Let’s talk about technology threats in financial institutions. How will banks handle these threats after five years or what will happen after ten years? Will we see the same situation that we are seeing right at this moment in the banking or financial sector? Who will be the game player then if we don’t want to see this thing? Who will be the makers of the change or who will be the competitors?
If we talk about fintech companies, you may see, they have brought so many products. So many things which again, in some cases, it is reviewing from the business point. Suppose I take an aspect or share of a business and take it to a different level, where it isn’t meant to be yet, but it is here now.
There’s nothing you can do to stop it. Be it due to the advancement of technology, or convenience of technology, new things are happening. A lot of opportunities are happening as well. It’s not just because of fintech companies, but also due to technology, that these threats are coming to retail banking. As business opportunities have grown, threats have grown too. However, fintech companies are not the real competitors here, the real competitors are the tech giants. They have grabbed a huge part of the retail business already.
A few years down the line we will probably witness that all the banking shares have gone to tech giants and Google. Google has Amazon, Google Pay, PayPal, Microsoft, Facebook, and so much more! Their brand value is incredibly strong, and in fact, if we were to put all the banks of Bangladesh together, they still wouldn’t create a similar value.
THE ADVANTAGES THE TECH GIANTS AVAIL
Having tech giants has its advantages too of course. Their strong brand value is a huge advantage. They have already researched and gathered a lot of necessary information and data and they’ve gotten onboard with them. Everyone has a Facebook account now, teenagers and adults alike have Google accounts, and they’re involved on other social media platforms as well.
That means all of us are a part of it. We’ve opened accounts using our phone numbers to register, so more information about us has gone to them. So Google knows everything about you. If you are aware, you can do money exchange and purchasing through Google now. In the future, Google will probably open an account where you can deposit your money as well.
Google also has KYC. Google knows your location, where you are, where you are going, all of that. They can also trace where your home address is. If you end up lying, they can track that as well. Let’s say you are in Mirpur, but you said you are in Mohammadpur, Google can track it and immediately send you a notification saying, “You’ve given the wrong information.” Google may also say, “Sorry, I can’t find the location.” But what happens in case of banking KYC? You cannot avoid your address. You may stay at Uttara, but you declared that you are not living there. Google will follow you indeed at every step, but banks will not do that. Because banks do not have a technology database like that.
Google has a huge reach, and they have track of their reach as well. There’s no information that they do not have. Let’s say for example you do not know how to get somewhere, but you ended up at the right place, how’s that? Using Google Maps of course. In fact, no one else knows where you have been or where you have gone, but Google knows. That’s what KYC is: ‘Know Your Customer’. So it is a reality. You can provide misinformation to your banks, but not to Google.
You can hide information from banks, but you cannot do so from Google. It’s because you can even lie to banks and they’re going to accept it. They will give you a form, you’ll fill it up, and the banks will accept it as facts. Google, however, already knows a lot about you. So if you try to fraud them, they’re going to catch you immediately, because they are already aware of your information.
When banks give out loans to customers, they’ve this risk whether they will be able to recover the complete amount from the person. This is not the case with Google. After banks hand out a credit card to a customer, he or she becomes untraceable really. You can send agents to look for them, but when they reach the address, the credit holder isn’t there, because they provided the wrong information in the first place. The person may have changed their identity as well.
Sure, having NIDs has definitely helped the process and safety a bit, but that’s limited help. Locating your actual address is still quite impossible for them. These are threats for banks, and if within the next 5 to 10 years’ tech giants take over the retail banking industry, they will have nothing to do about it. The tech giants have proven to become a real threat for the banking industry.
THE BANKS AND THE FINTECH
A customer comes to the bank to make a deposit because they trust them. If there’s no trust, then people like you and I could open up stores upon stores for money lending and borrowing but it’s not going to work out. Similarly, at one point, customers are going to trust the tech giants completely and move over to them. All the scanning and research that is done across the world is now published. From that, you can see, that right after banks, PayPal is the most popular. It is equivalent to a bank now.
If you want to get a loan, there’s just so much paperwork involved and then there’s the whole verification part to it as well. Analyzing your financial strength is a big part of it. If Google already knows your financial strength, where you work, what you do, they already know your strength. Tech giants have this kind of information already. Our banks do have the technology to assess and transact loans, but they’re just not enough. See, while you’re walking, Google can even find out your energy levels and measure your pressure levels.
At one point, Fintech companies and Tech Giants are going to take over everything. From retail businesses to everything else is going to be under them. I wouldn’t be surprised if we hear that Google has information about our treasury products. It’s highly possible, because they’ve come to the field fully prepared. Like if you were to open an LC, you could just sit at home and get it done through Google, therefore saving you time and effort, and eliminating the need for you to deal with a bank directly. That’s definitely a threat to the banking industry. It’s a technological threat. Google is, however, not specifically targeted towards a particular sector, they are building an empire in every aspect. They want to conquer all parts of the world.
Virtualization has taken the world years forward. Store management has now become virtual management through Google, as all the products they are selling you are ordered virtually by you. Google also sends you a report immediately to track the product.
CLOUD COMPUTING AND DATA STORAGE
There’s also the whole aspect of cloud computing which unfortunately is not something our country is too familiar with just yet, especially because they’re so expensive. Like we say ‘trust’ in banking language, that trust doesn’t exist here for these ideas because we are still far behind in adapting to them.
We will store our data on Microsoft cloud, and in fact we will do so with trust, because it’s a reputed company. Then 4 to 5 years down the line we will think to ourselves that since Microsoft is a very trustworthy place to keep all our data safe. That’s definitely more protected. That’s because there’s so much that we cannot do practically that the cloud gets done all by itself. And of course, every service will be charged. Cloud sharing, cloud processing, every service will have a minute-based charge. This is another challenge for the banking sector. In this case, Governor of Central Bank of Australia said, “Please, don’t think the bank to be your competitor, you may see the tech giants will be your competitors.”
You probably know the famous quote that Bill Gates made, “Banking is important, banks are not.” They are actually future thinking words. It is sure that banking at one stage will go at the reach of cloud computing. If there are no banks will it negatively impact employment opportunities? No, not really, there’s a huge advantage instead. You’ve definitely heard of Artificial Intelligence (AI). By 2030, 20 million jobs will be taken over by AI. At the same time, 50 million new jobs will be created. Because every job that the AI takes, a new job will be created in its place. Legal support may be required. But Google already has a form for that, verification will happen automatically and everything will get done. Ask your costing there and the lawyer will answer all these things. It’s all about a matter of intelligence.
Take a look at Sophia the robot. She came to Bangladesh as a part of digital world and she was fascinating because she’s a huge technological success and she acts completely like a human being. She is a really big deal for the success of artificial intelligence.
CRYPTOCURRENCIES, THE CHANGE MAKERS?
Let’s talk about cryptocurrencies. About 23 years ago just .5% of the people around the world used the e-mail. Today, in 2018, .5% of the people have cryptocurrencies. So what will happen similarly after a few years? It’s a massive success of technology.
Bitcoin’s rate is growing exponentially every day. At this moment the rate of Bitcoin is over USD 10,000, and by the end of the year it could go up to USD 40,000. Even back in November 2017 the rate was just USD 7500. Just in a few months the growth has increased manifolds. And the curve of this fact shown in different medias is a very rising curve. So cryptocurrency is getting so much popular by dint of technology. You cannot even control that particular thing of technology. However, business opportunities for banks is also increasing. There has to be a legal shape for cryptocurrencies to understand how you can buy them. Our country hasn’t started utilizing them properly yet. Bitcoin isn’t responsible for the ransomware attack. There’s this risk or fear of the attack that is being tackled by the banks. Like there are a lot of threats and attacks happening on bKash accounts, but bKash is not always responsible for these attacks, it’s all about how they are being handled.
bKash is a facilitator here in this scenario. Very few people are using it for wrong means, to be honest. So you should arrest those criminals who use it in a bad way. It’s not the fault of bKash. For example, you built a road, and a criminal used that road, doesn’t make it the road’s fault. However, in our country, it has become a norm that the road is called a bad road because a criminal used it.
Actually, channel is a facilitator. It gives you opportunity, makes you the way, but the people who handle it should use it in a right way. Now if a criminal or a terrorist opens an account in this channel, it is not the channel’s fault. Similarly, if a criminal gets caught using Bitcoin and is identified, it is not Bitcoin’s fault either.
However, on court orders, a bank can dispose off their money. If the police approach a bank, the bank has the right to deny them by stating that they do not have the authority to access the particular information. If it’s legally allowed or asked for, then bank can give it to them. The police have to get a written order from the court and once it is shown to the bank, they will oblige and share the information.
While opening a bank account there’s an aspect of regulatory fulfilment. It’s quite threatening to them if this aspect too gets taken over by tech giants who will definitely be able to refine it and hand it more specially. Therefore, it’s a huge threat for the banks as most of these problems can be easily solved on online platforms and verification can be done online with access to absolutely accurate information.
Another thing can be said about these regulations with regards to retail banking. The generation after ours is known as the millennium babies, as in those who are born in 1980 and after. They grew up witnessing a lot of technological advancements and are growing up with access to smart devices. For them, there’s little to no interest on traditional things and now they are much interested in online things, internet access. They will not even want to move on physically.
As life’s getting easier it’s also bringing a lot of change in its wake. This generation is going to be our future leaders and they’re incredibly tech savvy. Therefore, they’ll definitely want everything to be done through these smart devices. Because, if we talk about 20 or 30 years ago, there was no availability of online system even, let alone internet browsing. But today it is all different. Everything has been changed and turned into tech part. So it is another reason of apprehension for banking.
HOW THE BANKS WILL SURVIVE?
But now the question is how will the banks survive? What we talked about are all threats. Then what will the solutions be? So these threats are a part of technological progress. The world is moving towards digitalization. Therefore, making it user friendly is mandatory. Banks need to keep up and become more updated. The fact is, everyone’s adapting to technology and progressing in their fields, so if the banks don’t do the same, they’re going to be far behind and lose everything. The best option is to cooperate and work together.
But we should admit that bank cannot go with technology as much as Google can go. While Google has millions and millions of people working for them, banks have to work with 500 or 1000 people at best. The customization needs to happen in ways where Google hasn’t done it yet. You need to overthrow Google to beat its advancements. How’s one going to do that? Through personalization, that Google can’t do yet. What does personalization need? Say for example, the people who are living in Gulshan area, what comes in their mind first? They have money, they have living capability, their cost of living and they are elite customers, so you can invest for them. You can have more deposit from them and also you can think or get the major revenue that can be earned from this class.
Of course, Google is already going to be aware of all the information, since they have more access to all the information in every aspect than the banks do. But whatever happens, Google cannot physically be there, right? That’s why customization is so necessary. That’s why banks can take a few products and physically advance with them. They’ve to focus especially on the products that customer’s need and advance with them that Google cannot do. Google is and will be aware of all the information, however there are some information that they can only access, but not do anything about it as Google works through programming, but they can’t physically or directly use them, the way you can. And you’ve to accept that human behavior and Google behavior is not the same at all. But, of course, Google is very aware of everything that we do and therefore knows exactly how humans behave and interact.
You can still make differences with it. You need to think about the demand of customers and the necessary products for them. Make customizations at your institution and also banks should know about every pros and cons of data management. They need to avail data center more and more. Data centers should be modernized and qualified persons should be appointed for the management.
However, think to use technology to radically simplify the customer experience. Think Uber or Amazon and use them as benchmarks for simplicity. Second, get teams to work on radically simplifying and speeding up internal processes.
Banks will have to find a creative way to create an organizationally distinct unit that has the ability to bring in outside talent where essential, free from the constraints of the procurement process and with the mindset and ability to partner with startups. For this, strong personal leadership from the CEO and unambiguous support from the board becomes imperative. It is crucial that the RBI and the finance ministry support the creation of such ambidextrous structures by at least a few of the largest PSBs. ■