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RegTech (regulatory technology) is a solution to this challenge. It is a category of FinTech (Financial Technology) that employs advanced solutions to bridge the communication gap between corporations and regulatory bodies. RegTech refers to the use of technology to help businesses meet their regulatory compliance obligations more efficiently and effectively. RegTech solutions are designed to automate compliance tasks, streamline compliance processes, and provide real-time monitoring of regulatory changes. Companies are investing in RegTech by developing their own internal solutions or leveraging external services.

RegTech solutions can help businesses in several ways. Here are some examples:

1. Reduce Compliance Costs: RegTech solutions can help businesses reduce the costs associated with compliance by automating manual processes, reducing the need for manual intervention, and providing real-time monitoring and reporting. For example, with the help of this technology, automated risk assessment software uses advanced algorithms and machine learning to analyze data and identify potential compliance risks, such as fraud, money laundering, or other illicit activities. Solutions like Fortinet, Palo Alto Networks, and CyberArk are being used to provide real-time monitoring and reporting of cybersecurity threats.
2. Improve Accuracy, Consistency, and Customer Service: RegTech can help companies provide better customer service by automating tasks, such as customer onboarding and account management. It can also improve the accuracy and consistency of compliance processes by reducing the risk of human error and providing a standardized approach to compliance. Solutions like Quantifind, Ayasdi, and DataRobot are being used to automate risk management processes and improve risk assessment accuracy.
3. Enhance Risk Management: RegTech solutions can help businesses better manage their regulatory risks by providing real-time monitoring and reporting of regulatory changes and alerts to potential compliance issues. Solutions like Quantifind, Ayasdi, and DataRobot are being used to automate risk management processes and improve risk assessment accuracy.
4. Regulatory Reporting: Many industries, including finance and healthcare, are required to submit regular reports to regulatory bodies. RegTech solutions automate the collection, analysis, and submission of this data, reducing the risk of errors and ensuring compliance. Solutions like AxiomSL, Verisk, and Cognizant are being used to automate regulatory reporting processes and ensure compliance with regulations.
5. Risk Management and Contract Management: Effective contract management includes identifying and managing risks associated with the contract, such as non-performance by one party, changes in scope, or disputes. RegTech solutions can help businesses assess and manage risk in real-time, allowing them to quickly identify potential compliance issues and take action to mitigate them. It can also help businesses automate the process of creating, reviewing, and managing contracts, ensuring compliance with relevant regulations, and reducing the risk of errors and disputes.
6. Data Management and Data Privacy: RegTech can help companies manage their data more efficiently and securely. This can include data storage, processing, and analysis, as well as data governance and data privacy. RegTech solutions help businesses manage and protect this data, ensuring compliance with relevant regulations. One area where RegTech has been particularly useful is in KYC/AML compliance. Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations require financial institutions to verify the identity of their customers and monitor transactions for suspicious activity. RegTech solutions such as identity verification software and transaction monitoring tools help automate these.

The Evolving Landscape of Global Regulations and the Need for RegTech

As the world becomes more interconnected and businesses operate across multiple jurisdictions, the complexity of the regulatory environment is only increasing. Regulatory bodies are constantly introducing new laws and regulations to keep pace with changing market dynamics and emerging risks. For businesses, this means that compliance can be a moving target. RegTech solutions are essential in this context, helping organizations navigate the ever-evolving regulatory landscape while reducing costs and risks. By leveraging advanced technologies such as AI, machine learning, and blockchain, RegTech solutions are likely to become even more effective in the coming years. In short, RegTech is not only a powerful tool for compliance management today but also a key driver of innovation and efficiency in the future.

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What is hyperautomation?

In 2019, Gartner begat the expression “Hyperautomation” (Gartner). Hyperautomation alludes to the utilization of cutting-edge innovations, for example, AI and mechanical technology process automation (RPA) to robotize manual assignments. It is basic to comprehend that hyper automation isn’t intended to replace human specialists, yet rather to coordinate them into the cycle.

Benefits of Hyperautomation

Regardless of a few early mishaps in the utilization of mechanical technology and artificial intelligence (AI) in banking processes (McKinsey), the future shows up splendid. Banks are likewise learning significant work process illustrations in this new world, for example, how to oversee handoffs among man and machine more successfully, and where conventional interaction update/reengineering can be postponed or even skipped for automation.

1.IT expenses have been decreased

With regards to assets and customer maintenance, banks ordinarily burn through huge load of cash. They can set aside cash through automation since it permits them to use cloud-based services like iPaaS (which permits them to convey developments, new items, and scale foundation).

2. Streamlined market time

The desire of great importance is for new items and services to be brought to advertise as fast as could be expected. This additionally applies to banks. Automation will support formalizing the interaction and utilizing cutting edge innovations and devices to help with the execution of new items over more limited and more effective item life cycles.

3. Information and customer experience

Across businesses, a noticeable shift from is being item driven to being customer-driven and information centered. These will turn into a pivotal mark of separation. With the expansion of computerized channels and stages, the volume of information has developed dramatically, requiring constant information handling and updates. At long last, it comes down to utilizing progressed investigation to settle on better choices and giving customized encounters.

4. Transfer speed

Scalability is the essential objective of any business, and it very well may be accomplished through associations and nonstop development. With the presentation of new stages, hyperautomation gives the valuable chance to scale quickly while spending less, to assemble a biological system, and to make incorporation simpler.

Conclusion: The pandemic has increased the requirement for financial services to mechanize their business and data technology cycles to stay coordinated and answer a continually evolving market. To avoid complication in customer administration conveyance with more automation, hyperautomation consolidates abilities with shrewd work process coordination. It is expected to develop close by a business, bringing about a functioning biological system that is continually instructed and ready to involve information and experiences for fast and exact navigation. As financial institutions strive to keep up with their capability in a post-COVID world, there has never been a superior opportunity to acknowledge the eventual future of intelligent automation.

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Over the last few years, the banking sector has gone through an inevitable transformation as more and more fintech businesses come into the market. Financial services are evolving to the point where new products, channels, partnerships, and opportunities are being created. At the heart of this digital storm, lies the concept of Banking as a Service (BaaS).

So, what is Banking as a Service (BaaS)?

In simple words, Banking as a Service (BaaS) is the provision of banking products and services through third-party distributors. It is an end-to-end approach that uses APIs to connect fintech companies and other third-party organizations to a bank’s system. This helps such third-party Fintech organizations build innovative financial services upon the provider bank’s regulated infrastructure while enabling open banking services.

Banking as a Service (BaaS), disaggregating the traditional banking value chain.

The typical structural functions of a bank as we all know are accepting deposits, lending deposits to businesses, remittance, and payment processing. To facilitate these, banks require huge investments and other physical assets like property, infrastructure, etc. All these processes create  gridlocks.

BaaS is bringing revolutionary changes in the finance industry by reconfiguring the value chain and promoting new sources of growth. FinTech companies & Non-banking Financial Services providers are working with traditional banks to create BaaS that enables innovative, specialized offers to get to market faster by combining the strengths of both institutions. With increasing problems of customers with existing banking barriers of regulation, security, and technology, Baas is delivering fast, agile and seamless offerings. The winning factor of BaaS is the ability to capitalize on technology investments and create value.

According to Finextra, the top companies that are actively pioneering BaaS strategies and have already experienced all the advantages first-hand are solarisBank, Bankable, Starling Bank, Pi1, Green Dot, and BBVA.

The future of banking is driven by next-generation technologies, enabling customers to make seamless, safe, and rapid payments in order to meet their changing needs. Let’s look into some of the key trends that are disrupting the banking industry in 2022 and opening new doors of growth for banking.

Embedded Finance or embedded banking: According to Juniper Research, the value of the embedded finance market will exceed $138 billion in 2026, from just $43 billion in 2021. Embedded finance is the seamless integration of financial services into a typically non-financial platform, enabling customers to use apps to avail banking services. Apart from the easy-to-use user experience, embedded finance is having a great deal of success because of its already existing broad customer base.  In addition to embedded payments, there are also emerging trends for embedded credit which allows customers to take credit within the non-financial platforms. For example, Amazon offers EMI options which purchasing any product. Moreover, embedded investments and insurance are integrated within the non-financial apps for a smooth customer experience. In fact, embedded insurance has the potential to increase the purchase of insurance for high-value products among eCommerce customers. Research reveals embedded insurance premiums to grow to over $10 billion in 2026, from just $3.8 billion in 2021.  

Emerging technologies in financial services: Advanced technologies like AI (Artificial Intelligence), Machine Learning, Blockchain, Internet of things (IoT) are rapidly transforming customer experiences by increased responsiveness, security, transparency, and time efficiency. Today, customers are exploring the benefits of open banking where they are thoroughly aware of their financial condition, they can plan investments, compare the alternatives and make better financial decisions.

Increase in Mobile Banking: According to 2020 mobile banking survey, approximately 58% of respondents indicated that they were visiting branches less frequently due to the pandemic; among them, over 61% indicated they were also using mobile apps more frequently. This trend is likely to continue as users are more comfortable than ever in availing mobile banking. Mobile banking enables users to have account information access, transaction access, investments, support services, and news and offers alerts. One of the biggest reasons for the rapid growth of this trend is because users can conduct almost all sorts of banking activities anywhere, anytime. This has further helped the bank to cut down on its operational costs by maintaining customer satisfaction.

To conclude, both banks and fintechs are imbibed in a symbiotic relationship. The difference between the structure and functions of the two is even making the relationship more valuable. Along with the provisions of banking infrastructure, regulatory legitimacy, and the existing customers who still rely on banks; fintech brings the freedom to create, design, and experiment, offering user-friendly and tailor-made solutions for the customers. Finally, it would not be wrong to say that banks, fintechs, and BaaS firms are most effective when they collaborate to reduce risk, maintain compliance, and provide the modern financial solutions that customers demand.

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Here is a selection of the benefits offered by Robotic Process Automation in the banking sector.

1) Minimal initial capital demands

Since the concept of bank automation is alien to many, it is important to tackle the issue at the rudimentary level. Since RPA is one of the simpler branches of Artificial Intelligence (in conjunction with Intelligent Automation), the existing IT infrastructure of most established banks prove sufficient to reap the benefits; the financial institutions consequently have a very low risk-reward ratio. Though banks are not always up to date on their IT resources, the legacy systems of these banks can take care of most RPA implementations. Since these services are outsourced, little to no skill is required in operation; this mitigates the need of extra manpower and thereby, extra costs.

2) Scalability

Although this may be viewed as a follow on from the first point, it is worthy of mention. RPA bots are built to be stable and vastly scalable. Once the firm identifies its objective clearly (reduce cost or labor, saving time and so on), scaling of the available technology becomes smooth. In fact, when powered by the faculties, they can handle leviathan volumes of organized data: for instance, consider the issue of data consistency that financial establishments have to maneuver; like the ever-changing details in personal information held in the databases of banks, like the spelling of a person’s name, their address or financial details. While a slight variability can make conventional systems go for a toss, the empowered Robotic Process Automation systems can process such information with no hassles, thanks to its prodigious, yet rigid order. This is what makes RPA head and shoulders above the rest and key to its scalability is the fact that its machine learning features, when incorporated, are resilient and robust.

3) Speeding up processing

Speed and efficiency are synonymous for finance companies since customers need timely service for their requirements and delays nurture the risk of losing customers. When opening an account, for example, the verification process can be tedious for many. With RPA, the procedure can be expedited and accelerated exponentially. The robots can deal with everything from the validation to the delivery of the account to the client on completion. The same could be said on loan and mortgage applications, or the repetitive aspects of AP accounting, which when carried out by machines, frees up the employees to garner complex solutions involving reasoning and creativity. Thus, by optimizing performance and eradicating human error, RPA offers us a win-win; banks can take the adage of “time is money” literally and enjoy the reward of satisfied customers. Rread Experion’s success story here.

4) Promote intelligent banking strategies

The application of RPA in finance could bring in key foresights and vision into banking. Many of the top companies today are using AI analytics to procure a bird’s-eye view of the market, tracking unexpected changes and shifts in trends to offer their customers the most optimal investment options, or in fixing the most competitive interest rates; the role played by RPA in this regard is monumental. This is reassuring for customers as they offer maximum output with little risk.

While we are on the topic of risk, it is imperative to discuss the uses of RPA in fraud detection and safety. According to Thomson Reuters, banks spend almost $384 million on KYC process compliance every year on average, and many are moving to RPA to analyze customer data. Software bots run checks on customer data to assess and confirm KYC compliance, or to ascertain a customer’s credit score, which helps to keep malpractice at bay. If suspicious activity is intercepted, they can employ account freezes or other means to curtail frauds.

In conclusion
In an age where AI is growing and proliferating at a rate unseen hitherto, banks find themselves in a do-or-die situation, where adopting superlative technology is necessary to stay in the hunt. With the current rates of adoption of RPA in the finance realm, if banks wish to stay relevant and competitive, they must critically analyze their position in the market and make paradigm shifting changes in their strategy. They must be on the lookout for the top IT service providers to be ahead and make impactful strides in the industry, the effects of which will show us the way to the future.

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Traditionally, the business of wealth management is based on personal relationships and trust as client engagement involves several individuals and manual processes. The clients deal with an investment advisor who is supported by the middle and back-office staff – the opening of accounts, transfer of money and transactions are all performed by various individuals and thus prone to human error. While it appears to be a smooth functioning place to an outside observer, in reality, it’s hardly ever the case.

The current business model has poor scalability and efficiency – according to McKinsey, the need of the hour is a next-generation operating model that is supported by Data, Analytics, and Technology. The pandemic has catalyzed this inevitable change since it caused a shift towards digital modes for sales and delivery of advisory services. The clients seem to have accepted the change too and expect the best of the changes to continue post-pandemic.

We are currently at a juncture when the industry’s business models are getting disrupted, with digitization accelerating the change. Here are a few of the several drivers bringing changes to the world of wealth management.

Data & Analytics

The wealth management industry seems to be behind the curve in terms of the adoption of Data & Analytics. However, leveraging D&A for different business processes such as client advisory, portfolio building &management, risk evaluation, etc. could significantly enhance the value delivered by wealth management firms.

Data analytics benefits advisors and clients alike – better analytics and visualization tools can add value to the vast amounts of data that advisors deal with. Leveraging advanced data analytics tools and techniques, wealth management organizations can generate meaningful and actionable insights for their clients to make informed investment and business decisions.

Cloud Adoption

Most wealth management firms struggle with the complexities and inconveniences of legacy software systems – cloud computing allows for modernization without changing the IT landscape completely in one go, as it can be implemented in a modular manner.

The pay-per-user function also transforms the way in which wealth management firms create and offer customized applications and services.

Future-forward firms have begun planning their cloud transformation strategies, as they are well aware of the challenges involved in implementing one, while simultaneously being convinced of the many positives it brings, including the ability to help Wealth Managers use their resources more efficiently, plan their budget management and allocation, and help the organization to obtain flexibility by building an enabling IT infrastructure.

Robo-Advisory

Robo-advisors are defined as digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision – they collect information from clients about their financial situation and future goals through an online survey and then use the data to offer advice and automatically invest client assets – thus, they are also called Automated Wealth Managers.

They are an attractive option for young investors who don’t have a large sum to begin investing with, who don’t necessarily need the face-to-face human interaction and relationships that the older generations prize, and who would rather not spend a lot of money on wealth manager fees.

RegTech

Complying with industry regulations is a high-risk area for wealth management firms since any failure on their part can result in financial losses in addition to costing them their reputation as well as punitive measures by Governments. Firms have begun to employ technology to perform functions such as due diligence, transaction monitoring, regulatory reporting, data management, and so on to reduce regulatory risks as well as costs.

RegTech, or Regulatory Technology, not only eases the burden of compliance for wealth management companies but utilizes AI, data mining algorithms based on machine learning, offers services on the cloud and integrates with existing systems in organizations through APIs to make it easier for firms to adopt new technologies.

In conclusion, digital transformation services are already underway in the wealth management industry. However, the successful transformation and adoption would require the organization to adopt it with an open mind. Technology adoption may be risky, but those firms that can adapt and embrace the change would fare better in the long term.

Black Rock IT Solutions is a digital transformation service provider with over 14 years of experience working with clients from the Financial Services industry. We have been instrumental in the digital transformation journeys of several firms, equipping them with the advantages of D&A, AI&ML, and Cloud Adoption to build a more future-proof business. For instance, blackrock proposed a data analytics-powered investment advisory services platform as a solution to the challenges a leading wealth management firm in the US faced. Designed with an intuitive interface on Web, Desktop, Android, and iOS devices, the investment advisory services platform helped its users to manage different kinds of investment portfolios seamlessly. Read the whole success story here.

If you are looking for a reliable IT-partner who understands your domain, drop a mail to sales@blackrockdxb.com.

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In the first six months, the global revenues for payment systems declined by an estimated 22% when compared to the same period in 2019. According to BCG, from 2019 to 2024, the global payments revenue is likely to increase by around 1% to 4%, depending on the speed of recovery from the pandemic. However, even in a best-case scenario where the rebound is quick, the expected growth rate would be half the rate of the prior 5 years. 

However, in the past six months, e-commerce, digital payments, and other online services have all registered excellent growth. The pandemic has reshaped how consumers and businesses interact with each other and this will shape the future of the payments industry. 

Here are a few of the trends that were observed during this time.

Cash to Non-cash conversion

Even countries that have been traditionally cash loyal have experienced a drop in the use of cash for transactions and have seen a rise in digital payments. For instance, the UK has seen a 50% drop in cash usage in March 2020. Payments made in-person are reducing every day, as people are being encouraged to stop handling cash to curb the transmission of the virus. In fact, most businesses encourage contactless payments, with some going so far as to not accept them at all. 

Electronic peer-to-peer and consumer-to-business payments have experienced growth during this time. Debit cards, normally associated with lower value transactions, have also exhibited growth. On the other hand, ATM transactions and cash use had experienced a decline during the same period – In India, ATM usage fell to almost 50% and a steep decline was observed in the UK as well. It was estimated that transactions executed via cash will decline by 4 to 5% during this year, which is around 4 to 5 times the annual decrease experienced during the last couple of years. 

Boost for e-commerce 

The pandemic forced a significant percent of the population to shift towards digital channels for their retail purchasing activity. Industries that depend on travel such as hospitality and tourism as well those that depend on density such as entertainment are likely to be unfortunate casualties in the short term, based on how the crisis has been progressing. However, niche segments such as fresh food, pet supplies, in-home entertainment, and so on are expected to grow at better rates. In the retail sector especially, a shift in buyer behavior was observed with customers moving from brick-and-mortar to online retail shopping. This was evident from Amazon’s second-quarter numbers that recorded a 40 % Y-O-Y boosted by the growth in grocery sales. 

This shift in consumption could also lead to a shift in the payment method used. For instance, in place of using credit/ debit cards, consumers could shift to contactless payment modes such as digital wallets or cryptocurrencies.

Move from “physical” to “virtual banking”

Banks in various parts of the world are closing branches either temporarily or permanently due to the current scenario. This has been aided by the adoption of technologies for real-time payment facilities.

In the words of Deepak Sharma, Chief Digital Officer at Kotak Banks, India – “Ninety-five percent of transactions moved out of branches post-COVID. Unless there is a great need for customers to visit branches, we don’t see it happening (again anytime soon). “

“We have also seen fast adoption of WhatsApp banking and conversational banking bots. Very soon, we will see (these changes apparent) while doing small business transactions and loan origination as well. Even after we come out of COVID, this shift in habits that we (have seen) will continue,” he added.

Cross-border payment flows severely affected

Because of lockdowns introduced by Governments, international travel came to a grinding halt causing a massive decline in international transactions. This was further worsened by waivers offered on the transaction to boost demand. Inter-regional trade had a deeper impact than intra-regional which further hurt cross-border payments, while at the same time the prices of commodities such as oil dropped since demand declined. This had a 2-fold effect on the transaction values since both the volume as well as the unit price dropped. 

To conclude, crises often create an opportunity for firms to take a good look at how they conduct business. COVID-19 is no different except for the speed at which it has managed to affect change. Payment systems have been forced to accelerate and meet the challenges raised against them. The most talented firms that adapt to the situation, leap ahead of the competition, and deliver exceptional value to customers will survive and shape the industry.

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In the wake of this uncertainty, firms have been focusing on investing only in the following areas:

Operations: to ensure continued access to basic services;

Supply chain: to address emerging supplier and customer needs;

Revenue: to ensure the continued viability of the business; and

Workforce: to support employees and remote working amongst disruption.

As per a study conducted by Boston Consulting Group (BCG), around 60% of firms have paused the deployments of new IT systems, for instance, and 44% have delayed upgrades to their existing systems. A study done by Gartner shows that the banking industry, one of the largest IT spenders, is expected to cut down on their IT spending by nearly 4.7% owing to the turbulent market. They are focusing on investing in technologies that will keep their businesses running – specifically by going digital and investing in emerging technologies trying to adapt to the “new normal”.

The New Normal

The entire world is currently transforming in an attempt to adjust to the new normal – the practice of social distancing. Even though a lot of industries can work with the limitations of social distancing poses, there are many which cannot. 

Banking is one such industry. Banks build trust in very tangible ways – with retail outlets that are designed to emanate confidence and security. Older and larger banks rely on the security that comes from human contact, reassuring customers that their money is safe and in a concrete vehicle, as opposed to a mere tab in their internet browser. 

When COVID-19 struck, their business took a hit even though most banks had already enabled digital banking for their customers. This was not because the business operations affected their customers drastically, but because they needed their employees to work out of their retail outlets to process transactions. Social distancing and working from home is feasible only when employees are enabled by the infrastructure they need. This new normal meant molding a secure environment that was safe for both the employees and for customers’ transactions.

Agility and Customer Experience

Banking, insurance, and other financial services are highly customer centric. Traditionally, they have always needed the human component to provide a sense of confidence to their customers. COVID-19 has put these companies in a situation that they haven’t ever seen before. Traditional financial systems have not been very agile when it comes to change, with a large cluster of systems hosted in an on-premises environment and large IT teams supporting it for years. The pandemic showed them the importance of agility in their systems and how it can impact their overall customer experience and hence, their business too.

During the initial days of the lockdown in different geographies, many banks could not keep up with the number of customer requests pouring in, and multiple outages were reported owing to the lack of staff. This was heavily impacting their business’s reputation. Soon, their customers’ behavior changed with the new normal and the demand for digital banking was at an all-time high. This is where an agile system would be quite useful, so they can quickly and efficiently change their business operations as needed by customer behavior. 

Risks and Business Continuity

With COVID-19, every organization was faced with a pressing question – how to keep the business running? This was definitely a concern for those who were doing business with banks or other financial services companies. 

For the banks themselves, the actual challenge was to reassess their customers’ Credit Risks. With a looming NPA crisis, it was already a tough task for banks to give out loans to corporates. Their existing formulas now needed a revamp, as the variables had changed. In many countries, a moratorium was announced by Central Banks, keeping private banks devoid of any interest revenue for that time. Handling the collection process and dealing with distressed customers was the other big challenge they faced as problems caused on this front were leading to a lot of reputation risk for the organization. Robust risk management functions would be needed with the active tracking of borrowers. 

Given the circumstances; their business operating model needed rework to ensure that business continuity is maintained.

How Can Technology Help?

Technology has been a key driver of the financial services industry for ages now, with the domain spending around 10 percent of its revenue on IT expenditure. However, now is the time for these companies to use this budget wisely, as technology is going to be what saves them from bankruptcy. 

In the current situation, there is an acceleration to the digital strategy of all bank leaders. Decision-making concerning these projects has quickened and “someday” or “one day” has become “today”.

Operational costs have become much higher during the pandemic due to unconventional methods of working and handling crisis management. Organizations have had to provide facilities for everyone, including their call center employees, to work from home. Thus, technology must play a key role to provide these facilities remotely – be it secure access through a VPN, or a security system to process the transactions without fail or delay. 

Machine Learning, RPA, and other emerging technologies could be an essential component to help solve a lot of these challenges, as they reduce the dependency on humans to an extent. It could be expected that financial services companies could start to adopt Machine Learning algorithms for their credit scoring systems to make their systems more agile. Insurance companies could adopt technologies such as image processing to help underwriters in claim processing and so on. There has also been a shift to Cloud hosting from On-Premise installations, which was highly preferred by the large traditional banks, to keep all activities remote. Some banks have started turning to intelligent automation to tackle problems related to collections and debt as well.

Conclusion

Going digital is the key solution, even though that is not the ultimate goal, as human interaction is still imperative when it comes to the banking and financial services sector. However, if  you work in financial services, now is the right time to look into developing a viable Digital Transformation roadmap for your company, and ensure you have the right technologies to stay agile and customer-centric.

The ability to balance technology and the human element will define every organization’s success in the future. At Experion, we help enterprises on their digitization journeys by developing FinTech solutions that are truly future-proof.  For more information on how we can help you stay future-ready, drop a mail to sales@blackrockdxb.com 

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But the recent pandemic, COVID-19,  which has the whole world reeling from the repercussions of being locked down,  has made steady paychecks with health insurance benefits look a lot more promising. And while there are advantages to being in the gig economy, there are also disadvantages that cause incredible anxiety to the workers in the ecosystem, the biggest among them, undoubtedly,  being the payment question.

According to a Global Marketplace and Gig Economy Payment Satisfaction report, a survey of gig economy freelancers from various industries around the world found that 73% of gig workers are likely to leave the marketplace due to payment issues. Many gig workers and freelancers face delayed or even denied payments, and many spend weeks tracking down payments every year. And this is where companies who rely on gig-workers can make a difference and digital transformation can be a lifesaver. One could argue that adopting a digital transformation platform to meet employees’ requirements in real-time –  an instantaneous payment platform for instance – will help the gig economy thrive going forward. 

In a move that seemed understanding of this predicament, the US Federal Reserve officially announced in August 2019 that it plans to build a real-time payment service by 2023-2024 called ‘FedNow’. Hopefully, the changes that COVID-19 has brought upon the world economy spurs them on to develop and implement this sooner rather than later. 

In the announcement, the Fed Reserve invited extensive feedback from members of the banking and payment community and in a much-publicized response, Google wrote to the US Federal Reserve Board detailing the successful example of the UPI (Unified Payment Interface) based digital payment platform in India to build FedNow. 

UPI, according to the NCPI website “is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments under one hood.”  It also caters to the ‘peer to peer’ collect request, which can be scheduled and paid according to your convenience. 

Google listed three major qualities of the UPI worth emulating: 

• Interoperability – account to account transfer and not just an online wallet
• Real-time money transfers
• An ‘open’ system – standards are open-source so technology companies can build their implementation of the solution

Let’s look at these qualities a bit closer and understand how they can become game-changers for the gig-economy.

Interoperability

The diverse requirements of the US FinTech industry necessitated multiple channels for enabling payments. The payment systems currently in place don’t interoperate seamlessly. Private solutions are closed-loop systems too –  real-time transfers are possible only between those users who use their specific solution. This is arguably the biggest drawback of the multitude of perfectly functional payments systems that have organically sprung up over the years.

Now imagine a new platform that can now provide you with access to the funds lying in your bank account and can transfer money from your PSP (Payment Service Provider) to another party’s bank account without worrying about the PSP the other party uses. This would essentially convert all PSPs into portals to your financial world. This is what the UPI platform accomplishes.  

Real-Time Money Transfer

As smartphones are replacing physical cards and POS systems, any new system being developed should be able to authorize a payment using a pin or two-factor authentication to transfer cash instantaneously regardless of the platform the merchant uses. Without Visa or Mastercard needing to act as intermediaries. A system that combines all the existing payment rails and can transfer money to any of the nodes seamlessly, just like UPI does.

‘Open’ System

In the current payment ecosystem, different payment rails need different types of authentication information. The new system should simplify and standardize these operations – the different types of authentication for each payment rail should be handled under the hood by the new system.  The result would be an open and interoperable payment infrastructure, compatible with all the existing technologies and has the potential to integrate newer ones. 

This is what will enable any PSP to facilitate transactions to any other PSP instantaneously, leveling the playing field for banking and non-banking PSPs (Fintech firms) when it comes to managing payments. 

The Entrepreneur’s Advantage 

The biggest beneficiaries of such an instantaneous payment platform,  other than gig workers, will be small business owners and the low fixed-income individual who has to wait for a couple of days after a paycheck is deposited for the amount to reflect in their account.

If FedNow works with this kind of an open system, it will create opportunities for small and medium-sized banks, credit unions, FinTech companies, and large retailers to develop their version of PSP applications. And while developing such a system, firms must ensure that they create a simple, intuitive platform for P2P transfers and digital POS systems for their customers. 

It will also create an opportunity for payment and ‘payment adjacent’ solutions providers to develop their own version of PSP apps. For instance, even small FinTech firms can utilize their existing infrastructure and leverage digital transformation solutions to meet customer requirements, offering innovative, secure and user-friendly solutions that can compete with the likes of larger banks.  In this way, they can reposition themselves for continued success, even post COVID-19.

Having developed FinTech solutions for their partners, companies like Black Rock IT Solutions have a distinct advantage in developing PSP apps for their client partners, that companies around the globe can rely on to be top-notch.

To know more about Experion’s Fintech offerings, drop a mail to sales@blackrockdxb.com

The post How real-time payments may save the gig economy in a post pandemic world appeared first on Black Rock IT Solutions – Software Product Engineering Services.

With the popularity of the internet, it has become easier for individuals to create consistent revenue from their underused assets. Any physical asset can be shared with the public as a service. Take for example, a private car that costs a fortune to buy and maintain, spends 95% of its time in a garage or parking space, gathering dust. Would it not be great if there is a system which could facilitate leasing the car to potential users, after the owner’s daily commute to work. The car could serve users for a wedding, special occasions as well as for corporates. The money earned through this sharing will cover the transportation/ service cost of the car, making its ownership expenses considerably less.

Current state of the sharing economy

The sharing economy has already become a major part of the global economy. Even if most of the global population is unaware of the term, most of us have used such services in one form or another. Please note that this term Sharing Economy is an umbrella term, and many of the below different business models can fall under it.

• Collaborative Economy  (Airbnb, Couchsurfing)
• On-Demand Economy  (UberEats, Netflix, UrbanClap)
• Gig Economy  (Uber, Lyft, Upwork, Freelancer)
• Peer Economy  (eBay, Craigslist)
• Crowd Economy (Kickstarter)
• Platform Economy (Amazon, Alibaba)

It is true that some of these new business models have disrupted the older and more established ones. By transforming such older models, these companies have brought in innovation and efficiency to the table in addition to convenience. At the end of the day, sharing economy is part of our larger economy and will spur growth, as it marries real world physical assets with the digital world.

Counter Opinions & Controversies

Experts have raised their opinion against using the term “sharing economy” in cases where such sharing is not true or does not focus on generosity in the strictest sense of the word. Uber is an example. Their argument is that many of the categories that are currently listed under this term are not entirely selfless as the term implies.

As per the WEF article published recently,

“As the sharing economy has grown, it has become a victim of its own success. Some people have charged that much of today’s sharing economy is not really “sharing”, an allegation that is partly right. While on the one hand, there are many platforms that espouse the true spirit of sharing – underutilized assets and building community – on the other hand, increasingly there is “sharewashing” going on: companies latching onto the term because it makes them part of a hot trend. Who doesn’t want to conjure up notions of community and cooperation?

An example of terminology confusion is Uber. Is it ridesharing when a driver leases out a car that they did not own before, in order to provide rides that they would not have taken otherwise? Hardly. Yet, for much of the public and media, Uber is one of the most touted examples of the sharing economy. That said, newer offerings such as Lyft Line and Uber Pool are wonderful examples of ridesharing: they enable more efficient use of cars, full stop. But they represent only a fraction of current rides provided. More broadly, when an entrepreneur claims to be the “Uber of X,” that is an immediate red flag of questionable sharing-economy status.”

(*Source: WEF Article)

However, it cannot be denied that the sharing economy has been responsible for a new world economic order, while parallelly enabling the sharing of idle assets. It has successfully enabled businesses/private individuals to cash in on user convenience. While the idea that Uber is not entirely selfless may be true, it is also true that the service has succeeded in taking off many a private vehicle from the road, thus paving the way for a less polluted environment /less congested roads.

Technologies Enabling Sharing Economy

Technology is the enabler and multiplier of this sharing ecosystem and plays an important role in facilitating both service providers and seekers. Some of the new technologies facilitating this new model of business are,

1. Online Digital Platforms: Sharing economy is often called a platform economy. This is because a digital platform or matchmaker is the most essential part of this economy. Such platforms act as intermediaries, enabling interaction between service seekers and providers.

2. Mobile Applications: More consumers would discover new products and services through their mobile devices than any other source. In fact, more and more people have started using mobile apps to browse, buy, borrow and sell goods than even a year before. This is quite evident from studies which predict that by end of 2018, mobile commerce would constitute a third of the total revenue earned by ecommerce companies.

3. Internet of Things: When sharing an asset as a service, it is important to track the usage of the asset and ensure routine maintenance. Internet of Things (IoT) empowers us to constantly monitor asset location among other parameters. This can be used for routine maintenance work of the asset.

4. Artificial Intelligence (AI) and Machine Learning (ML):  AI and ML can be used to personalize customer experience based on previous purchases and search trends. AI can also be used to determine the price of a product dynamically based on demand.

5. Blockchain:  Trust is a critical component for any trading platform, digital or not. Blockchain technology can be effectively used to build trust into a sharing economy system. Cryptocurrencies, Smart contracts and other implementations of the blockchain algorithm can and will play a critical role in this process.

The Future

In the future we will see a steep rise in the penetration of these type of digital services in our everyday lives. From an earlier model of individuals owning physical assets, we will see a shift where physical assets are shared between individuals. These assets are used only when there is a need and then, the asset will be readily available through a cloud platform. The result is lower cost of ownership while providing consistent customer experience. People have shown a higher level of interest in an on-demand model for shared services in all sectors such as,

• Hospitality & Leisure
• Automotive
• Transportation & Logistics
• Retail
• Consumer goods
• Professional services
• Healthcare

Conclusion

New technology has the immense potential to transform people’s lives. When mobile technology was introduced in some of the developing countries within Africa and Asia, it acted as a leapfrogging technology, saving such countries the huge costs associated with setting up of landline infrastructure, while providing a consistently improved user experience. It had a huge impact on the user lives as well as the GDP numbers (See Blog). Platforms supporting the sharing economy models are examples. Such platforms have the tremendous potential to bypass the asset ownership model of the past to the shared ownership model of the future.

At Experion, we have implemented several projects across the retail, healthcare and transportation domains, many of which have enabled the shared economy business model. We have worked together with nearly 70 early stage businesses to disrupt traditional business models and markets. We have also worked with large and medium enterprises to accelerate their transition to the digital mode by transforming traditional business models.

Please write to sales@blackrockdxb.com to know more.

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