Banking on The Future: Using Active Intelligence to Prepare the BFSI Sector for a Digital-First Tomorrow

The term bank originated from the Old Norse/Germanic word bakki, which means 'to set things in a row.' For the longest time, that is exactly what it did. However, while its essence might be immutable, the sector has evolved drastically over time in how it operates.BFSI, today, has transformed into a multifaceted, multidimensional entity that powers almost every aspect of life in the 21^stcentury.

And, as the last 12 months have shown, it is due to another evolution – this time powered by Active Intelligence.

The Digital Wave, Millennial Consumers, and Online Threats: Why the evolution of the BFSI sector can wait no longer

As the COVID-19 outbreak brought the physical world to a grinding halt, the digital ecosystem kicked into another gear – a shift that reflected in the growth of non-physical modes of transactions. In 2020, real-time digital payments across the globe increased by 41%, year-on-year, with the total transaction volume exceeding 70 billion. Developing economies such as India, Mexico, Brazil, and Malaysia, previously dominated by cash, were amongst the leading contributors to this growth.

As far as the global BFSI sector is concerned, this is not an insignificant development. However, before banks and financial institutions can congratulate themselves, they must pay heed to two of the most important developments in recent months.

As people increasingly took to transacting digitally during the pandemic, the number of frauds and cyber-attacks also rose exponentially. A VMware report revealed that, between February and April 2020,cyber-attacks aimed at the global financial sector surged by a staggering 238%. More alarmingly, the depth and volume of such threats have also increased.

This should have been obvious. BFSI companies are vast storehouses of critical personal and financial information that cybercriminals want to get their hands on. Experts have warned of how accelerated digital migration can provide an opportunity to compromise existing and emerging gaps within the banking infrastructure, its processes, and end-consumer knowledge. And yet, the sector was caught underprepared to deal with the growth in the quantum of threats and frauds during the pandemic.

The second development has also been in the making for some time. Today's consumer ecosystem is increasingly populated by digital natives who demand better, more seamless services. So far, the BFSI industry has managed to cater to their requirements with successful DX initiatives – but only just.

The truth of this was recently laid bare in the 'stonks' rally and the stunning rise of Dogecoin. Inspired by memes, Reddit discussion threads, social media, and new-age retail investors who had a bone to pick with the Establishment, the 'stonks' trend saw hedge funds holding short positions in select stocks lose almost $13 billion between January 1 and February 1. On the other hand, there is Dogecoin, a meme-based cryptocurrency that started out as a joke in 2013 and is currently more valuable than Ford Motor Company (est. 1903) and Twitter.

Regardless of whether one is in favour of this shift or against it, the data is clear on the outcome: social media is driving major trends by levelling the playing field for new-age consumers. The BFSI sector can no longer ignore it.

Active Intelligence: The Great Equaliser for BFSI companies in the Digital Age

As BFSI players already collect and process massive quantities of data every day, Active Intelligence has a part to play. Leveraging an Active Intelligence-led framework can help them embed analytics into their processes to trigger automated actions and more contextual, real-time decision-making.

For instance, banks can use Active Intelligence to automate certain processes such as underwriting, customer onboarding, branch operations, customer interactions, and customer intelligence. This integration of advanced analytics at a process level constantly evaluates contextual data such as transaction status, stakeholder details, transaction type, payments processing, compliance, documentation, and more to flag off anomalous behaviour. This flagged data acts as the trigger for the first level of intervention by the system itself while also compiling in-depth insights for high-level, human-led responses to the alert.

HDFC Life, a Qlik customer, is already doing something similar by using Active Intelligence to weed out insurance fraud. It uses an Active Intelligence framework to create a 360-degree view of its customers, queries, and policies that allows it to identify suspicious behaviour, such as frequent changes in nominees or even sudden spike of interest in a particular policy from different geographies. Branch managers handling such policies are then alerted to intervene. Doing so has helped the company strengthen its fraud analysis for a more secure and seamless claims process.

BFSI companies can also use Active Intelligence-based processes to improve the depth, quality, and range of insights they generate from data, enabling them to predict future market trends. Embedded analytics enabled by Active Intelligence, for instance, can help them improve their 'social listening' capabilities to predict major market developments ahead of the curve, such as 'stonks' and 'Doge to the moon.' More importantly, it can help them understand stated and unstated consumer requirements to devise more personalised products and offerings that might not be available in the market – giving them a first-mover advantage and strengthening their revenues, profitability, and consumer operations.

Change is always chaotic but, as the world we live in becomes more digitally-driven with each passing day, BFSI companies must learn to embrace this chaos by adopting Active Intelligence. For it is only with data that they can turn challenges and disruptions in a rapidly changing business ecosystem into exciting new opportunities.

Author

Varun Babbar, Managing Director, Qlik India