1.3 Evolution Of Banking + Harnessing Of Technology

Question 1

World oldest bank

Answer 1

Monte dei Paschi de Siena
(1472)
Operates in Italy till this day

Question 2

1472-1980

Answer 2

Historical, traditional banking, first ATM opened in 1967

Question 3

1980-2007

Answer 3

Self services, home and online banking, access to bank services outside the usual bank hours

Question 4

2007-2018

Answer 4

Mobile banking, fintechs, digital only banks

Question 5

2017 onwards

Answer 5

Real time banking everywhere
Digital innovations

Question 6

Uks Financial Conduct Authority 2022 review:

Answer 6

Innovation is a risk to vulnerable customers who still want to use ATM/branch

Weakening in historic advantages of large banks by digital innovation

Question 7

Three key trends that is continuing to reshape the competitive environment:

Answer 7

• shift from branches to innovation
• consumers demanding more digital offerings
• digital attackers taking a significant share of tradition banks revenue streams

Question 8

Banks becoming more technology advanced by:

Answer 8

• giving employees continuous training
• assessing the skills required of their staff
• reviewing their organisational structures
• digitising their core processes

Question 9

Technology that are having a major impact on banks and and their customers:

Answer 9

• open application programming interfaces (APIs)
• advanced analytics/AI/machine learning
• Conversational user interfaces (CUIs) chargers, voice user interface
• internet of thing (IOT)

Question 10

Open APIs

Answer 10

Allows different applications to communicate and interact with each other.
Customers own their financial data and can share it with other providers and have instant access to a wide range of options and services.

Gives customer more choice and control on what to do with their money.

API cheaper and faster than traditional card based payments

Question 11

Advanced analytics

Answer 11

Information technology (IT) that arw used to gather, examine and analyse data.

Banks can use this to predict customer behaviour and presences

Question 12

Four part of advanced analytics solutions for banks

Answer 12

Descriptive
Diagnostic
Predictive
Prescriptive

Question 13

Descriptive analytics

Answer 13

‘What happened’

(simple type of analytics)

• convert raw data into meaningful information

E.g. bank can use this to see how many customers are using their products

Question 14

Diagnostic analytics

Answer 14

‘Why did this happen’

Used for processing and summarising the information gathered from the 1st stage

Identify and compare patterns/trends and show correlation where these exist

Question 15

Predictive analytics

Answer 15

‘Why might happen in the future’

Use historical date and patterns identified to make informed predictions on what could happen in the future

E.g. how customers may act

Question 16

Prescriptive analysis (future)

Answer 16

‘What should we do next’

Use results of the above 4 to determine what is likely to happen and why and how the bank can take advance of future opportunity

Question 17

By banks use analytics to:

Answer 17

Offer customised products to customers

Identify and provent fraud

Result = improved customer satisfaction, loyalty and retention

Question 18

Artificial intelligent (AI)

Answer 18

AI = Branch of computer science that deals with the stimulation of intelligent behaviour in computers.

A machine intimidating humans behaviour and perform tasks that rely on an human doing

E.g. transactions of languages

Question 19

Machine learning

Answer 19

Computer systems learn from data,identify patterns and make decisions

Question 20

Conversational user interfaces (CUIs)

Answer 20

A facility like a chat box which allows the human user to interact and hold a conversation with a computer

Question 21

Two types of CUIs

Answer 21

1. Voice assistant that responds when the user talk
2. Chatbox that responds when user types

Question 22

Chatboxes

Answer 22

Help banks improve customer engagement
Constantly available and instance responses

Can access customers preferences and suggest products that suit their needs

Question 23

November 2022

Answer 23

Open AI launched the latest chatbox tec - CHAT GPT

Question 24

Other digital innovation in banking

Answer 24

1. Internet of things (IOT)
2. Cloud computing
3. Wearable
4. Block chain
5. Augmented reality and virtual reality (AR + VR)
6. Quantum computing
7. Robotic process automation (RPA)
8. Regulatory tech (RegTech)
9. Cryptocurrencies

Question 25

Cloud computing

Answer 25

Delivery of computing services over the internet without direct active management by the user Helps bank automate workflows, deliver new services faster, boost efficiency and cost savings

Question 26

Wearable

Answer 26

Digitally connected devices that people wear on them (smart watches, fitness trackers) - alternative way to do banking tasks (check bank balances, convenient for disabilities)

Question 27

Robotic process information (RPA)

Answer 27

- computer software robots - can handle more complex functions and with machine learning can make decisions Banks use RPA to automate some of the more repetitive task E.g. carrying out mortgage processing, detecting fraud and checking identity of customers.

Question 28

Internet of things (IOT)

Answer 28

= network of devices that talk to each other (wearables, smartwatches) and connect to produce data. - allows network devices to be controlled remotely Bank use = collect information from customers from devices they use and with the data collected ➡️ offer them services that the data suggest to best meet their needs.

Question 29

Block chain (disturbed ledger)

Answer 29

= digital record of transactions (individual records ‘blocks’ are linked together in a chain) All allows to pay each other without a central clearing point

Question 30

Blocked database

Answer 30

It’s spread across network of computers. Can be used to pay each other without a central clearing point Block chain allows bank and other payments provideres to process payments more quickly and accurately

Question 31

Quantum computing

Answer 31

Solves problems that would be too complex for a normal computer - Store,process and manipulate very large amounts of data (can perform hard calculations very quick) In banking ➡️ can analyse data to make financial predictions etc. Keeps customers confidential info safe through strong encryption mechanisms

Question 32

Augmented reality and virtual reality (AR + VR)

Answer 32

AR - layering info on top of what the user is already seeing VF - takes the user somewhere else Can use apps to educate customers (e.g. stock market) Banks can use for digital banking solutions Tech being used to improve customer engagement

Question 33

Regulatory Technology (RegTech )

Answer 33

Use the power of AI, big data and block chain to increase regulatory compliance and reduce financial risk

Question 34

Cryptocurrency

Answer 34

Electronic means of payments (only exist in digital realm) Value is very volatile and risky Not accepted as a means of exchange and is illegal to use in China and Saudi Arabia Not regulated or created by any central bank