT’s cloud-based digital vision middleware was developed to keep pace with industry variations, so that businesses can set their financial goals accordingly. 

In addition, FIS, the global leader in financial services technology and PCT’s strategic partner, runs the US market analysis using the cloud. FIS’s Market Reconstruction Platform can collect and process data, and generate feedback reports within hours, with the ability to support fluctuations in market activity and complex analytics.

Serve Customers Faster

Cloud computing makes it easy to develop and launch new products and services, which is especially important for a financial services industry that has traditionally been slow to adapt to customer needs.

With PSD2, Open Banking and other initiatives that are ongoing or on the horizon, and customer-centric, start a new wave of fast-moving digital banking, with new features in less than 3 months. The deployment cloud capability will be important to both the competitors as the bank and the established institution as they strive to be relevant.

Unisys, a global information technology company, recently teamed up with PCT to use Microsoft Azure Cloud as a key component of Elevate by Unisys, an omnipresent digital banking platform that enables startups and established financial institutions to provide secure banking services anytime, anywhere.

Build strong customer relationships.

The combination of big cloud data and potentially unlimited computing power allows banks to gain better insight into their customers than ever before.

Financial services organizations that ignore this unique opportunity to customize the system to their customers’ expectations will pay the price by losing key demographics.

For example, 52% of SMEs in the UK say that banks are not business friends, while 44% of the US do not feel that their bank understands them. In an increasingly competitive market, it is unlikely that banks will understand these groups and survive without serving them accordingly.

When ING Direct renamed itself to Tangerine in 2013, it adopted a completely new business model to ensure that it had easy access to customer feedback, and provide services effectively.

The bank achieved this using Microsoft’s Analytics Platform System (APS) and Azure HD Insight. After transferring 45 Business Intelligence (BI) end users to the Microsoft BI environment, Tangerine was able to turn customer data into solid insights faster and more easily than ever before.

Furthermore, using Microsoft Cloud, Tangerine has been able to adjust the new product rollout based on customer feedback in real time, putting the bank one step ahead of its competitors.

Added flexibility

Thanks to the Fourth Industrial Revolution, organizations in all industries are under increasing pressure to respond immediately to consumers and situations, 24/7. As the banking sector continues to grow, this means that banks and financial institutions need to be as flexible and agile as possible. If you are a large, cumbersome financial corporation, this is difficult to eliminate this idea.

They need to be able to solve problems and change direction quickly.

High-performance banks have discovered that the most cost-effective way to achieve this is through enterprise-wide hybrid cloud.

Hybrid Cloud is an IT infrastructure that connects the public cloud to the private cloud space to create a single, flexible cloud environment. Not only does it give organizations the benefit of having public and private cloud space, but it also solves issues surrounding data security, governance and compliance, as well as the ability to manage resources in minutes.

The theoretical model of such a cloud seems to be the most efficient yet it is still under trial in most parts of the world.

Conclusion:

IT technologies are not limited to a particular sector of life. Yet they cover a huge canvas benefiting almost every aspect of life ranging from domestic to the huge manufacturing level. The world is continuously headed towards the next industrial revolution and all you need to do is to stick with us in this journey!

That brings us to the end of this blog! Thanks for joining us during that amazing discussion. We hope that the information we shared was beneficial to you. As always, thanks for reading.

With this I conclude this Episode. I have also started my own PodCast, Please do Follow, Subscribe and Share – Do read the Blogs, I assuming they will be informative to you if you are interested in this pod cast series