What are the technology innovations that banks are showing an increasing interest in?

Coauthored with — Siddharth Tikoo (Medium Handle — Siddharth Tikoo)

Banks these days are no longer following the traditional and age-old legacy methods. With the increasing focus on customer experience, banks are investing heavily in disruptive innovations that can fetch more revenue and increase customer stickiness. While innovation departments across banks are experimenting with several interesting technologies across automation, analytics, customer centricity and ecosystem models, here are a few of the innovations that are really piquing their interest:

I. Blockchain in trade finance

Within banking & finance, there are several start-ups and technology companies targeting use cases across insurance, capital markets, payments etc. But one of the most interesting areas grabbing eyeballs is trade finance. While there are many industries like diamond trading, music release, ticketing systems which are exploring blockchain for operational efficiency, this technology has the biggest use cases in health care and trade finance, since they involve multiple parties and documents.

In a typical supply chain finance ecosystem, there are not just the importer, exporter, banks and shipping companies — there are several intermediaries involved like customs agencies, transporters, tech platforms, etc. It’s a complex process involving plenty of document transfers, information exchanges, financing and payments, risk mitigation and physical movement of goods.

Currently the trade finance industry is plagued by challenges like manual contract review, fraud and inefficient communication, repetition of tasks by intermediaries, paper-based systems, manual KYC and delays in payments. It’s riddled with risky, inefficient, and expensive processes. But by using smart contracts, blockchain offers a disruptive and efficient solution to streamline these processes:

· All the suppliers, buyers and related parties can access the same underlying data on one single network rather than creating individual mini networks

· Contract execution is decentralized which enables real time status updation

· Eliminates the need to have multiple intermediaries and correspondent banks

· Reduces transaction fees and automates settlement, along with providing transparency and real time review

II. Speech analytics for improving contact centre operations

Speech analytics is gaining rapid momentum for improving customer service, especially in contact centres/call centres. There are many start-ups out there offering voice/speech/text-based analytics services for analysing human behaviour. By analysing voice recordings or through live analysis of a customer voice using speech recognition software, companies can get tremendous insights on customer behaviour which can be used to improve servicing.

Moreover, this can also be used for training contact centre associates and improving their performance while dealing with customers and responding with empathy to agitated customers. Such sentiment analysis of customer’s responses helps in making more informed, personalised responses and addressing their concerns effectively. Speech analytics offers the following benefits:

· Improved customer satisfaction with a more personalized experience

· Reduction in query resolution time

· Better tracking of a contact centre agent’s performance

· Reduction in customer churn rate

III. Facial recognition enabled authentications at ATMs

Currently, people visiting ATMs need to remember several PIN numbers for different cards. But an innovation that is slowly being tested out at several countries is the use of biometric technology at ATMs, as an effective alternative to PIN. People can use facial recognition technology at ATMs, wherein they just need the system to scan their face and approve any transaction like cash withdrawal or other banking services available.

This can vastly improve customer experience, as it eliminates the need to remember PIN numbers, thereby improving convenience and security. Before visiting an ATM enabled with biometric authentication, a customer will have to get their facial scanning done at a bank branch, which creates a database of thousands of facial touchpoints.

IV. Multilingual conversational bots:

Multilingual conversational bots, also known as chatbots, are becoming increasingly popular in the banking industry for customer service. These AI-powered tools can understand and respond to customer queries in multiple languages, making them a valuable asset for banks with a diverse customer base. Here are some of the key uses of multilingual conversational bots for customer servicing in banking:

1. 24/7 availability: One of the major advantages of chatbots is their ability to provide customer service around the clock. Multilingual conversational bots can handle customer queries in multiple languages, which means customers can access assistance at any time, regardless of their preferred language.
2. Improved customer experience: Chatbots can provide quick and accurate responses to customer queries, reducing wait times and improving the overall customer experience. Additionally, multilingual conversational bots can understand the nuances of different languages and cultures, which can help to build trust and improve customer satisfaction.
3. Cost savings: Implementing multilingual conversational bots can help banks to reduce their customer service costs. Chatbots can handle a high volume of queries, which means that banks can reduce their need for human customer service representatives. This can result in cost savings for banks, which can be passed on to customers in the form of lower fees or better interest rates.
4. Personalization: Chatbots can be designed to understand customer data and provide personalized financial advice. By using data analysis techniques, such as natural language processing (NLP), chatbots can understand customers’ specific needs and provide tailored responses.
5. Fraud detection: Multilingual conversational bots can also play a role in detecting and preventing fraud. For example, chatbots can flag suspicious transactions or detect patterns of behaviour that may indicate fraud.

Overall, multilingual conversational bots have the potential to revolutionize the way banks provide customer service. By providing 24/7 availability, improved customer experience, cost savings, personalization and Fraud detection, these AI-powered tools can help banks to better serve their customers and stay competitive in the digital age.

V. AR/VR

Immersive technologies, such as virtual and augmented reality, have the potential to revolutionize the banking sector by providing a more engaging and personalized experience for customers.

Some key use cases of Immersive Technology use cases are as follows:

1. VR Banking: Customers can interact with their bank in a virtual environment. This could include virtual branches where customers can speak with a representative, access account information, and even deposit checks. VR banking also allows customers to visualize financial products, such as investments and mortgages, in a more interactive and engaging way.

2. AR Banking: With AR, customers can overlay digital information onto the physical world, such as viewing account balances and transactions on their mobile device while at an ATM. This can make banking more convenient and accessible for customers, as they can access account information at any time and in any place.

3. Employee training: VR can be used to create simulations of real-life scenarios, such as handling difficult customer interactions or identifying fraud. This can help employees develop the skills they need to provide better service to customers.

Overall, immersive technologies have the potential to revolutionize the banking sector by providing a more engaging and personalized experience for customers, while also making banking more convenient and accessible. Additionally, it can also help in the training of the employee, which will in turn benefit the customers.

It’s important to note that while this technology have a great potential, it still in its early stage, and the industry need to explore and experiment more to realize the full potential of this technology.

VI. Digital Twin

Digital twin technology is a cutting-edge innovation that can bring a wide range of benefits to the banking sector. A digital twin is a virtual representation of a physical asset or system, such as a bank branch or an ATM network. This technology can be used to simulate and analyze the performance and behaviour of these assets and systems, providing valuable insights for optimizing their performance and efficiency.

Some of the use cases of Digital Twin in Banking sector are as follows:

1. Bank Branch simulation: One way digital twin technology can bring innovation to the banking sector is through the simulation and optimization of bank branch operations. By creating a digital twin of a bank branch, managers can simulate and analyze customer flow, staff utilization, and equipment performance. This can help identify bottlenecks and inefficiencies and optimize branch operations to improve customer experience and reduce costs.

2. ATM network simulation: Banks can create a digital twin of their ATM network to simulate and analyze ATM performance, availability, and customer use patterns. This can help identify areas for improvement and optimize ATM network operations to improve customer experience and reduce costs.

3. Banking operations simulation: Digital twin technology can be used to simulate and optimize other aspects of banking operations such as risk management, fraud detection and supply chain management. This can help identify shortcomings and safeguard against unseen and unrealized threats in a controlled and safe environment.

4. Customer experience: Digital twin technology can be used in the form of virtual banking, which allows customers to interact with their bank in a virtual environment. With digital twin technology, customers can visualize financial products, such as investments and mortgages, in a more interactive and engaging way.

Overall, digital twin technology can bring a wide range of benefits to the banking sector by providing valuable insights for optimizing operations and improving customer experience. This technology is still in its early stages, however, with its potential to revolutionize the way banks operate and improve their services.

Radhika Iyer is a Business Consultant in the BFSI domain (IMEA region) at Tata Consultancy Services. She is an MBA graduate from IIM Ahmedabad.