Big Data – A real phenomenon or consultant buzzword for analytics? what do you think?

The real question which needs to be asked is how banks are using their data they currently are sitting on. Earlier banks used their in-house teams to mine data for business reporting, then came building a decision support systems to support business decision making and in next phase, came in concepts and tools like CRM to be able to include customer in the decision making process to be able to drive business for the person, who provides business and is core to anything and everything rather than doing it creating money for shareholders (maximizing shareholder value).

Now data was always pouring in and will continue pouring in as more avenues like social media, behavioral analysis, consumer and human psychology get integrated in business strategy. The question is how geared bans were in the past, are geared up for present and want to gear up for future.

The ROI on earlier phases as explained above has still not be demonstrated and proven conclusively and it has only become a support tool rather than a strategic core around which business strategy can evolve. A lot of decisions are still made based on gut feeling or instinct and many organization still thrive on charisma than intelligence coming from data.

In my mind, any new concepts or tools are welcome as long as it can first demonstrate how it adds value and then it can be absorbed and made the oxygen on which the blood thrives and gives life to mind and body.

The approach could be to work with data driven business first (like retailers) and then bring it to more sophisticated decision making for evolved needs (financial) and then banks can invest dollars into it rather than adding and investing in one more business intelligence tool.

The author can be contacted over email, rajnishkhare@gmail.com, for feedback and comments

Cybercrime, a real threat to our online franchise – the approach

Cybercrime continues to show no signs of slowing down. In fact, 2011 marked a year of new advanced threats and an increased level of sophistication in the attacks witnessed around the globe. As we move into 2012, cybercrime is diverging down a different path as new financial malware variants emerge, cybercriminals find new ways to monetize non-financial data, and the rise of hacktivism-related attacks breathes new life into an old adversary. The top threats hitting the mind are

• Trojan Wars are there and Zeus is emerging as the Top Financial Malware. Zeus is responsible for around 80% of all attacks against financial institutions today and is estimated to have caused over $1 billion in global losses in the last five years.


• Cybercriminals are finding new ways to Monetize Non-Financial Data


• Fraud-as-a-service Vendors will Bring New Innovations


• Out-of-band Methods are forcing Cybercriminals to Innovate and intercept.


• The Rise of Hacktivism – Reputation damage by targeting bank as a whole in online world e.g. defacing sites

The Approach

Now the organizations have to gear up to counter such rising threats which require it to implement a solution which addresses security concerns

• By adopting a risk based authentication mechanism and


• Having the right information which can be shared to lead to Crackdowns on Cyber Gangs and Botnet Operators

In this context organizations need a dynamic and evolving solution to

• do device authentication


• do customer authentication


• build Real time monitoring of transactions capability extendable to all channels and core systems


• have a dynamic risk policy engine which can be applied to all systems without overburdening the customer


• cost effectively address the long term concerns

There are various ways to do so today and one of the best ways is to partner with a cyber security firm to advise, consult and implement a solution which is best, adaptive and value effective so as not to induce organization into investing money when the perceived/realised threat cost is still in nascent stage.

The cost of the solution needs to be looked from a long team perspective and not as a cost benefit approach to be able to inspire confidence not only among your customers in online world but to send a message across to all prospective customers, regulator and other stakeholders that organizations are looking to build a lifelong relationship and not merely a transaction relationship.

The author can be contacted over email, rajnishkhare@gmail.com, for feedback and comments

Financial inclusion – Non cash frameworks need to penetrate the remotest regions to deliver the next wave of growth.

The next wave of growth, in banking and financial services, is expected to come from under-banked and unbanked population, mostly residing in rural areas. However, there are unique challenges in brining this segment under the umbrella of financial services and a non cash framework, will need to evolve and reach out to the people, in the remotest area. I will attempt to outline the issues in brief and suggest a model too, to bank rural population, profitably.

• The rural livings pose a great many challenges to bring them under the banking and financial services universe and some of them are outlined below.


• Infrastructure continues to be woefully inadequate in rural landscape and even today, it’s estimated that around 20% of the villages don’t have electricity and around 70% don’t have post office. Even the wireless tele-density is approximately at 35% relative to 100% coverage in urban landscape.


• The literacy rates remain abysmally low despite all attempts at just 69% compared to 85% in urban areas and the national average of 74%.


• The government is banking on initiative like Aadhar Card to provide a credible identity to rural folks, without which, banks or financial entities are unable to extend credit services to them, through, microfinance companies and self help groups are making some great inroads, with some help from NGOs and Self Help Groups.


• The middle-men continue to rule the roost and wield a great influence on rural population, when it comes to providing credit to rural borrowers, because of the reach, flexibility terms and in-built risk sharing arrangements, even though, they charge much more and in some cases, even 50% of the principal, is taken as interest, in just a couple of months. They also score over banks and financial entities, as they don’t ask for documentation and rely on influence, pawing of living, in-animated and future assets (cattle, land and crops) and at times even muscle.


• There are regulatory constraints inadvertently or indirectly contributing to lack of formal banking channels in these areas. e.g., ATMs usage in these areas may need in-person support or the approval to be taken through authorities may deter banks and financial entities to establish presence there in time (read at a lower cost).


• The villages are primarily dependent on agriculture and cattle farming. Agriculture being dependent on monsoon and cattle farming needing access to healthy breed-stock and veterinary services, cause, income to be irregular, thereby, resulting in non performing loans which are extended to village folks.


• Due to low and irregular income, the average ticket size of deposit or credit transaction, tends to be lower and that becomes a challenge to provide an ecosystem, which can process these transactions at a low cost
  
  These unique challenges, require us to deviate from the traditional banking models and come out with alternate delivery models, which can address these challenges, in a cost effective manner, to improve the business prospects for banks and financial entities, thereby, helping rural folks to get access to cheap credit, to be able to create value, which can then be funneled back in to the banking and financial entities, who in turn, can then build on the value pyramid.
  
  The model, I propose, is a combination of Hybrid Smart Cards, Mobile Phones and Biometric enabled Information and Transaction Devices/gadgets/hardware like ATMs, Kiosk and Mobile PoS.


• Hybrid smart cards can solve the problem of identity, information storage and secure access, through biometric enabled devices/gadgets/hardware, to carry out a debit/credit transactions and upload to central repository , wirelessly in real time or through wire-line in an offline manner, which can then lead to a credit bureau taking shape, to access customer identity, his transaction history, his cash flow, leading to improving credit worthiness of rural customer and helping, in designing customized financial products and services for them.


• Mobile Phones, riding on universal coverage and technologies like USSD, IMPS or Voice Recognition, can help in creating an ecosystem, where low tickets payments, transfers or purchases can take place either thru a smart card inbuilt in phones or the smart card details loaded onto the mobile phones or even into cloud. Even, the direct cash subsidy can be sent on to m-wallets or mobile nos tagged to a card (stored value cards), which in turn, updates it on a hybrid smart card through a secure read/write terminal.


• The Biometric enabled hardware like ATMs can provide a secure access to cash either thru a combination of smart card and a thumb print scanner or through a voice recognition system enabled on ATMs to dispense cash or accept cash. The wirelessly enabled Kiosk can provide information access, data upload, low ticket transaction platform (e.g. mobile recharge, bill payment or even allow mail to be sent to another mobile number though voice message), acceptance of cash/cheque and/or dispensation of food stamps.

Since, the ecosystem is wireless, secure and encrypted, transactions are electronic and data is stored in binary, an audit trail will exist forever, leading to transparency and improved accountability

All this is possible, as wireless penetration increases, technological advances provide identification and authentication technologies, bring down cost of hardware and gadgets, help illiterate people to virtually read, write and even interact with those who don’t speak local lingua and the cost of providing banking and financial services reduces riding on increased adoption.

Finally, productivity and penetration are the value drivers for businesses: The former, brings down the cost of providing financial products and services and improves revenue per customer and the latter, helps in building the scale of economies, so essential to have a sustainable advantage in the long run. The non cash frameworks, riding on the combination of Smart cards, Mobile Phones and Biometric enabled hardware, will deliver just that. What is needed, is the will to go, where no one has gone before...profitably.

The author can be contacted over email, rajnishkhare@gmail.com, for feedback and comments

Leveraging Technology – The CACID Dimensions

In today’s world, where technology is so ingrained in our business, daily lives and in our future, it’s given that it’s no more a word, its real leverage to influence present and shape future. There are many aspects to the influence it commands and to put it summarily, I call it, “The CACID Dimensions”.

Cost - Technology can dramatically alter the cost equations of New Product & Services Development, Concept Testing or Test Marketing, Operations, Services, and Delivery. What took oodles of money and time before can be done at a fraction of the cost today, by leveraging technology. A simple example of that would be post office stamps becoming a collector items more than the means to send a message across. Don’t have to buy an envelope, a stamp, no visit to a post office, no cost to send and instant delivery with a return receipt guaranteed. Sounds too simple an example, It is.
In business perspective, the cost of information access, selling or buying products without the need of a retail store, experiencing services (Access banking - anywhere, anyway, anytime), all has been dramatically brought down just because communication technologies make it possible.

Access – The wonder aspect of technology is that it makes access for both business and consumer so ubiquitous. Where physical infrastructures can’t reach or is unviable to access customers, a mobile bank, an ATM or a PoS terminal or better so internet or mobile exists. The unbanked or under banked population, which has the potential to provide next round of growth suddenly becomes accessible and vice versa with the near universal reach of mobile phones, the unbanked or under banked customers can access the bank without the need to open an account with bank or to have a plastic card because cardless cash, mobile money, virtual cards or biometric terminal/kiosk or an Aadhar Card (direct cash subsidy) make it possible. New markets, new segments, new products and services (read customized at micro level) are emerging and the revolution has just begun.

Convenience – Suddenly convenience has become the operative word as dynamically changing lifestyles, rapidly evolving global environment, altering rural/urban landscape, shifting preferences and paucity of time force all to adapt to life differently. Information search, decision support, payments/purchases/transfers, need to connect in real time and live and share life digitally, all are becoming possible thanks to World Wide Web. Multiple access and delivery channels have evolved for you to do anything, anytime, from anywhere. Business and Consumers both have rapidly evolved to make convenience not just a word but an experience.

Innovation – In this world, where change is the only constant, innovation has become the fuel on which business and individual thrive…Be it a smart phone, a tablet, a notebook, the power to engage, interact and do business, has been put in the hands of the Businesses or individuals . A relevant example could be the way banking has evolved. From Ledgers in bank branches to electronic accounts to cards to PoS to ATMs to Phone Banking to Online Banking to Mobile Banking to virtual accounts to virtual cards to m-wallets to cardless cash to video banking to online financial malls to electronic trading accounts, banking world has undergone a sea change and it has just begun. Now all that would not have been possible without the need to innovate and without technology supporting the innovative concepts. Not only that, technology has made innovation “viable” not just innovation with “no real benefits”.

Disruption – Technology has uprooted many a tall towers and decimated them. Be it mainframe computers industry, the thriving middle-men (who instead of bridging the gap between producers and consumers in fact tried to create the gap to benefit them), the information controllers and sellers, all have bitten the dust to name a few. Mainframe computers have become obsolete and are being replaced with storage devices as computing power is put in miniature computers or independent access devices. The online platforms connecting producers and buyers (Web Information and Transaction Portals, Payment Gateways, Integrated Delivery and Logistic platforms and Service Platforms) have rendered the middle man obsolete and created a huge market, where everyone is welcome and where everyone is a winner. Today, with the power of professional and social networks, the knowledge sharing platforms and the power of connecting and sharing information in real time, has toppled many dictators, autocrats, secretive governments as information flows freely, opinions are built in real time and decisions are made and supported almost in a matter of days having far reaching consequences.

Leveraging technology to shape the build, shape and realize the world, as we dream it, has become possible and the day is not far where all will matter and all that matters, will be in reach of all, who matter…

I can be reached on rajnishkhare@gmail.com for any comment, feedback or discussion.