Research article on disruptive innovation

1. DISRUPTIVE INNOVATION IN FINANCIAL SECTOR WITH
SPECIAL REFERENCE TO BANKING SECTORS.
Presented by:
Prof RossyMathur
M.Phil , MBA, M.com, PGDMM, PGDIBO, PGDHE, PGDHRM, B.Com
Assistant Professor, Marketing & Finance,

2. FLOW OF THE PAPER
Introduction
 What is fintech
 Research Questions
 Objective of study
Scope of study
 Discussion on Conventional Banking experience to Digital transformation
 Disruptive Innovation, Some Business models, Product and Process
 Major opportunities and challenges faced by incumbents as well as FinTech startups.
 Conclusion
 Scope for Further Research

3. INTRODUCTION
 Technology is upending Business models, workflow
and processes and services in the financial services
industry.
 At the intersection of finance and technology lies this
amazing phenomenon, which has been accelerating
the pace of change at a remarkable rate and is
reshaping the industry’s status quo, called FinTech.
 Disruptive Innovation
 Disruptive innovation is a term in the field of business
administration which refers to an innovation that
creates a new market and value network and
eventually disrupts an existing market and value .

4. WHAT IS FINTECH
 Fintech - financial technology - is an umbrella term
describing disruptive technologies in financial services
 It relates mainly to small start-up companies which develop
innovative technological solutions in such areas as online and
mobile payments, big data, alternative finance and financial
management, analytics-backed financial advisory services.
 Startups are re-imagining financial services processes, while
incumbent financial services firms are following suit with new
products of their own

5. SOME FINANCIAL FACTS
 The Indian fintech sector saw investments upwards of
$1.6 billion in 2016 and has been growing at a steady
rate, while investments in the global sector grew by
10% to $23.2 billion.
 The payments startup Stripe has a multibillion-dollar
valuation and a partnership with Apple Pay.
 Bitcoin companies and exchanges such as 21 and
Coinbase are attracting tens of millions of dollars from
venture capitalists.
 Peer-to-peer lending is booming in the small loan
market with many players, including Upstart, Prosper,
Funding Circle, and more are setting foot.
 The financial-planning startup LearnVest just got
acquired for more than $250 million.

6.  Bank spending on new technologies in North America
was projected to reach 17 billion U.S. dollars in 2015 and
increase to 19.9 billion in 2017.
 On a global scale, the value of investment in financial
technology ventures amounted to approximately three
billion U.S. dollars in 2013 and was projected to grow to
around eight billion U.S. dollars in 2018.
 In 2013, the global value of FinTech was estimated by
Statistics at approximately $3 billion. By 2014, FinTech
firms had already attracted $12 billion of investment, and
by 2015, that figure had risen to over $20 billion globally

8. WE’VE ESTABLISHED THAT THE FINTECH SECTOR – A DYNAMIC MARKET LED
BY NEW ENTRANTS – IS BOOMING, THEREFORE IT HELPS TO FRAME SOME
RESEARCH QUESTIONS.
 Research Questions;
 1.Which are emerging innovations relevant to the financial
services industry?
 2.What is the evolutionary path of emerging innovations
 Objective of study
 1.A comprehensive understanding of the state of disruptive
innovation in the Financial industry
 2. To understand the implication of disruptive innovation on
Business Model
 3.To understand how they impact the core
functions/Processes of financial services.
 Scope of study
 An Attempt has been made to study Payment Rails, Big
data, Artificial intelligence, Robo advisory, Block chain and
virtual reality technology in financial industry.

10. DISCUSSION
FIRST PHASE
 Conventional Banking experience after automation
 The evolution has been from Core Banking Solution (CBS) to
Customer Relationship Management (CRM) to Electronic Payment
Services (E-Cheques)
 ‘Automatic Teller Machine’(ATM), ‘Real Time Gross Settlement
System’,(RTGS)
‘National Electronic Funds Transfer’ ,(NEFT), Debit Card/Credit Card,
Total Branch Automation (TBA),Banking Kiosks, Microfinance, Self Help
Groups, Personal Banking, Retail Banking.

11. SECOND PHASE
THE FINANCIAL SERVICES INDUSTRY DISRUPTION—
TECHNOLOGY
 Sophisticated Apps
 Augmented Agricultural Banking App (DenizBank (Turkey) )
Business Model disruption.
 The benefit of this type of application is the ability to distribute
expertise digitally, saving time for both the bank and the
farmer. Instead of physical interactions, the mobile app
leverages digital interaction on demand, personalized for
each unique farm’s needs.
 Smart Watches
 Now banking transactions can be done on smartwatch—be it
an Apple Watch, Android Wear or Samsung Gear. Indian
private sector banks like HDFC, AXIS, ICICI banks have
introduced smart watches apps.

12. BIG DATA, ANALYTICS, AI, AND ROBO ADVISORY
 Product innovation -- Sberbank (Russian Federation)
took home the Big Data, Analytics & AI award for “Tips” in
Sberbank Online, an artificial-intelligence-based tool that
helps users change their financial habits for the better,
saving them money, time and effort.
 The objective was to make the digital assistant, at a
certain abstract level, generate and provide clients with
advice, without interference from content managers.

14. CUSTOMER EXPERIENCE AND ENGAGEMENT
 KBC Bank (Belgium) introduced “My car”, which uses
blockchain technology to create a seamless
experience in car loans, from the instant the customer
signs the order to the moment they drive their car off
the dealer’s lot
 The My Car program makes the actual payment of a
car hassle-free while reducing fraud .Every participant
in the ecosystem profits from a faster and more secure
flow: the customer, the car dealer, the distributor, the
government, the insurer, and the bank.

15. DISRUPTIVE TECHNOLOGY TRENDS THAT WILL TRANSFORM BANKING
SECTOR., INDIAN AND INTERNATIONAL CONTEXT
 Open banking—a connected ecosystem for financial
and non-financial services with multiple underlying
service providers—is the future of banking.
 The launch of Unified Payment Interface(UPI) by the
National Payments Corporation of India (NPCI) has
thrown open the gates for innovation in the open banking
space.
 UPI will empower payment service providers to create
state-of-the-art products/offerings without being limited
by the underlying account relationships.
 Customers will be given the flexibility that they desire
and a unified interoperable interface will allow all service
providers to innovate for better customer experiences.

16. BLOCK CHAIN AND THE RACE TO PRODUCTION, CUSTOMER EXPERIENCE
AND ENGAGEMENT
 Block chain will be one of the enablers for re-
imagining processes.
 In 2018, banks will increasingly move some
projects from pilot to production and leverage
blockchain to automate inter-organisational
processes.
 The recent Emirates NBD and ICICI Bank
Partnership to launch a blockchain pilot
network for international remittances and trade
finance is a precursor for advances in this
technology.

17. ARTIFICIAL INTELLIGENCE
 AI has already proven itself in providing seamless
differentiated customer experience on digital channels, and
security measures with its integration within the banking
infrastructure.
 These self-learning programs keep getting better with every
interaction.
 Artificial intelligence (AI) and Cognitive technologies have the
potential to transform both front office and back office
operations.
 One of the largest Indian ICICI bank has deployed software
robots across 200 business process functions, reducing the
response time to customers by up to 60%.These robots are
now performing over 10 lakh transactions per day for the
bank which comprises 10% of its total transaction.
 Voice recognition service

18.  Recently an ICICI bank announced the launch of their
digital bank initiative that offers zero balance savings
account with zero charges for all digital transactions and
can be opened using Aadhar and PAN card. Born out of
Hon. Prime Minister ShriNarendraModi’s vision of a
Digital New India, this product has been designed
around the idea of simplicity and ease of use.
 Finance Minister Arun Jaitley, formally inaugurated
Paytm Payments Bank in New Delhi. The Minister said
that a new chapter in history has been written with the
launch of this new Payments Bank.
 RFID-enabled banking cards whereby a
branch/relationship manager can identify a valued client
entering a branch with the card.

19.  Facial recognition technology
 Chinese e-commerce firm Alibaba believes that payments could
be made with a smile.
 HSBC is the first bank who adopt the facial recognition
technology.
 Rise of conversational chatbots
 Through their mobile banking app and social media messaging
platforms users can chat with these bots to pay bills, transfer
funds, manage credit card spends and more. Bank of America
with “Erica”, choose to develop their own bots.
 Natural language generation
 NLG is being used by major financial institution to generate
automate portfolio commentary, automate investment performance
reports and automate regulatory reports, such as Suspicious
Activity Report (SAR) narratives.
 Virtual reality isn’t just for gamers
 It will revolutionize customer relations, by offering a new method
for “enhanced” communication.
 It will present trading data to users in a dynamic 3D view. Polish
startup Comarch has demoed its own VR investing app

20.  Crypto currencies
 A crypto currency is a medium of exchange like normal
currencies designed for the purpose of exchanging
digital information.
 A crypto-currency is a digital currency created through
encryption techniques. Bitcoin is the most famous form.
 ATB Financial, based in Edmonton, Alberta, sent
C$1,000 to Germany’s Reise Bank over a platform
developed by Ripple, the San Francisco-based specialist
in block chain . It took only 20 seconds to complete the
transaction.
 Banks that are opening crypto currencies includes UBS,
BNY Mellon, Deutsche Bank and Banco Santander

22. P2P LENDING PLATFORM
 Faircent
 connects borrowers and lenders to interact directly.
 Lenders can individually make offers to borrowers,
which the borrower can accept or refuse.
 Both lenders and borrowers can interact and make
transactions with multiple people.
 Faircent claims to eliminate the high margins which
banks and financial institutions make on
transactions, and pass it on to the customer as a
saving on the services availed.

23. CONCLUSION
 To conclude, Banks have to understand that survival in the
new e-economy depends on delivering all of their banking
services on the Internet with help of the latest technology
 The technological advancement in banking sector can be
made effective only when a simple, flexible and modular
approach is considered and implemented in the financial
sector.
 Banks will need to develop a better understanding of off-
the-shelf offerings and architectural requirements. They
should also carefully look into features (such as scalability of
solutions) and check on regulatory aspects, while deploying
AI.
 The incumbents’ who embrace change by partnering and
collaborating in open ecosystems with fintechs will be the
winners of the future.”

24. SCOPE FOR FURTHER RESEARCH
 The Statistical analysis of Fintech start up Growth, Region
wise.
 Case study of various incumbents in financial services
and growth mapping with the introduction of technology.
 Case study - Deep dive study of technological disruption
w.r.t
 Business Model
 Product
 Process
 Technical Know How
 Service blue print
 Service delivery

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 Variuos Bank websites, ICICI, HDFC, KBC etc
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 https://www.forbes.com/sites/ciocentral/2017/02/24/is-the-financial-services-industry-ripe-for-
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