1.3 Evolution Of Banking + Harnessing Of Technology Flashcards
World oldest bank
Monte dei Paschi de Siena
(1472)
Operates in Italy till this day
1472-1980
Historical, traditional banking, first ATM opened in 1967
1980-2007
Self services, home and online banking, access to bank services outside the usual bank hours
2007-2018
Mobile banking, fintechs, digital only banks
2017 onwards
Real time banking everywhere
Digital innovations
Uks Financial Conduct Authority 2022 review:
Innovation is a risk to vulnerable customers who still want to use ATM/branch
Weakening in historic advantages of large banks by digital innovation
Three key trends that is continuing to reshape the competitive environment:
- shift from branches to innovation
- consumers demanding more digital offerings
- digital attackers taking a significant share of tradition banks revenue streams
Banks becoming more technology advanced by:
- giving employees continuous training
- assessing the skills required of their staff
- reviewing their organisational structures
- digitising their core processes
Technology that are having a major impact on banks and and their customers:
- open application programming interfaces (APIs)
- advanced analytics/AI/machine learning
- Conversational user interfaces (CUIs) chargers, voice user interface
- internet of thing (IOT)
Open APIs
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
Advanced analytics
Information technology (IT) that arw used to gather, examine and analyse data.
Banks can use this to predict customer behaviour and presences
Four part of advanced analytics solutions for banks
Descriptive
Diagnostic
Predictive
Prescriptive
Descriptive analytics
‘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
Diagnostic analytics
‘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
Predictive analytics
‘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
Prescriptive analysis (future)
‘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
By banks use analytics to:
Offer customised products to customers
Identify and provent fraud
Result = improved customer satisfaction, loyalty and retention
Artificial intelligent (AI)
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
Machine learning
Computer systems learn from data,identify patterns and make decisions
Conversational user interfaces (CUIs)
A facility like a chat box which allows the human user to interact and hold a conversation with a computer
Two types of CUIs
- Voice assistant that responds when the user talk
- Chatbox that responds when user types
Chatboxes
Help banks improve customer engagement
Constantly available and instance responses
Can access customers preferences and suggest products that suit their needs
November 2022
Open AI launched the latest chatbox tec - CHAT GPT
Other digital innovation in banking
- Internet of things (IOT)
- Cloud computing
- Wearable
- Block chain
- Augmented reality and virtual reality (AR + VR)
- Quantum computing
- Robotic process automation (RPA)
- Regulatory tech (RegTech)
- Cryptocurrencies
Cloud computing
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
Wearable
Digitally connected devices that people wear on them (smart watches, fitness trackers)
- alternative way to do banking tasks (check bank balances, convenient for disabilities)
Robotic process information (RPA)
- 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.
Internet of things (IOT)
= 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.
Block chain (disturbed ledger)
= digital record of transactions (individual records ‘blocks’ are linked together in a chain)
All allows to pay each other without a central clearing point
Blocked database
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
Quantum computing
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
Augmented reality and virtual reality (AR + VR)
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
Regulatory Technology (RegTech )
Use the power of AI, big data and block chain to increase regulatory compliance and reduce financial risk
Cryptocurrency
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
