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In addition to the traditional Bitcoin Blockchain, asset-centric crypto-technology, and its advanced state “smart contracts”, will form the basis for most applications of Blockchain technology in the BFSI industry.
Disclaimer: the following work of fiction has no relation to anybody living, dead, or yet to be born.
In the year 2248, the crash of the global economy quickly turned into an apocalyptic situation, with a complete breakdown of any form of order, leading to chaos and extinction-level events. At the same time, two brilliant scientists – a computer genius and an astrophysicist fascinated by the laws of space and time – were working on ways to prevent the crash from ever occurring. They were able to isolate the core reason for the crisis as extreme dependence on central clearinghouses and central banks of the world, which had become too powerful and systemic. The two scientists, determined to stop the end of the world, realized that it was possible to transfer data in any point of time as a base to create an intelligent digital personality that was just a combination of a series of billions of 1’s and 0’s. This digital personality was designed to ensure that the world’s central clearinghouses and central banks would not become too big to fail, per several key attributes: proposal of a virtual currency over a distributed ledger system; help building the system; and an auto self-destruct sequence to the digital identity once the currency found supporters globally (this to ensure the identity of the creator of this virtual currency remained mystery.) They sent this intelligent digital personality back in time to 2008 – when the world experienced a major economic crisis – and the rest, as we know, is another timeline that we live in!
Now, away from fiction and into facts about Blockchain – the distributed ledger technology – and the resultant wave of disruption in the financial services domain and beyond.
In 2015, no industry conference or trends forecast in the BFSI sector was complete without the mention of Blockchain technology and its potential benefits of reduced transactions and infrastructure costs, efficiencies, and financial inclusion.
In the last two years, we have witnessed major banks, financial institutions, technology companies, and even governments and international bodies presenting their views on whether they consider this technology revolutionary, and on their investment plans about adopting it.
Several firms have invested in Blockchain technology research to answer the questions on whether it will really transform the BFSI ecosystem and ultimately optimize middle- and back-office functions. And, if so, how they can prepare for that future.
Others are asking a broad range of questions about this distributed ledger technology, including:
• Will it reduce the time and costs of transactions and settlements to a fraction of what the current systems have to offer?
• Will it drive transparency and ease of global compliance?
• Will it break big banks?
• Can smart contracts automate transactions and create trust without central clearing parties?
• Can a combination of different forms of smart contracts, IoT, and Blockchain technology create a self-governing Decentralized Autonomous Organization (DAO) that makes the need for human intervention redundant?
There is no doubt that Blockchain has a lot of potential. But it currently faces a lot of uncertainty and challenges. There are several different versions of the shared ledger technology, and they will evolve as rapidly as the technology itself. The future of these different Blockchains is uncertain, as is the final shape they will take, and whether they will work or not.
Everest Group’s just published report, “Blockchain in BFSI: Beyond the Hype,” removes the hype from all the facts, tells the story of key investments made to date, how Blockchain has evolved and predicts the trends that we will witness in the next 12 to 18 months, and the key implications it will have on enterprises and service providers.
What are your experiences with, or thoughts on, Blockchain?
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With no rest for the weary, a wave of regulatory overhaul and technological disruptions made the first half of 2015 very busy for enterprises in the banking, financial services, and insurance (BFSI) sector. Indeed, rather than being an enabler of efficiencies and operations, technology is now the fundamental differentiator for banks to grow their revenue and increase market share.
To keep up with all the activity, Everest Group in the past six months published a number of research reports examining the health of the market, the service provider landscape, and the digital effectiveness of BFSI organizations.
Following are some key insights and highlights from our research.
So what is in store for the next few months? Lots! Our upcoming reports through the end of 2015 include:
Everest Group’s goal is to help ensure enterprises and service providers achieve maximum success from their sourcing initiatives. Thus, we encourage you to reach out to us directly with your questions and comments.
Jimit Arora, VP and Global Head of IT Services Practice, [email protected]
Aaditya Jain, Senior Analyst, [email protected]
Archit Mishra, Senior Analyst, [email protected]
Ronak Doshi, Senior Analyst, [email protected]
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“A customer is not an interruption in our work. He is the purpose of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.”
The above quote by Gandhi takes a whole new meaning in the current banking and financial services (BFS) landscape. There was a time when banking customers were plagued by issues such as obscure contract terms, hidden costs, and protracted complaints handling. While this may still continue to be the case, a confluence of different forces has created a new era in which all efforts by banks seem to point in one direction – customer centricity.
Exhibit 1: Key forces driving customer centricity in banking and financial services
Drivers of discretionary IT spending in BFS
In such a scenario, almost all banks are investing in one or more customer-centric initiative to enable a differentiated customer experience and servicing:
The table below shows select examples of technology initiatives taken by banks and financial institutions to drive customer centricity.
Exhibit 2: Key customer-centricity focused IT outsourcing transactions announced in 2013
|Investment theme||Buyer||Service provider||Deal value (US$ million)||Duration (years)||Scope of services (Among other things)|
|Data management and customer data analytics||Banorte||IBM||1,000||10||Investment in master data management (MDM) software to create a 360-degree view of the customer|
|Janalakshmi FS||Accenture||N/A||5||Implementation of CRM software and MDM enabling customer onboarding|
|Springleaf Financial||Acxiom||N/A||N/A||Customer/prospect database management support, including customer acquisition, engagement, and development through analytics|
|Mobility||ING Vysya Bank||IBM||N/A||N/A||Development of mobile banking channel to reach into untapped markets, such as remote cities and rural areas|
|Omni-channel experience||Industry Bancshares||FIS Global||N/A||N/A||Upgrade of core banking system which enabled real-time access to customers across various channels|
|Large Middle East Bank||Atos||N/A||3||Atos implemented Backbase Customer Experience Platform enabling a multi/omni-channel environment for the bank|
|Front-office modernization, omnichannel experience||BBVA Group||Accenture||25||4||Upgrade of core technology for the bank. Improved customer service through reduced account opening time, centralization of customer account information, creation of a multichannel environment|
|Front-office modernization||Maybank Singapore||NTT, Dimensions Data||47||N/A||Upgrade of Maybank’s IT infrastructure to improve service reliability and customer user experience|
Source: Everest Group’s proprietary Transaction Intelligence Database
Service providers have identified the market need for technology that enhances customer experience and have developed capability accordingly either organically, inorganically or through partnerships.
But we challenge the providers to further think how they can become partners in achieving business outcomes for their clients. As for the banks, how successful have they been in implementing these initiatives? In the current whirlwind of regulatory compliance and governance, are some finding it too difficult to innovate customer facing functions?
Photo credit: 10ch