Financial Technologies Innovations: A Roadmap to Social Well Being

2021 © NextGen JIMS - International Finance Seminar
F i n a n c i a l T e c h n o l o g i c a l
I n n o v a t i o n s : A R o a d m a p
t o S o c i a l W e l l B e i n g
International Finance Seminar 2021
January 9, 2021

2021 © NextGen JIMS - International Finance Seminar 2
Financial Technology (FinTech), Landscape, Facts & Trends
Unbanked / Underbanked , Financial Inclusion
Most Active Areas of FinTech Technological Innovation
FinTech Technological Innovation & Social Well Being
Outline

What is Financial Technology (FinTech) ?
Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery
and use of financial services. At its core, fintech is utilized to help companies, business owners and consumers
better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that
are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of "financial
technology".

FinTech Landscape
Payments
Payment processors , card
developers, money transfers
platforms and tracking software
Banking
Digital first banks or companies
digitizing banking services for
credit and debit
Alternative Lending
Companies creating new
solutions for personal or
commercial lending
Wealth Management
Personal finance tools ,
investment and wealth
management platforms and
analytical tools
Insurance
Companies selling or
distributing insurance digitally
or providing data analytics
and software for (re) insurers
Capital Markets
Sales and trading analysis, and
infrastructure tools for financial
institutions
SMB
Companies focused on
providing solutions to small
and medium sized businesses
Real Estate
Mortgage lending transaction
digitization, and financing
platform

FinTech: Some Facts
$ 50 bn
is invested each year in FinTechs
500 +
New FinTechs are created every year
2 bn
Unbanked people could be addressed
through mobile
2/3
Of financial transactions are now made
online
20 bn
Smart things may become the next
banking customer
$50 mn
Is sufficient to create a new digital bank
40%
Existing bank roles will be disrupted by
machine learning
30%
Increase in operating profits could be
gained by banks through digital by 2020
$5.6 bn
Was raised by Blockchain starts-ups
through ICOs in 2017

TREND TWO
02
TREND FOUR
04
TREND THREE
03
TREND FIVE
05
TREND ONE
01Enhanced digitization
of operations
Robotic Process
Automation
Growing variety of
mobile payment options
Partnership with
Financial Institutions
Increased focus on
cost savings
FinTech Trends to Watch in 2021
F O R B E S

TREND SEVEN
07
TREND NINE
09
TREND EIGHT
08
TREND SIX
06Rise of embedded
finance
Bigger focus on
cyber security
Capturing real-time
data for underwriting
Reliance on
behavioral science
technology
FinTech Trends to Watch in 2021 Cont.…
F O R B E S

Unbanked
The unbanked are adults who do not have their own bank accounts. Along with the unbanked, they may rely
on alternative financial services for their financial needs, where these are available.
Source: Wikipedia

Unbanked Population by Region (%)
200+ million
Micro, small and medium enterprises without
access to banking services
1.7 billion adults
Global unbanked population
Central Asia & Western Europe
49%
East Asia & South East Asia
59%
Source: Global Findex Database World Bank Group
South Asia
58%
Middle East
67%
Sub-Saharan Africa
80%
Latin America
65%
High Income
OECD Countries
8%

The reasons for the unbanked and
underbanked not having a bank account
Geographical access to financial
institutions is limited
Insufficient funds to operate
an account
Financial services are to
expensive relative to income
Lack of personally formal
documentation (Id Proof ) to
formally open a bank account
Family member already has
an account
Religious reasons Lack of trust towards
financial institutions
Source: Global Findex Database World Bank Group

Financial Inclusion
Financial inclusion is defined as the availability and equality of opportunities to
access financial services. It refers to a process by which individuals and businesses can access
appropriate, affordable, and timely financial products and services. These include banking, loan,
equity, and insurance products.
Source: Wikipedia

Most Active Areas of FinTech Innovation
Cryptocurrency &
Digital Cash
Blockchain Smart Contracts Open Banking
InsureTech RegTech Robo Advisors Cyber SecurityUnbanked/Underbanked
Services

Crypto Currency or Digital Cash
Crypto currency is a digital asset designed to work as a medium of exchange where individual coin ownership
records are stored in a ledger existing in a form of computerised database using strong cryptography to secure
transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.

Advantages of Crypto Currency
Fraud
Cryptocurrencies are digital and can’t be
counterfeited or reversed arbitrarily by the sender
as with credit cards and chargebacks.
Identity Theft
When you give your credit card to a merchant,
you give him access to your full credit line. Crypto
use a “push” mechanism that allows no further
information to be shared with other then the
coins.
Access to Everyone
There are approximately 2.2 billion individuals
with access to the internet who don’t currently
have access to traditional exchange systems.
These individuals are primed for the crypto
market.

Without comment…
Ken Olsen
Founder, DEC
“There is no reason everyone will have
computer at home.”
Jim Keyes
CEO, Blockbuster
“Netflix is not even on the radar screen in
terms of competition.”
Jamie Dimon
CEO, J P Morgan
“Bitcoin is not a real thing.
It’s fraud and will blow up.”
Steve Ballmer
CEO, Microsoft
“Google is not a real company.
It’s a house of cards.”
Oliver Blume
CEO, Porsche
“An iPhone belongs in your pocket, not on
the road.”

A Blockchain is a decentralized ledger of all transactions in the network. Using Blockchain technology, participants in
the network can confirm transactions without the need for a trusted third party intermediary.
Someone in a network requests
a transaction
The transaction is broadcast to
other computers (nodes) in the
network
The network nodes validates the
transaction using agreed algorithms
Private Key
Smart contacts
(additional business
logic) could be
applied, if needed.
The transaction is complete The new block is added to the network’s
Blockchain, in a way which is permanent
and unalterable
The verified transaction is combined
with other transactions to create a new
block of data for the ledger
Blockchain

E-Commerce
Global Payments
Remittance
P2P Lending
Micro Finance
Health Care
Title Records
Ownership
Voting
Intellectual Property
Digital Rights
Wagers
Escrow
Equity
Private Market
Debt
Crowd Funding
Derivatives
Blockchain is radically changing the future
of transaction-based industry
Blockchain Potential Applications

Blockchain can help in financial inclusion
Blockchain addresses high fees issues
Processing payments via national
payment system is often expensive
and time consuming. If fully adopted,
blockchain can enable near-real-
time and accurate payments, thus
reducing transaction processing costs.
Blockchain facilitates the account
opening process
Working with identity solutions tools,
blockchain can assist in creating a
decentralized approach to identity
management, and manage social
and financial entitlements.
Blockchain reinforces trust
The real promise of blockchain
technology is its clear and trustworthy
value proposition., which fits the social
and cultural practices of unbanked
and underbanked.

Initial Coin Offering (ICOs) have raised over $ 20 Billion for
SMEs and start-ups in past 12 months.
Billions more have flowed into well funded platforms to send
money across borders, execute atomic swaps, and manage identity
and KYC checks.
Blockchain is in policy agenda in many countries
World bank illustrated the potential of blockchain when it issued the
first global blockchain-based bond with the Commonwealth Bank of
Australia in Aug 2018, which brought down settlement time from 5 days
to few seconds.
Source : OECD
Future of Blockchain

Smart Contracts
Smart contracts are lines of code that are stored on a blockchain and automatically execute when
predetermined terms and conditions are met. At the most basic level, they are programs that run as
they’ve been set up to run by the people who developed them. The benefits of smart contracts are
most apparent in business collaborations, in which they are typically used to enforce some type of
agreement so that all participants can be certain of the outcome without an intermediary’s
involvement.

Sell House Buy House
Match Buyer with Seller
Exchange
Contract receives Assets
Contract distributes Assets
Registry
Digitize the Land Deed
Clearing and
settlement is
automated
Ownership is
undisputed
Digitize currency
How Smart Contracts Works?

Advantages of Smart Contracts
Trust
By being encrypted on a shared folder, these
contacts and documents are well protected,
removing the risk of accidental or intentional loss.
Autonomy
The details of a smart contact need to be
confirmed only by the person entering the
contact, keeping sensitive data free from scrutiny
and manipulation by third parties.
Reliable
Smart contacts are duplicated across the network
servers, ensuring that they can’t be lost even if a
copy is misplaced.

Advantages of Smart Contracts Cont.…
Security
Smart contracts are built on blockchain which is
incredibly secure and nearly impossible to hack or
manipulate, keeping data and transaction details
accurate, original, and immutable.
Automated
Executed through a pre-written code, smart
contract takes much less time and efforts to be
implemented. The process is automated, and this
saves numerous business hours, allowing for
greater efficiencies.
Accurate
Smart contacts are fulfilled on the basis of code.
Once this code has been tested and approved,
errors are almost impossible. Manual errors
during execution are completely avoided since
the process is automated.

Open Banking
Open banking is also known as "open bank data." Open banking is a banking practice that provides
third-party financial service providers open access to consumer banking, transaction, and other
financial data from banks and non-bank financial institutions through the use of application
programming interface (APIs). Open banking will allow the networking of accounts and data across
institutions for use by consumers, financial institutions, and third-party service providers. Open banking
is becoming a major source of innovation that is poised to reshape the banking industry.

InsureTech
Insurtech refers to the use of technology innovations designed to squeeze out savings and efficiency
from the current insurance industry model. Insurtech is a combination of the words “insurance” and
“technology,” inspired by the term fintech.

Loss Incident
Customer incurs a loss.
Claim Initiation
Customer calls the insurance
company and reports the loss.
Current Process Future Process
Inspection
Claim is assigned to a surveyor,
who in turn inspects the damage.
Vendor Appointment
Surveyor gives his consent for
vehicle repair and coordinates
with the vendor and customer.
Settlement
Claim is settled.
Loss Incident
Customer incurred a loss.
Vendor Appointment
Customer visits the authorized
vendor for repair. Vendor inspects
the vehicle, posts the picture, loss
description and estimates on
blockchain.
Auto Initiation
Claim is initiated. Policy coverages
are automatically verified,
fraudulent or duplicate claims are
automatically detected. Repairs is
auto approved.
Settlement
Vehicle is repaired and details are
posted on the blockchain. Claim is
settled through auto pay.
The Third Party Service Provider and the Insurer shares a distributed ledger and the policy
details are incorporated in a smart contact which automates the claim process that eliminates
the third party.
Claim management process Claim management process under
blockchain
InsureTech: Insurance Claim Processing

2
7
Regulatory Framework
Regulatory
Framework
Client Classification
RegTech

Robo Advisors
Robo Advisors such as “Betterment” utilize algorithms to automate investment advice to lower its cost
and increase accessibility

Unbanked and Underbanked Services
Unbanked/underbanked, services that seek to serve disadvantaged or low-income individuals who
are ignored or underserved by traditional banks or mainstream financial services companies.

Cyber Security
Cybersecurity, given the proliferation of cybercrime and the decentralized storage of data,
cybersecurity and fintech are intertwined.

“No matter how complex things are,
basically everything is simple.”
Questions
31

THANK
YOU
32

Vinod Kashyap
Email : vinod.Kashyap@nextgenknowledge.com

Financial Technologies Innovations: A Roadmap to Social Well Being

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