In the midst of the black swan year 2020, technological evolution continued at a steady pace, and so were the applications of such technologies. Plentiful banking use cases were put on a pilot mode and some others were accelerated to large scale implementation. We list down three technological initiatives that may get wider adoption in the coming years.
Artificial Intelligence (AI), for Smarter STIP by Visa
In its full capacity, AI would trump human intelligence. That scary possibility could be a few decades away, but at present moment we see many incrementally intelligent applications being launched with a great frequency every year. Singling out ‘Smarter STIP’ that Visa launched in 2020, an enhancement to existing STIP.
STIP stands for Stand-In Processing. With Smarter STIP intelligence, Visa aims at helping issuers in the card authorization step when they are offline for any reason. The system uses analytics and AI to take an informed decision on card transaction authorization. Visa claims that Smarter STIP would closely reflect issuers’ decision on the transaction with 95% accuracy. UBS had declared its acceptance already. Banrisul Brazil has also launched the service at the end of December 2020.
For a brief period when the issuer system is offline, the card transaction decision is ‘outsourced’ to STIP. Issuers’ decision to ‘outsource’ the card transaction decision makes it a very interesting case.
Whether Visa/Schemes will take over the decision-making process in the future, do they want to do so, who owns the liability of those decisions are some of the questions we will have to watch out for. As card schemes process billions of transactions compared to a fraction few by the specific issuer, schemes have more data points to make a decision. It is still questionable whether issuers would outsource the decision to schemes as a rule rather than an exception.
Banking as a Service (BaaS), for iFood Brazil
A step-up from open banking initiatives, BaaS could potentially leave a bigger impact. It goes beyond fintech space and any non-banking/non-fintech business can leverage BaaS offering. Here, we discuss a delivery app and food-tech company iFood Brazil launching digital accounts for its business partners (restaurants).
The digital accounts system is developed by MovilePay along with Zoop, both fintechs from Movile Group. Restaurants would be able to avail a number of financial services such as transactions, payments of invoices, card service, credit transactions (iFood receivables). From MovilPay and Zoop’s perspective, they are terming themselves as a ‘bank of restaurants’.
Providers of the platform – Zoop and MovilePay, are riding on BaaS technology. Non-banking firm iFood is able to offer business accounts seamlessly in a white-labeled manner. There is a surge in BaaS platform providers in the recent past. Companies like Conductor, Swap, Banco Tapazio, Stark Bank, etc. are among a few other players in the BaaS space. The activity would catalyze other non-banking companies in launching financial services.
Voice Banking, for multiple banks across the globe
If going to the bank branch is/was inconvenient, mobile and web banking made it much more ‘less’ inconvenient. Further evolution is in the form of ‘voice’ banking that brings even more ease of use as it reduces the frictional step of taking out your device(s) to type out instructions. Speech is very natural to us and faster than written instructions. Thoughtfully designed voice-enabled consumer journeys in banking bring more comfort as well.
Proprietary/Alexa/Google assistant voice banking services are being enabled across all the continents. NLP (Natural Language Processing) is backed by AI to train systems and execute the steps involved. It is a continuous learning process for machines (software) that could deliver a near-natural and near-human interactive experience. Imagine yourself in the bank branch and talking to an executive for a specific banking service. Now replace the bank executive with Alexa, and keep everything else in your interaction identical. That is the power of voice banking and it’s not even futuristic thinking anymore. A flurry of banks launched or improved on their voice banking offering in 2020. Though in different stages of maturity at present, voice banking will witness more use cases and adoption in the next 2-3 years. It is supported by infrastructure readiness estimates as well. As per Juniper research, voice assistant devices in use will reach 8.4 billion by 2024.
In the year 2020, ICICI bank India added their bot ‘iPal’ to Alexa and Google Assistant to enable voice banking channels. Other Indian banks Indusland, Axis, United bank of India also have Alexa voice banking service. Bradesco in Brazil has Alexa supported voice banking services. Other big banks in Brazil such as banco do brasil etc. are also experimenting with voice-aided services. Some banks are further progressing from Alexa/Google assistants and are launching proprietary voice services. Bank of America already has Erica (2019), while Emirates NBD has Eva (2017). This year the U.S. Bank has declared its own In-App voice assistant.
Certainly, there are numerous other technologies being tested. Blockchain, robotics, augmented reality (AR), and analytics are gathering rapid momentum. Application of these technologies has more utility when intertwined together (e.g. AI + analytics + bots/voice) rather than deploying in isolation.