Exlclusive Interview with Ahmed Mansour, Blockchain & Fintech Expert, Egypt for NAB Confex 2019
For the last few years we have seen technology disrupt various industries and it has become imperative for businesses to evolve with this rapidly changing technology landscape, do you agree that legacy systems are ready for further disruption in the Banking Industry?
The technological revolution is now shaking up the banking industry like all other industries. Today, millennials are no longer interested to use the banking system that was actually designed for their granddads.
Millennials are embracing these technological developments for their day to day payments as this generation is more gadget dependent than their older generations. Banks have the opportunity to cater this new generation embracing fintech innovation for smarter banking solutions.
Banks, on the other hand, usually struggle to come out of their legacy system and bureaucratic trap, although banks have the power to attract the tech talent, they can hardly come out of their old shells. Just offering internet banking or a mobile app for the current account is not sufficient to face the emerging challenges, although it may be a case of “sustaining innovation” for the incumbents.
Banks should not consider their existing strategy as the permanent strategy, if their current strategy is successful, they should think they have a temporarily successful strategy and should look for innovations even while their core business is strong.
Incumbent banks should focus on the following technologies to respond to future challenges:
- Distributed ledger technology (DLT)
- Artificial intelligence (AI)
- e-KYC and identity
Yes, legacy systems are part of the problem. But I think that the way of thinking and doing things in banking is also legacy, which has been key to this driving force. Banks have operated for so long with the if it ain’t broke… mind-set and just lived in that comfort zone. And while a comfort zone is a beautiful place, nothing ever grows there.
Financial Technology, nowadays better known under the term ‘fintech‘ are on a rise globally, in your opinion will FinTech’s have an edge over banks in the near future or will partnering with FinTech’s benefit the banks?
A basic example of a fintech offering is the mobile banking services that most traditional banks offer. More commonly, fintech refers to non-traditional financial offerings such as PayPal, Zelle and Venmo in the U.S. and digital-only Starling Bank, Monzo and Revolut in the U.K.
Yet its not about banks vs fintech, but which bank will dominate digital economy using fintech.
Fintech have the agility, risk-taking, disruptive mindset
Banks have to customer scale, brand, experience & expertise ( risk – regulation – enterprise level IT) , comprehensive product protofolio.
So partnership is the perfect act between them.
Open Banking or Open APIs are gaining traction, how do you see open banking affect a bank and how will open banking benefit a customer?
Open banking is the practice of sharing financial information electronically, securely, and only under conditions that customers approve of. Application programming interfaces (APIs) allow third-parties to access financial information efficiently, which promotes the development of new apps and services. Ideally, open banking should result in a better experience for consumers.
Open banking efforts are a big deal for banks, regulators, and startups.
But what about consumers? You should eventually have more options for managing your money, borrowing, and making payments.
Pressure on banks-More helpful tools-Streamlined lending -Business loans -Automated accounting-Fight fraud and waste-New ways to pay (and accept payments)-Innovative services.
Open banking relies on sharing data, but you might prefer to keep your information private. Fortunately, open banking should not automatically reduce security or privacy. Third-parties, banks, and APIs would all use robust security measures to encrypt and protect confidential information.
What do you see as the most critical security concerns with Open API’s?
Cybersecurity threats are at the forefront of social, political, and corporate discussions every day, and for good reason. We are also becoming regularly cognizant of how our data is gathered, stored, and shared with other applications, companies, and individuals. Unfortunately, open APIs are one source of how our data is breached and shared with third-parties. API Academy says, “Not only does publishing an open API theoretically means that any developer can access exposed backend systems, it also risks bringing the existence of the exposure to the attention of hackers who might never have noticed a private API.” In the past, applications were quite simple and secure. However, with the emergence of the internet of things (IoT), open APIs can be found in everything from mobile devices, smart TVs, and gaming consoles. Today, hackers do not have to test applications for vulnerabilities. Because the code is essentially public, hackers can just integrate a virus or malware directly into the code of an open API.
The security risks of open APIs are not limited to hackers and malware. Open data and codes can lead to data sharing among applications. The amount of personal information attained by open APIs can undoubtedly be shared with third-parties.
When searching for a product to house and secure sensitive documents, it is imperative that companies and users are informed about the inherent risks of open APIs. APIs are a key integration for the growth and development of an organization. It is essential that all developers and users are aware of the security risks and the actions required to protect and defend their personal privacy, data, and documents.
On a global perspective, do you see a bright future for open banking security?
Security Risks of Open APIs
The market for API security products is potentially huge. To get an idea of the scale of API usage, consider these statistics: 69 per cent of organizations are exposing APIs to their customers and partners, according to an Imperva poll of 250 IT professionals, and each organization is on average managing a staggering 363 different APIs.
Not surprisingly, API security product sales are growing rapidly as organizations increasingly see the need to protect their API-related activities. In 2017 the market was worth $961 million, according to Gartner, and it is expected to exceed $1 billion by the end of 2018. From 2016 to 2021, Gartner expects the market to grow at a compound annual rate of almost 15 percent.
Many API security products are actually API management products that bring APIs under centralized control and allow security and other policies to be applied to them in a systematic and unified way.
The market for API security products is becoming increasingly mature, and many of the smaller participants have been acquired by larger companies: Apigee was acquired by Google, Apiary by Oracly, Akana by Rogue Wave, 3scale by Red Hat, and MuleSoft by Salesforce, for example.
Although API security is still sold as an on-premises solution, it is also increasingly available as part of a cloud service, from the likes of Amazon, Google, and Microsoft.
What do you see as the long-term impact of AI in the banking industry?
There is no doubt that AI is driving the banking and FS markets of tomorrow. This is according to executives who said that AI will be crucial to their ability to compete in the coming years. 59% said that this technology was highly important to drive competitiveness.
Yet, there are also challenges that must be addressed. For example, banking and FS executives admitted that managing the security risk of AI systems is of paramount importance. Other issues like the challenge of developing AI tools that were able to improve decision-making were also reported as potential buffers to the technology’s development.
Investing in the right AI technology can have a major impression on operational efficiency, but its success boils down to the customer impact above all else, and like any technological innovation, the best results will be realized only if they are improving the end user’s experience. So if AI can save time by pointing a consumer in the direction of the most appropriate financial product, then great. However, if it gets in the way of a seamless experience and frustrates end users, then there’s a problem.
How the banks want to use AI
- Chatbots and virtual personal assistants
- Profiling customers
- Streamlining processes
- Spotting patterns
Do you feel that the Blockchain environment is improving for banking and fintech players?
Blockchain now has many more advancements that are seeing it penetrate the payment scene and potentially make it a much more accepted payment technology. Sharing this information can help more startup founders and business decision-makers see why they should consider adding blockchain to their payments systems.
Blockchain will do to banks what the internet did to media. When it comes to banks and financial organizations of this day, Blockchain has the potential to solve a lot of problems. Blockchain technology possesses all the attractive characteristics needed by a reliable technology involving money matters. It is safe, secure, decentralized, transparent as well as relatively cheaper.
With emerging use cases with each passing day, the blockchain technology has the potential to disrupt the banking and finance sector of current times. A few ways in which blockchain can change the current face of the banking industry are as follows:
- Fraud Reduction
- Know Your Customer (KYC)
- Smart Assets
- Smart Contracts
What are the main areas of synergy or collaboration between Banks and FinTechs?
- Mobile Payments
- Open Apis
- P2P Lending
- Big Data
- Wealth Management
Do you think that the environment in the region is conducive for FinTechs and Is the region prepared for open banking?
Fintech Is The New Oil In The Middle East And North Africa. … In the Middle East and North Africa (MENA), the financial technology sector, or fintech, is coming of age with regulators and governments across the region thinking more deeply about the impact that fintech companies will have on the broader economy.
The major technology players, Google, Apple, Facebook and Amazon also known as GAFA are transforming the digital banking landscape. What are your thoughts on GAFA in banking?
During the financial crisis of 2008 A gap was created between what your banks were offering you and what you as a customer came to expect especially from a user experience and convenience perspective and that gap is what the FinTech industries tackling right now but that gap was so big that even non traditional banking players decided to jump in & capture this opportunity mainly technology firms for example : Facebook , Amazon , Alibaba
For banks to remain central in the lives of consumers, they must provide consistent and fulfilling customer experiences across the digital and physical environment. It’s not just about having access to customers credit or debit accounts, but also a greater/wider insight into their individual customers.
4 steps to challenge the GAFA force
- Client on-boarding
- Personalised services and partnering for suppliers and customers
- Leverage Consumers data
- Create an ecosystem
This approach will help counter the GAFA threat and create greater cross and upselling opportunities, along with building customer acquisition, retention and cost optimization, transforming the cost-to-income ratio from the current average of 63% to hopefully less than 50%*. It is critical for banks to think innovatively and act quickly, otherwise, they will become a victim of the GAFA dominance which has already infiltrated other industries.
What are your parting thoughts on the future of banking in the region?
We, banks face some challenges include :
- Legacy Systems
- Risk-averse culture
- Insufficient agility
Yet we have the power of customer scale – experience – robust infrastructure.
We need to adapt to the new era and manage the millennials expectations and customer behaviour
They are looking for:
- Real-time service
- Value at low cost
If banks managed this with the right collaboration with regulators – entrepreneurs – mnos – financial services providers, we will manage to have a great ecosystem to introduce a lot of services and service the financial inclusion in our society
Ahmed Mansour, Blockchain & Fintech Expert, Egypt will be speaking at #NABConfex New Age Banking Confex 2019.
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