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It is estimated that nearly 1.7 billion adults remain unbanked globally. Besides the unbanked there are large sections of the world that are underbanked or underserved because of geographical, educational and gender divides. And then there are the entrepreneurs and small and medium enterprises that find it harder to secure funds.

There are several ongoing initiatives by policy organisations, governments, corporates and FinTechs that aim to fulfil the goal of creating an inclusive world.  

This Ecosystm Snapshot looks at some recent examples from central banks such as MAS, RBI, BSP Philippines, the Royal Monetary Authority of Bhutan; financial services providers such as Mastercard and Citi; and FinTechs such as Microchip Payments and Sempo.

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Is Decentralised Finance taking over the banking world? Decentralised Finance is an emerging phenomenon, and it has been gaining the attention of the mainstream media since 2020.

Globally, about 1.7 billion adults remain unbanked. There’s a race to “bank the unbanked” to promote financial inclusion. On the other end of the spectrum, there are also efforts to “un-bank the banked”. With the rise of blockchain, it’s time to reformulate the consumer banking system with more secure and more affordable financial products. We hear from an unparalleled group of Decentralised Finance innovators and change-makers on how Decentralised Finance will define the next era of global finance. Hear from Dr Ben Goertzel of SingularityNET, Johann Eid of Chainlink Labs, Sudhir Pai of Capgemini and Justin Amos of Lygon. This session was moderated by Anjali Kapoor of Alt Key Theory.

Organised by the Monetary Authority of Singapore, the 6th edition of the Singapore FinTech Festival (SFF) ran from 8 -12 November 2021. The annual event brings together 60,000 participants from 160 countries – both virtually and in-person – for the development of financial services, public policy and technology.

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When the FinTech revolution started, traditional banking felt the heat of competition from the ‘new kid on the block’. FinTechs promised (and often delivered) fast turnarounds and personalised services. Banks were forced to look at their operations through the lens of customer experience, constantly re-evaluating risk exposures to compete with FinTechs.

But traditional banks are giving their ‘neo-competitors’ a run for their money. Many have transformed their core banking for operational efficiency. They have also taken lessons from FinTechs and are actively working on their customer engagements. This Ecosystm Snapshot looks at how banks (such as Standard Chartered Bank, ANZ Bank, Westpac, Commonwealth Bank of Australia, Timo, and Welcome Bank) are investing in tech-led transformation and the ways tech vendors (such as IBM, Temenos, Mambu, TCS and Wipro) are empowering them. 

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The number of IoT devices have now crossed the population of planet earth. The buzz around the Internet of Things (IoT) refuses to go down and many believe that with 5G rollouts and edge computing, the adoption will rise exponentially in the next 5 years.

The IoT is described as the network of physical objects (“things”) embedded with sensors and software to connect and exchange data with other devices over the internet. Edge computing allows IoT devices to process data near the source of generation and consumption. This could be in the device itself (e.g. sensors), or close to the device in a small data centre. Typically, edge computing is advantageous for mission-critical applications which require near real-time decision making and low latency. Other benefits include improved data security by avoiding the risk of interception of data in transfer channels, less network traffic and lower cost. Edge computing provides an alternative to sending data to a centralised cloud.

In the 5G era, a smart combination of technologies such as IoT, edge computing and AI/machine learning will be a game changer. Multiple uses cases from self-driving vehicles to remote monitoring and maintenance of machinery are being discussed. How do we see IoT and the Edge transforming Financial Services?

Before we go into how these technologies can transforming the industry, let us look at current levels of perception and adoption (Figure 1).

There is definitely a need for greater awareness of the capabilities and limitations of these emerging technologies in the Financial Services.

Transformation of Financial Services

The BFSI sector is increasingly moving away from selling a product to creating a seamless customer journey. Financial transactions, whether it is payment, transfer of money, or a loan can be invisible, and Edge computing will augment the customer experience. This cannot be achieved without having real-time data and analytics to create an updated 360-degree profile of the customer at all times. This data could come from multiple IoT devices, channels and partners that can interface and interact with the customer. A lot of use cases around personalisation would not be possible without edge computing. The Edge here would mean faster processing and smoother experience leading to customer delight and a higher trust quotient.

With IoT, customers can bank anywhere anytime using connected devices like wearables (smartwatches, fitness trackers etc). People can access account details, contextual offers at their current location or make payments without even needing a smartphone.

Use Cases of IoT & Edge in Financial Services

IT and Digital Leaders in Financial Services are aware of the benefits of IoT and there are some use cases that most of them think will help transform Financial Services (Figure 2).   

However, there are many more potential use cases. Here are some use cases whose volume will only grow every day to fuel incessant data generation, consumption and processing at the Edge.

• Smart Homes. IoT devices like Alexa/Google Home have capabilities to become “bank in a speaker” with edge computing.

• In-Sync Omnichannels. IoT devices can be synced with other banking channels. A customer may start a transaction on an IoT device and complete it in a branch. Facial recognition can be used to identify the customer after he/she walks in and synced IoT devices will ensure that the transaction is completed without any steps repeated (zero re-work) thereby enhancing customer satisfaction.

• Virtual Relationship Managers. In a digital branch, the customer may use Virtual Reality (VR) headsets to engage with virtual relationship managers and relevant experts. Gamification using VR can be amazingly effective in the area of financial literacy and financial planning.

• Home and Auto Purchase. VR may also find use in home and auto purchase processes with financing built into it. The entire customer journey will have a much smoother experience with edge computing.

• Auto and Health Insurance. Companies can use IoT (device installed in the vehicle) plus edge computing to monitor and improve driving behaviour, eventually rewarding safety with lower premiums. The growth in electric mobility will continue to provide the basis for auto insurance. Companies can use wearables to monitor crucial health parameters and exercising habits. The creation of real-time dynamic rewards around it can change behaviour towards a healthier lifestyle. Awareness, longevity, rising costs and pandemic will only fuel this sector’s growth.

• Payments. Device to device contactless payment protocol is picking up and IoT and edge computing can create next-gen revolution in payments. Your EV could have an embedded wallet and pay for its parking and toll.

• Branch/ATM.  IoT sensors and CCTV footage from branches/ATMs can be utilised in real-time to improve branch productivity as well as customer engagement, at the same time enhancing security. It could also help in other situations like low cash levels in ATMs and malfunctions. Sending live video streams for video analytics to the cloud can be expensive. By processing data within the device or on-premises, the Edge can help lower costs and reduce latency.

• Trading in Securities. Another area where response time matters is algorithmic trading. Edge computing will help to quickly process and analyse a large amount of data streaming real-time from multiple feeds and react appropriately.

• Trade Finance. Real-time tracking of goods may add a different dimension to the risk, pricing and transparency of supply chains.

Cloud vs Edge

The decision to use cloud or edge will depend on multiple considerations. At the same time, all the data from IoT devices need not go to the cloud for processing and choke network bandwidth. In fact, some of this data need not be stored forever (like video feeds etc). As a result, with the rise in the number of IoT devices and increasing financial access, edge computing will find its place in the sun and complement (and not compete) with cloud computing.

The views and opinions mentioned in the article are personal.

Anupam Verma is part of the Leadership team at ICICI Bank and his responsibilities have included leading the Bank’s strategy in South East Asia to play a significant role in capturing Investment, NRI remittance, and trade flows between SEA and India.