While most articles in the class blog deal with Fintech as a disruptive industry for traditional financial institutions, the fintech festivals are common grounds of co-opetition for banks and fin-tech companies.Tech companies also help traditional banks to gear up to take on the new era of competition and integrate latest technology for their efficient running.
Let us discuss the merits and de-merits of few such examples that Microsoft CEO Satya Nadella cited at one such Fintech festival.
- ‘MetLife is using Microsoft Azure to run complex actuarial simulation models, delivering insights to decision makers around the globe’
Advantages:
- Complex risk assessment is aggregated in the cloud to complete in much lesser time.
- Faster business decision making process resulting in improved customer experience.
- 45-55 percent savings on infrastructure costs .
Disadvantages:
- Security of customer information is the most major concern when an on-premise data store is moved to a third party cloud computation engine.
- Once computation is moved to a particular cloud offering, the process develops platform dependencies that is hard to integrate with other systems or change in future.
- If there is a contract fallout, customer data can go into vendor lock where the parent company loses flexibility and control over data. This is why banks are reluctant to adopt cloud technology.
2. ‘Emirates National Bank of Dubai is reinventing its customer relationship management with Azure Machine Learning and Microsoft Dynamics 365’
Advantages:
- Data mining and prediction helps identify how to spend time with customers, and targeted next-best actions and offers.
- 15-point conversion rate of customers to new services.
Disadvantages:
- Again there is a conflict over online vs on-premise solutions against Microsoft’s cloud-based bundle.Hence your data, algorithms, experiments and results would reside in the cloud. Depending on your data sensitivity, that may be a deal breaker.
- The Microsoft CRM and ERP solutions are in their infancy and there are lots of kinks to iron out.There are better solutions out there for a lesser price point.
3. ‘Bank of America Merrill Lynch is working with Microsoft Treasury to use Azure Blockchain as a Service to transform and automate the processes for standby letters of credit’
Advantages:
- Reduces process time from 5-7 days to 5-7 minutes
- Reduces error rate down to zero percent.
- Significantly reduces the cost of process.
Disadvantages:
- Being a new technology there are challenges such as transaction speed, the verification process, and data limits.
- Control, security, and privacy are still cyber security concerns that need to be addressed before entrusting personal data to a blockchain solution.
- High initial capital costs : Blockchain proof of work implementation offer solutions that require significant changes or replacement of existing systems. In order to make the switch, companies must strategize the transition.
Thus we see the 2 sides of the coin while implementing fin-tech in traditional financial institutions. Financial institutions weigh all the pros and cons before trusting new ideas and technology. Fact that fin-tech is still percolating and accepted into such organisations is proof that widespread acceptance of fin-tech is starting.
REFERENCE:
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