Welcome to Banking Quest

Fin Tech Objective 

1. History of FinTech
2. Reason for FinTech as a concept came in the Forefront
3. Stepping up with World Class Banking Norms

 FinTech History

• FinTech is an Abbreviation for Financial Technology. 
• Money transfer dates back to 1880 in India “Money Order” days, where the Indian Post did the transfer across the length & breadth of the Country. 
• Fast forward to the 1960’s when IBM came out with their Machines to read MICR strips, until then as we all know it was the Non MICR Cheques.
• As you would have guessed the processes were Mechanical, leading to increased delays & Errors too.

FinTech

FinTech History

Computer History: 

1961 IBM 1210 Reader-Sorter MICR

Check Processing 1401 

BANKING Automation

https://youtu.be/JdZ8Apvwu5A

https://www.youtube.com/watch?v=B0Kc0-Kvww0

• The era continued until the late 1980’s, when the need for Computerised MIS & Book Keeping was felt. 
• So; The RBI set up a Committee on Computerization in 1988 under Dr.C. Rangarajan.

 Purpose? 

• To address competition arising from Opening of the economy in early 1990 –1991 –92 from private sector banks and Multinational banks.
• 2008 during the financial crises.

 FinTech - Reason for IT Coming to the Forefront

  The repetitive Nature of Basic Banking Transactions –such as

1. Cheque Clearance
2. Settlements
3. Batch Management 
4. Pass Book writing -etc

 The 2008 Financial crisis

Loss of trust -

Note –Study by the CCP Research Foundation showed that in 2016 the worlds 16 Global Banks incurred US$306 Billion in Conduct Related Costs since 2010.

 For the Customer

• Millennials & Gen Z customers are more tech Savvy (increased users globally)
• Penetration of Cellular Phone & the dawn of 5 G in some countries. Credit-Newzoo's Global Mobile Market Report 2019 –Light Version
• Jan Dhan, Aadhaar, Mobile promotion wrt Indian Context 
• Security Aspect

 For the Banks

• Secured Transactions 
• Reduced transaction Cost 
• Increased Revenues & Profits 
• Quicker TAT for processing every transactions.
• Reaching more Number of  Customers
• Cross Selling of Banks Products

 It was realized that traditional Retail Banks provided

• Security to the customers - store Cash / valuables
• Keep Deposits.
• Earn interest on deposit kept.

 Retail banking facilitated movement of money through

• Cash, Cards, E / Digital Transfers 

 The New Gen FinTech services provides the same - 

• Money could be put in Pre-paid cards, Digital Wallets
• Invested in Any digital Currencies.
• Peer to Peer lending
• Money lent (retail loans) can be repaid thru a variety of means –E-Wallets, Transfers, Mandates etc. 

Retail Banks also realized that the most important part was cost & Error reduction from Traditional / Retail Banking

 Cost of Bank transaction on:

Branch Banking Rs. 70/ -Rs. 75/- 

ATM reduced it      Rs. 16/ - Rs. 16/-

to 

Online Banking Rs. < or = Rs. 2/-

Mobile Banking Rs. < or = Rs. 1/- 

• Data from RBI.
• The usage of Prepaid Payment Instruments (PPIs) for purchase of goods & services and funds transfers has increased considerably in recent years. 
• The value of transactions through PPI Cards (which include mobile prepaid instruments, gift cards, foreign travel cards & corporate cards) & mobile wallets have jumped drastically from 
• Rs.105 billion and Rs. 182 billion respectively in 2014-15 to Rs. 277 billion and Rs. 532 billion respectively in 2016-17.

 FinTech - Reason for IT Not Coming to the Forefront

• Lack of vision by the senior management 
• Decision making delays
• Not wanting to Pivot 
• Too much of dependency on Old Software 
• Leading to Cyber Security issues
• Product fit
• Too Much dependency on MS Office
• Gartner -over 75% Traditional Financial Services Institutions / banks will face challenges if digitalisation is not made a priority.

 FinTech Current Status - Indian Context

• Launch of UPI –United Payment Interface & Launch of BHIM – Bharat Interface for Money -By NPCI –National Payment 
• UPI uses Mobile user interface by which customers can pay between a/cs virtually, without the mentioning the 15 digit CBS Bank A/c No.

 Technology Used

• MS Access
• Basic Apps
• API
• Artificial Intelligence
• Machine Learning 
• Virtual Reality and Augmented Reality
• Geo-tagging 
• Biometric Iris recognition

 BLOCKCHAIN 

• Current financial system is -
  • Silo-ed
  • Centralized
  • Trusting intermediaries
  • Represents value 
• Blockchain 
  • Not silo-ed - open system
  • Trustless - no-intermediaries
  • Represents value 
    • Not just monetary value
    • House deeds, Paintings etc
    • Other usecase
    • Crowd funding - ICO
    • Public Records
    • Supply chain
    • Invoicing

 SMART CONTRACTS AND DeFi

 Smart Contracts

• Smart - they can be custom made.
• Contracts - does the same work everytime.
• Building blocks of Ethereum.
• Built in solidity programing language.
• Just like ATM.
• Does predefined work.
• Lets you create your own cryptocurrency without creating a blockchain.
• Defines token standards - ERC-20 (Token), ERC-721 (NFT)

DeFi

• Yield farming
• Stake 
• Farm/Harvest
• Provide Liquidity
• Lend + Borrow to earn interest

 FinTech Learning & Way Forward

• Fintech is here to stay 
• Way-forward –The Banking Sector needs to update technologically
• The customer needs convenience & Security 
• More Secured system will be used in future for confidentiality of Customer information Blockchain May be the next Big Think