By Anuja Mardikar
Blockchain and AI are currently trending not just in the technology space but also the changing the dynamics of the business environment today. Blockchain uses a database system that takes a number of records and puts them in a block. Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and corroborated by anyone with the appropriate permissions. According to a 2016 Harvard business review, “The technology most likely to change the next decade of business is not the social web, big data, the cloud, robotics, or even artificial intelligence. It’s the blockchain.” Artificial Intelligence or AI, as it is called, is an area of computer science that emphasises the creation of intelligent machines that work and react like humans. Knowledge engineering is a core part of AI research. Machines can often act and respond like humans only if they have abundant information relating to the world. But what benefits are these technologies delivering to the end users?
Blockchain and AI
In case of the banking industry, all customer data can be accessible at one click. With authentic, verified customer data loan approvals can be made faster. Prevention of money laundering by tracing unique cryptographic signatures shall be possible. In supply chain management, increased visibility is possible by easily tracking the goods and materials within the organisation and throughout the supply-chain ecosystem. In the e-commerce sector, the technology can be used to ensure maintenance of transparent (blockchain is a very secure format) records of customer purchase history, warranty information, reduced transaction cost and easier and quicker payments, streamlining the supply chain with real-time monitoring shall be possible.
Artificial intelligence is popping up everywhere and changing how customers interact with brands. In fact, by 2025, an estimated 95 percent of customer interactions will be supported by AI technology. Providing convenient customer service is the need of the hour. Chatbots make this an efficient and seamless process. These are AI enabled devices which can be operational 24X7, unlike their human counterparts. Customers today reach out to the companies through various channels – social media, phones, mobile apps, emails, etc. Therefore, it becomes essential to integrate data from all these channels to provide a wholesome customer experience. AI helps in giving that omnichannel support to the agents. Chatbots, being virtual agents, use historical data to provide real-time information to the human agents. This information empowers the agent to be spontaneous and provide a customised experience to the customer. The customer shall be happy that the company is sensitive to her/his issues which can convert into brand loyalty.
Evolution of banking in the past decade
Ten years ago, banks were mainly involved in their traditional roles of lending and accepting money deposits. Over the years banks have added a range of products and services in their portfolio. Investment advisory, customer relationship management, debit/credit cards, bank guarantee, ATM services, online and mobile banking to name a few are the added services provided by banks to the customer. One of the main highlights of the evolution is the emphasis on the “customer”. Processes like faster loan approvals, priority banking, easier applications for account opening prove that customer is the centre focus for banks today. In this endeavour, banks have increasingly adopted the digital way in the past decade. Withdrawal of money, transfer of funds, customer service, and even loan approvals have now become digital. This digitisation in the banking industry has given rise to a whole new domain of ‘fintech‘. The main aim of the digital revolution is to make banking procedures easier, faster and more secure. Thus, spending less time at the bank’s branch, and rather completing the same banking transaction on our mobile phones is the big evolution that has happened in the past decade in the banking industry.
The payments and fintech ecosystem in India has been growing rapidly, according to the EY Fintech Adoption Index 2017. The index, which denotes fintech users as a percentage of the digitally active population, ranks China first (69 percent) and India second (52 percent) in the list that comprises 20 countries. A lot has changed for e-wallets and digital payments companies. “The payments space changed dramatically in terms of acceptance. Till 2016, most of the payment apps were working on consumer features, but now the focus has shifted to (wider) acceptance. With demonetization, the interest among merchants has increased,” said Deepak Abbot, senior vice-president, Paytm. There are over 100 players in the digital payments space in India, out of which 60 are non-banking players like Paytm, Amazon Pay, Mobiwik etc. With banks coming up with their digital payments ecosystem, it is quite possible that the e-wallet players may face stiff competition from banks in the digital payments space once banks start targeting merchants. For wallets to survive and maintain the lead over bank-promoted wallets and Unified Payment Interface (UPI) solutions, more innovations are imperative. Also, banks are not going to go away, so there is a possibility of collaborations between financial institutions and banks.
In addition to the existing players, there have been two big entrants in India in the digital payments space: Google and WhatsApp. WhatsApp is partnering with large banks and will use the Indian government-backed Unified Payment Interface (UPI) that allows inter-bank transfers. To transfer funds via UPI, customers don’t even need to remember the recipients’ bank details, instead, they only need a customer ID which is set by the recipient and can be a personal indicator like phone number or name. Google launched the Tez app in September 2017, and that is also UPI-based. With a huge customer base already in place, it shall be much easier for WhatsApp to engage customers. Four months since the launch of Tez in September, it is already processing the same number of digital transactions as Axis Bank, which is the fourth-highest digital player among banks, a Credit Suisse report said. The presence of these large companies will also help grow India’s payments ecosystem, given their capacity to invest, offer better technology, and a large diversified customer base.
The digital payment ecosystem is rapidly evolving in India, and only a few major players are going to survive. The rest will have to either shape up or ship out. However, there are plenty of opportunities that can be identified by the smaller players. For instance, instead of companies looking primarily at urban customers who are already using digital modes of payments, areas where cash still rules can be targeted. Also, untapped areas of digital payments can be explored. For example, Oxigen (a mobile-wallet player) has now been focusing on the remittance market as there is significant scope to grow there. Therefore innovation, collaborations and exploring new areas of business shall be the key for the smaller players to survive in the digital payments space.
Exploiting big data
The payments industry can benefit tremendously from adopting the latest techniques in data storage and analysis. Payment providers have been sitting on petabytes of customer data and have only now begun waking up to the possibilities of monetising this data. Using all of the payment data available to them, payment providers can help merchant retailers understand their customers better as well as improve their loyalty programs. Payment providers can create a single view of a cardholder across multiple accounts and channels of usage. Doing this will enable cross-sell/upsell and better customer segmentation. Customers have numerous ways of paying for their necessities today. Big data analytics lets retailers figure out each consumer’s preferred method of spending, and with this information, retailers can provide an even more niche shopping experience. Consumers are also getting very impatient about the time it takes to get their purchase needs sorted out. Big data analytics is paving the way for the seamless integration of payment options, better customer experience and enabling data to become a useful tool for decision making and strategy designing in a business.
Role of the government
In a transformative attempt to weed out black money and corruption from public life, the Government of India has constituted a Committee of Officers to enable 100 percent conversion of government-citizen transactions to the digital platform. To encourage the digital payments, the following few of the many initiatives can prove to be useful:
- Oil Marketing Companies, viz IndianOil, BPCL & HPCL are now offering an upfront discount of Rs 5/- on every LPG refill to all LPG customers who will book and pay for their LPG cylinders online
- Railway through its suburban railway network is providing incentive by way of discount upto 0.5 percent to customers for monthly or seasonal tickets from January 1, 2017, if payment is made through digital means.
- To expand digital payment infrastructure in rural areas, the Central Government through NABARD will extend financial support to eligible banks for deployment of two POS devices each in one lakh villages with a population of less than 10,000.
- All railway passengers buying online ticket shall be given free accidental insurance cover of up to Rs 10 lakh. Nearly 14 lakh railway passengers are buying tickets every day out of which 58 percent tickets are purchased online through digital means.
When the Government is also involved in the promotion of a modern technology, it gives confidence to the citizens of a country, and it acts as a boost for the growth and use of the technology.
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