Banking 4.0 – how to stay relevant in a disrupted world

Digital transformation is both inevitable and necessary for the financial and payments industry. Adopting new technologies, including artificial intelligence and machine learning, cloud computing and distributed ledger technology, will allow the financial services sector and to the other players to develop new services and platforms to significantly reduce operational costs. 

The speed and scale of digital transformation within the financial services industry is contributing to the emergence of new non-financial risks.It is essential for new technologies to be integrated safely within existing operating models while minimizing risk.

This is why “Nocash Events” organizes on the 27th of November 2018 a conference where specialists in the financial and payments industry come to analyze top emerging technologies set to disrupt the fintech industry.

The conference sections are:

Real-time payments and open banking are major competitive differentiators in the future of banking. More and more banks expect real-time payments to drive revenue growth and are investing in real-time payments solutions.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • instant payments cost implications on the banks
  • the burden of changing the legacy infrastructure to shift to real-time and 24/7 capabilities
  • do faster payments mean faster frauds
  • how banks can ensure that full compliance is met while executing Instant Payments?

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Financial sector faced almost three times the cyber attacks as compared to that of the other industries. Data breaches (both internal through fraud and external through cyber criminals) leads to the exponential rise in costs. It has been estimated that cost of implementing and managing the cyber security infrastructure will increase over 40% by 2025. There is an increase in biometrics and tokenization as banks have begun to recognize that in addition to being a solution for payments these controls are also useful in security the sensitive data. With digital channels becoming the preference choice of customers for banking services, banks will also need to leverage advanced authentication and access control processes, without any compromise to customer experience.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • how to proactively identify operational and security threats, reduce costs, and re-focus resources
  • how to manage internal and external risks to IT systems, including the ownership, operation, involvement, and influence of IT within an enterprise
  • how to improve service delivery to clients, business performance, and resiliency while meeting business objectives and regulatory requirements.

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Consumer dissatisfaction with current on-boarding processes is clear and this dissatisfaction manifests itself in abandoned sign-ups. Furthermore, loan applications must become faster while maintaining the conformity of the process. Banks have the ability to rectify this relatively simply and in doing so could increase the number of customer accounts substantially. New customers would not be the only benefit; existing customers will be far more likely to purchase additional products.

Consumers want to move to digital and they want to be able to verify their identity online. The data shows that 97% of consumers have access to either a driving license, passport or utility bill that could form the basis of a digital identity, reducing the requirement to present personal information physically, accelerating the on-boarding process.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • how to efficiently and cost effectively eliminate the customer frustration with on-boarding process
  • how will the current forms of identity will be reused as the basis of digital identity?

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Younger adults are putting less care into traditional password hygiene, yet are more likely to use biometrics, multifactor authentication and password managers to improve their personal security. With millennials quickly becoming the largest generation in today’s workforce, these trends may impact how employers and technology companies provide access to devices and applications in the near future.

The vast majority of consumers—93%—prefer biometrics over passwords for validating payments and according to a recent research paper conducted by Oxford University in collaboration with Mastercard, 92% of banking professionals want to adopt biometric solutions.

Mastercard announced already that all consumers will be able to identify themselves with biometrics such as fingerprints or facial recognition, when they shop and pay with Mastercard by April 2019.

In practice it means that banks will have to be able to offer biometric authentication for remote transactions, alongside existing PIN and password verification. It will also apply to all contactless transactions made at terminals with a mobile device.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • biometrics as a convenience feature
  • the combined challenge of adoption and security

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Distributed Ledger technology is a combination of technological components such as cryptography, peer-to-peer (P2P) networks, consensus algorithms and smart contracts, that allows multiple parties to share and process data without a single central management system. Tests have been made on settlement mechanisms based on delivery versus payment (DvP) that link the transfer of two assets in such a way as to ensure that the transfer of one asset occurs if and only if the transfer of the other asset also occurs. The outcome of settlement is either both parties successfully exchanging those assets, or no transfer taking place.

The financial services industry is spending about $1.7 billion per year on blockchain, as banks and other firms move beyond the proof-of-concept stage and start rolling out commercial distributed ledger technology (DLT) products, according to a new report by Greenwich Associates. The study results show that blockchain budgets increased 67% last year, with one in 10 of the banks and other companies now reporting blockchain budgets in excess of $10,000,000.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • how close/far are we to the “smart contracts” moment?
  • how and in which areas we can use blockchain to reduce operating costs and fees, increase transparency, speed and security, with clear impacts on their costs, revenues and capital?

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By 2030, technology will drive an even deeper fundamental shift in banking – moving it from being hidden to completely invisible. However, it will be more intertwined in the lives of consumers than ever before. Virtual assistants, robo advisors, learning algorithms. Chatbots can complete e-commerce transactions at the point of entrance (e.g. Facebook). All elements leading to expected potential savings of between 20 – 25% across IT operations, including infrastructure, maintenance and development costs. Changing how banks work at a fundamental level, and incorporating AI along the whole spectrum of a new value chain, might lead to massive human capital redeployment into higher-value areas.

Discussion topics at “Banking 4.0” conference will include aspects like:

  • what types of AI applications are currently in use by customers and employees and what applications are in the works?
  • how much do the Romanian market plan to invest in AI and emerging tech innovation?

Special anniversary feature

During the “Banking 4.0” conference we will have a special anniversary feature: 10 year of contactless payments in Romania. A look forward to the next 10 years.

In Nov 2008, Garanti Bank tested in Romania the first contactless payment tools. Under the form of stickers, the payment tools were equipped with Mastercard PayPass. This came as a logic move since in Turkey, after two years form the launch, already 200.000 users were registered. Unfortunately, the project didn’t move beyond pilot phase (the product was available only to the bank employees).

On the 26th of November 2008, ING announced a world premiere: a top-up transaction – the client can transfer money from the current account into the Maestro PayPass account associated to the phone in order to be able to pat at merchants using Near Field Communication technology.

In this section of the conference we will engage in a conversation on topics like:

  • how difficult was the journey so far and what have we learn?
  • what knowledge can be transferred other areas?
  • what is next?