Technological interventions that are gradually making an entry into the global financial sector, including big data, artificial intelligence, blockchain technology and internet of things, promise far greater convenience in day-to-day banking transactions for customers. Cutting-edge technology is being leveraged by financial institutions across the world, with the ripple effect expected in India. Sample this:
* Spain’s CaixaBank is in the process of launching a mobile-only bank called imaginBank, which will use Facebook, Twitter and mobile apps to connect with its customers in a move the bank says is aimed at young, ‘digitally native’ consumers. The Spanish bank is one of the country’s three biggest financial institutions and the move is aimed at connecting with customers in the 18-35 age bracket. imaginBank offers everything via apps on mobile devices and social media
* MasterCard has partnered with Norwegian startup Zwipe to launch a contactless payment card that has an fingerprint authentication sensor. This is the first card to combine biometric security authentication with contactless payment technology, which is being seen as a solution to the challenge of finding a payment option that does not compromise security.
* RBS has trialled “Luvo”, an AI customer service assistance as an interface with staff and to potentially serve customers in near future while Spanish bank Banco Santander has announced plans to provide secure transactions using voice recognition via its banking app.
* Japan’s Softbank, in partnership with Paris-based robotics firm, Aldebaran has developed Pepper, the world’s first humanoid robot that will be used in customer services industries as a replacement to an information booth or the welcome desk. Mizuho Financial Group Inc. bank has reportedly introduced Pepper to its flagship branch in Tokyo in 2015 to deal with customer enquiries, while Mitsubishi UFJ Financial Group has tested “Nao”, a humanoid robot to interact with customers.
* Banks in India, including HDFC Bank, are reportedly working on plans to introduce automation via robotics on the lines of what the Japanese banks are doing.
The increasing reliance on technology in the banking sector in India is already evident in bank statistics, according to information provided by Reserve Bank of India Deputy Governor SS Mundra at the ‘International Seminar on Cyber Risk and Mitigation for banks’ organised by CAFRAL on September 7.
As per the latest RBI Annual Report, the share of electronic transactions in total transactions in volume terms surged to 84.4 per cent from 74.6 per cent in the previous year. In value terms, the share of electronic transactions has shot up to 95.2 per cent from 94.6 per cent.
By end-March 2016, the national electronic funds transfer (NEFT) facility was available through 130,013 branches of 172 banks, in addition to business correspondent (BC) outlets. NEFT handled 1.2 billion transactions valued at around Rs 83 trillion (approximately $1.3 trillion) up from 928 million transactions for Rs 60 trillion (approximately $0.9 trillion) in the previous year. In March 2016, NEFT processed the highest ever monthly volume of 129 million transactions.
So, while the future may be promising for consumers, there are some obvious downsides to all of this. Alongside the increased use of internet banking and mobile banking-based payment tools, increasing concern is being expressed by the banking regulator on the lack of Board-level oversight on cutting-edge technology-linked services and the product vendors offering these solutions, especially those on the cusp of being deployed for commercial use.
With the attempted $951-million Bangladesh Bank heist providing an alarming backdrop, banking sector players in India have indicated that the RBI is strongly prodding banks to step up the vigil against cyber crimes, a growing bugbear for consumers. As a concrete step in this direction, banks have been specifically directed to put in place a security policy enlisting the strategy to combat such threats, duly approved by their Boards, by September 30, 2016.
Alongside this measure, banks and financial institutions have been told to set up a Security Operations Centre and beef up the role of the chief information security officer (CISO) within individual banks. Further, the need to leverage the CISO forum under RBI’s Institute for Development and Research in Banking Technology (IDRBT) for exchanging information among banks and generating quick responses to cyber incidents has been stipulated by the central bank.
In recent months, with the SMAC format (social, mobile, analytics and cloud) driving innovation in the banking sector, the security imperative is even more compelling with regard to preventing data theft and checking financial fraud. The recent spate of cyber attacks have been turning highly sophisticated and the missive to banks now is on using specialised analytical techniques and exploiting vulnerabilities that had hitherto gone unnoticed.
The wake-up call, though, has been the attempted heist in the Bangladeshi central bank. In February 2016, cyberthieves had issued instructions to transfer $951 million out of Bangladesh Bank’s account at the New York Federal Reserve. While most were declined, an amount of $81 million was transferred to a bank in the Philippines, never to be traced again. The theft sent shock waves through the global banking community, both for the amount of money that was swindled and how the heist leveraged the Society for Worldwide Interbank Financial Telecommunication (Swift) system, the backbone of international finance. Gottfried Leibbrandt, chief executive of Belgium-based Swift, had termed the Bangladesh cyber attack “a watershed” for the banking industry.
Among the RBI’s initiatives, alongside the IDRBT — which is primarily a banking research institute established in 1996 by the RBI — the central bank has also established a new institution, the Reserve Bank Information Technology (ReBIT) Pvt Ltd, as its wholly owned subsidiary, for stepping up focus on cyber security and for building cutting edge capabilities for supervising financial technology usage in the sector. The RBI, it is learnt, has also constituted a working group on financial technology, “to fully understand the new paradigm of Fintech and to chart out the best way of using it”.