Fintech

Presented To:
Prof Tahseen Mohsan
Presented By:

1- Ahsan Qureshi (Reg# 2233019)

2- Wajahat Moheed (Reg# 2233549)
3- Bahadur Ali (Reg# 2233548 )
4- M. Waqas Amin (Reg# 2233098)

Assignment No. 2

Innovative Products introduced by banks

What Is Financial Innovation?
Financial innovation is the process of creating new financial products, services, or processes.
Financial innovation has come via advances in financial instruments, technology, and payment
systems. Digital technology has helped to transform the financial services industry, changing how we
save, borrow, invest, and pay for goods.

While large banks continue to invest in mobile banking, FinTech companies, like Stripe, help small
businesses conduct online payments, and investment broker Robin hood seeks to democratize
investing and finance. These innovations have increased the number of financial providers available
to consumers, borrowers, and businesses.

Key Takeaways

Financial innovation refers to the process of creating new financial or investment products, services,
or processes.

These changes can include updated technology, risk management, risk transfer, credit and equity
generation, as well as many other innovations.
Recent financial innovations have included crowd funding, mobile banking technology, and
remittance technology.

Understanding Financial Innovation

Financial innovation is a general term and can be broken down into specific categories based on
updates to various spheres of the financial system. While the following is not an exhaustive list,
major financial innovations have come in the raising of equity capital, remittances, and mobile
banking.

Investment Crowd funding

Investment crowd funding has begun to open up and make the process of raising equity capital more
democratic. While investing in early and growth-stage companies used to be reserved for a
privileged few (generally institutional investors), new infrastructure and regulations have allowed
individual retail investors to invest in projects they are passionate about and/or have other
connections to for a small sum. Individuals receive shares of the new company commensurate with
the amount they have invested.

Two popular platforms for equity crowd funding are Seed Invest and Funders Club. In addition,
micro-lending platforms such as Lending Club and Prosper allow for debt financing similar to crowd
funding. In this asset class, instead of owning part of the company, individuals become creditors and
receive regular interest payments until the loan is eventually paid back in full. Also, P2P lending
marketplaces enable both people and companies to buy whole or fractional loans.

Remittances

Remittances are another area that financial innovation is transforming. Remittances are funds that
expatriates send back to their country of origin via wire, mail, or online transfer. Given the volume of
these transfers worldwide, remittances are economically significant for many countries that receive
them.

In the early 2000s, the World Bank established a database where people could compare the prices of
different transfer services. The Gates Foundation subsequently began tracking remittances in 2011.
Western Union and MoneyGram once monopolized remittances; however, in recent years, startups
such as Transfer wise and Wave have competed with their lower-cost apps.

Given the onset of Bitcoin, Ethereum, Stablecoins, and Blockchain technology, remittances are
becoming more affordable. The lower costs are in line with the Sustainable Development Goals
(SDG) of the World Bank to reduce the cost of remittances from 7% to 3% by 2030.1

Mobile Banking

Finally, mobile banking has made major innovations for retail customers. Today, many banks like T.D.
Bank offer comprehensive apps with options to deposit checks, pay for merchandise, transfer money
to a friend, or find an ATM instantly. It is still important for customers to establish a secure
connection before logging into a mobile banking app in order to avoid their personal information
being compromised.

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1. Advanced Self-Service Capabilities

Today, consumers do not have the patience to wait in a long line at a physical branch and fill in tons
of paperwork.

Especially when there are intuitive self-service digital banking solutions that provide a low-effort,
fast, and pleasant user experience via the consumer device of choice.

The Covid-19 crisis has made consumers of all generations even more confident in using digital
banking channels, and many will not be returning to the branch.

Self-service capabilities no longer refer only to common activities, such as the ability to transfer
money and check account balances online.

With the help of the latest banking technologies people can perform advanced digital self-service
jobs like:

● Self-registration

● Remote account opening

● Loan origination

● Buying insurance, and more.

The world-class self-service banking solutions are those available to users at any time, from
anywhere - quick, simple, and transparent.

Designing such processes involves cutting-edge technologies, including:

● KYC compliance

● Real-time ID verification

● Selfie capture and verification

● Device verification

● Facial and fingerprint biometrics

● Omni channel capability (in-branch, mobile app, website)

● Real-time credit bureau checks

● Instant approvals
 ● Interactive forms

● E Signatures and others.

Any digital process should be designed to go beyond the form fill and ensure a frictionless customer
journey across channels.

2. APIs

In our hyper-connected society, the growth of a bank will rely on its ability to build and participate in
digital ecosystems. A key prerequisite is the ability of the bank to integrate its products and services,
both internally and externally, with various 3rd-party services and applications.

APIs make this possible.

By definition, APIs (Application Programming Interfaces) allow two software systems, apps, or other
services to communicate with each other and share data.

In other words, APIs let bank products communicate with each other or with 3rd-party products in
real-time and in a secure way.

For example, APIs enable Core Banking Systems to receive money transfer requests from customer
mobile wallets, card systems, 3rd-party financial service providers, payment switches, etc.

But APIs are much more than that.

They are the key tools that open the door to innovation and allow banks to adapt faster to an ever-
changing customer-centric world.
Customers expect seamless integration between all types of devices, channels, apps and services.

And a good API strategy helps banks create a first-class connected, omnichannel experience.

Here are other vital benefits of APIs that accelerate digital banking transformation:

● Data insights: APIs enable banks to collect and combine customer data in order to gain
insights into consumer behavior and target the right market with the right financial services.

● New revenue: Banks can monetize access to raw data and banking services to create
alternative sources of revenue.

● Agility: APIs speed up the development time and delivery of new products and services to
market.

3. Instant Payments

Consumers are used to digital products that work in a matter of seconds and they don't expect
anything less when operating their money.

To meet these demands, banks are adopting instant payment solutions that provide real-time,
convenient, and effortless payments.

An instant payment happens when money is transferred electronically between two accounts within
seconds, instead of the usual 1-3 business days.

Both payer and payee almost immediately receive notifications (via SMS, mail, push notification, or
other ways) that the transaction has been completed successfully.

Splitting the bill with friends at a restaurant, transferring money peer-to-peer, shopping online, and
paying for tickets on public transport are just a few cases of how instant payments can make life
easier for both payers and payees.
There are two main instant payment concepts:

1. An instant payment scheme that spans multiple banks

This instant payment solution requires regulations and a gross settlement process to address the
associated risk on the one hand, and open API and 24/7 payment processing capabilities on the
other hand. The SEPA Instant Credit Transfer scheme enables pan-European credit transfers with the
funds made available on the account in less than ten seconds.

2. Instant payment scheme within a closed-loop payment scheme

The second concept is built on an organization level and requires a respective license. To bring value
to merchants and consumers the financial service provider should ensure innovative UX, flexible
business parameters and innovative services or pricing. On the technical side, account management
in a private ledger is needed, along with integrations to service providers for value-added services as
well as integrations to payment schemes for deposits and withdrawals.

4. Cloud Computing

Banks are facing a growing number of competitors entering the financial market - fintechs, BigTech
and even non-financial players.

To compete with them successfully, incumbents need to act with agility and speed. Many are already
turning to the benefits of cloud technologies when crafting their digital strategies.

Cloud computing allows banks to store data and applications, and use scalable computing resources
on-demand via the internet.

The leading public cloud providers (like Microsoft Azure, Amazon Web Services (AWS) and Google
Cloud Platform) offer a range of services to banks, allowing them to build and scale innovations
quickly.

Cloud platforms:

● Drive costs down as banks do not need to make significant investments in software and
hardware infrastructure

● Make developing and launching new products easier, and help banks respond to client
demand and technological trends faster

● Allow banks to store big data, while using powerful data analytics and machine learning to
gain valuable insights into customer behavior

5. Biometric Technology

Customers trust banks with their personal information, and expect the highest level of security and
protection.

Biometric technology allows financial institutions to balance security, speed, and convenience for a
seamless customer experience.

Biometrics are physical human characteristics (such as fingerprints, iris, and voice) that can be used
to verify the identity of customers.

Unlike PINs or passwords, biometric identifiers are impossible to lose or forget, and much more
difficult to hack.

By 2023, the need for a secure and smooth authentication process will prompt nearly 2.6 billion
biometric payment users. With ease-of-use and availability, biometric technology should offer a
unified, superior customer experience across all types of payment channels - from smartphones and
ATMs to smart home devices. Here are some of the key ways that banks can use biometric
technology to improve remote experiences:

● Mobile banking
Financial institutions include biometrics in their mobile apps to let customers safely transfer
funds or access their banking accounts while on the go.

● Digital onboarding
Biometric authentication allows banks to simplify and speed up due diligence and KYC
processes to mitigate risks and ensure excellent onboarding experiences.

● ATM transactions
Banks can implement biometric identifiers like fingerprint scanners in ATMs to make sure
that only authorized customers can use ATM services.

6. Chabot’s
Long response times, lack of available call center operators, limited working hours - these are all
hurdles that are faced on the journey to an excellent Net Promoter Score (NPS) and high customer
satisfaction.

In a digitalized society, any customer can write a review online and share their poor banking
experience with people all over the world.

Chatbots, enabled by artificial intelligence (AI), can resolve some of the above challenges and help
banks improve customer service quality.

Chatbots are software programs that can simulate online conversations with people via different
channels like websites and mobile apps.

They act as personal digital assistants that answer customer questions in real-time, offer 24/7
service, and provide a personalized experience.

Moreover, an advanced chatbot can support customers in daily banking tasks (like checking account
balances and tracking expenses), and can even collect marketing leads and perform cross-selling
activities.

Chat bots can communicate with millions of consumers at a much lower cost than human agents.

According to a Juniper study, chat bots will save banks up to $7.3 billion worldwide by 2023. In short,
chat bots could be one of the most beneficial innovations in the financial industry.
7. Process Automation - RPA, AI, Machine Learning

Modernizing legacy systems and optimizing processes are key focus areas in bank digital
transformation.
Making multiple departments and soloed systems work together comes with its difficulties,
workflow issues, and clunky procedures.

Integration and orchestration platforms, robotic processing automation (RPA), AI, machine learning
are all innovations that deliver the next level of cost savings, productivity, and improvement in
processes.

According to a report from Accenture, financial institutions in North America alone can gain $140
billion in productivity and cost savings by 2025 if they employ new automation technologies.

Automation is the procedure of replacing manual, time-consuming, repetitive human tasks with
automated systems that provide greater accuracy and speed that allows the bank to achieve
operational agility, reduce costs, improve customer service, and accelerate digital transformation.
Some areas where process automation is playing a vital role in banking are:

● Compliance

● Customer on-boarding, and KYC (Know Your Customer)

● Account opening

● Mortgage lending

● Automatic report generation

● Core banking operations

● Credit card operations

● Customer service

● AML and sanction screening

● Fraud detection

● Repeatable payments, and many more.

A unified automation strategy starts with identifying the key areas for automation - an area where
promising innovations like Process Mining can help.

8. Micro-services

Traditionally, many banking applications were built using the so-called monolithic architecture that is
an inflexible one-for-all approach.

But with the rise of mobile devices and changing customer expectations, the market started to
require applications that are easier to build, upgrade, and scale, with a focus on functionality instead
of coding.
The above can be achieved with the help of micro service architecture.

With micro services, the entire banking application is divided into standalone services that can
function independently but work together seamlessly.

In this way, unlike monolithic architecture where a failure in the code can affect the entire business,
a failure in one micro service doesn't disturb the work of the rest, which ensures better service
reusability and business continuity.

With benefits such as scalability, high performance, and reliability, micro services allow banks to
move quickly, increase business agility, constantly innovate, and provide consistent user experience
across channels like web, mobile, and IoT.

9. Internet of Things (IoT)

IoT is one of those innovations that can fundamentally change our lifestyle and the nature of
banking itself.
By definition, IoT is a network of devices connected through the internet (such as smartphones,
home appliances, wearable’s, vehicles, etc.) that collect and transmit data.
Banks can make use of IoT in various ways. Here are some examples:

● Payments
IoT technology enables consumers to pay for goods (like coffee and food) by simply putting
their wearable’s (such as smart watches) near the point-of-sale terminal in the store.
Wearable’s can also perform other transactions anytime and anywhere.

● Notifications
Wearable’s can receive bank notifications and alerts such as the availability of a monthly
statement or a new bank offer.

● Wallet of Things
The digital wallets stored in the customer's mobile phones, smartwatches, or even car
dashboards allow people to pay for products right from the device.
In a completely cashless society, the potential of IoT in banking can be limitless.

10. Big Data and Advanced Analytics

With millions of customers, banking and financial institutions are probably the most data-intensive
organizations in the global economy.

The next winners in the digital banking race will be the banks who manage to continuously generate
tailored offers and personalized experiences for their customers.
The answer to understanding what customers want and need lies within the mounts of data across
different banking channels.

Only through analyzing data, banks can truly listen to customers and create personalized financial
services that will benefit them.

Banks can leverage data from a variety of sources, such as online and mobile payments, withdrawals
at ATMs, usage of digital banking channels (mobile banking app, internet banking, e-wallet), IoT
devices, customer data collected for KYC, biometric authentication, etc.
 ● Data insights allow greater personalization that enables banks to offer tailored products to
individual consumers.

● Data provides opportunities to predict future outcomes, risks, customer decisions via next-
best-action models, financial crimes, etc.

● Data combined with automation reduces operational costs and risk.

● Data insights improve sales and marketing efficiency and feed the development of
innovative new financial products.

The data-driven bank has the power to make successful decisions and to thrive in this age of
innovation.

How Software Group Can Help You Deliver the Digital Banking of the Future Today

Driving the digital transformation of financial service providers worldwide, Software Group is
committed to building impactful digital banking solutions that enhance financial wellbeing and take
customer experience to a new level.

From self-service banking and remote account opening to chat bots and biometric authentication,
we leverage in-depth knowledge of cutting-edge technologies to help banks and other financial
institutions embrace the opportunities of the digital future.

Keeping the end customer at the heart of everything we do, we innovate to meet the demands of
the new decade, including memorable experiences, instant solutions, robust security, ultimate
convenience, reliability, and inspirational design.

In our opinion Mobile Banking is most

facilitating banking product
HOW THE REGULATOR AUTHORITY (I.E) TAKING CARE
THE INTEREST CUSTOMERS IN THIS REGARDS.

Regulatory authorities play a crucial role in safeguarding customer interests across various sectors.
Here's a breakdown of how they typically operate:

Key Functions of Regulatory Authorities:

* Setting and Enforcing Standards:

* Authorities establish rules and regulations that businesses must adhere to, ensuring fair
practices, product safety, and service quality.

* They monitor compliance and take action against those who violate the rules, which can
include fines, penalties, or even license revocation.

* Protecting Consumer Rights:

* They work to ensure that consumers have access to accurate information, fair contracts, and
effective complaint resolution mechanisms.

* This often involves handling consumer complaints, investigating unfair practices, and providing
consumer education.

* Promoting Competition:

* In many sectors, regulators aim to prevent monopolies and promote healthy competition,
which benefits consumers by driving innovation and keeping prices competitive.

* Addressing Specific Sector Needs:

* Regulatory bodies often specialize in specific sectors, such as:

* Telecommunications: Ensuring fair pricing and reliable service.

* Finance: Protecting consumers from predatory lending and ensuring the stability of financial
institutions.

* Energy: Regulating prices and ensuring the safety and reliability of energy supplies.

* Food and Drug: Ensuring the safety and efficacy of food and medical products.

General ways that these authorities protect consumers:

* Legal Frameworks: They operate within legal frameworks that define their powers and
responsibilities, providing a foundation for consumer protection.

* Transparency and Accountability: Many regulatory bodies are required to operate

transparently, providing public access to information and being accountable for their actions.

* Consumer Advocacy: Some authorities actively engage with consumer groups and advocate for
consumer interests.
In essence, regulatory authorities act as a vital link between businesses and consumers, working
to create a fair and balanced marketplace.