Vinod Sharma: Financial innovation and the industry of tomorrow

African Business Review: Tell me a little about your role with Econet Wireless Zimbabwe.

[Vinod] – You can find everything on my blog, but here’s a brief word or two about where I am right now. I have extensive experience in IT networks, telecom services, and the financial technology space, now exploring artificial intelligence to add value to myself and add to my skills, as machine learning is the future of every business and technology of today. I sit in a very key position to oversee the entire changing landscape of the financial IT i.e. fintech services sector.

In our previous issue of African Business Review, you discussed the challenge that banking and financial organisations face in trying to keep costs low while ensuring the same high quality of services - is this still the case?

[Vinod] – Unfortunately it's the same case and I believe fintech will settle its score in the next couple of years. Keeping costs low is the prime idea, as this is a low margin business for low value transactions, if the cost at any time starts looking north, customers immediately start running south.

With the continued growth of mobile payments, how has this impacted the industry?

[Vinod] – The continued growth has made a positive impact to the industry and will only continue to do so. As mentioned before, fintech will be settling down in the next couple of years and will rest for good in order to look at what it has got and how to make best out the tools in its pocket. One of the biggest tools is the data it has collected and continues to collect. It’s a time for data science and to explore every bit to see how cost, revenue, sales, growth, usage etc. can be optimised.

In Africa, my belief is that this has gone up many folds. Zimbabwe is a unique case where growth is at its highest level. Artificial intelligence will guide and work as navigator for this industry.

What are the challenges that come with mobile payments?

[Vinod] – There are some challenges like cost of transaction, ease of performing the transaction, acceptance by merchants, should it be close or open loop? The question on customers mind and at heart is “How secure is my transaction?” and time it takes to perform the transaction etc. 

For service providers, the biggest challenge is how much capacity needs to be designed and bought and how best to secure it. Companies have started managing their data as they manage their money.

What is the financial industry doing to overcome these challenges?

[Vinod] – There has been a lot of work in the form of innovations and technological advancement but still, there is a long way to go. To see a fully successful and useful industry there needs to be the implementation of technology in large financial services firms. Despite $480bn spent globally in 2016 on financial services IT, the pace of financial innovation from incumbent’s still lags behind fintech which received a smaller $17bn investment in 2016.  

Big banks’ organisational structures block digital innovation due to their old mindset and refusal to acknowledge the truth that BaaS (Banking as a Service) is more efficient with a combination of BaaP (Banking as a Platform), which demands a complete change in value chain compared to traditional closed core platforms

Functionally, a typical banking organisation sees IT as a cost centre and every one working in IT and technology as a cost rather than an asset.

Is there a notable risk of adopting this technology?

[Vinod] – In every industry, risk is a friend which is present at all times. Its purpose is to help, guide, drive and navigate organisations out of problems. Interestingly, Africa is blessed with the best, most advanced technologies, and adoptability is extremely good in the area of mobile money, mobile payments and other mobile driven financial services.

Previously, you spoke of an industry that creates too many products for problems that don’t exist, is this still true?

[Vinod] – This is where my argument still holds. Out of everything going on around the world in the mobile payments space, I must say we ‘should avoid creating creative mess’; stop innovating for some time and start improving.

Let’s measure success and repeat with variation what works well (the process of innovation does not stop entirely). Developing something new on top of old systems/designs/philosophy is not always the answer. Sometimes its ok and good for everyone to un-develop something existing to uncover the hidden gems. Maybe we should un-develop to innovate?

How important is financial inclusion?

[Vinod] - Financial Inclusion or “Finclusion”, is very important. It is like a train that needs to be steered on a proper route & track, at the correct time and should know exactly where to stop, when to stop, for how long and when to take off again.

Finclusion makes sure that every segment, group, or individual is covered and have been given access to secured financial services. To build the banking culture and banking services, Finclusion needs to be included in the book of ‘Basic Human Rights” and should be enforced on all institutions. Finclusion as a “Basic Human Right” does not require change but requires enforcement and control. I recommend  my post on Finclusion, which details how Finclusion can balance the gender gap.  As well as my blog which poses the question, Financial inclusion: Need or opportunity?  

Is there a banks vs fintech industry, or have the lines begun to blur?

[Vinod] – This industry still has algorithmic thinking. But every industry has its business cycle and fintech is not excluded from this. Fintech will settle its score and there after you’ll see some mergers coming out between these two entities who don't want be together but can’t survive without each other.

There is talk of merging the boundaries between e-commerce, banks and financial organisations - do you agree?

[Vinod] – In Africa, we have witnessed backend mergers of retailer, e-commerce service providers, mobile money or mobile payments companies along with banking support from banks.

At the end of the day these industries are inter dependent on each other and have many common business interests.

An interesting point you made previously was the idea that fintechs are responsible for innovation; “finnovation”, is this still true?

[Vinod] – Looking at where banks sit and where banking (my argument is bank and banking are two separate items) service providers sit, banks rely big time on fintech for “finnovation” and they always will. Banks are nourishing “finnovation” and have slowly started learning the space of the digital world and the advantages it brings.

What examples have you seen over the last year?

[Vinod] – I’ve seen a lot coming in i.e. bots, machine learning to make scientific predictions for Fintech and AI started ruling over fintech to guide customers.

You can read more in my blog post that looks at the data science of payments as well as my attempt at demystifying machine learning in fintech.  

You predicted a future where customers will still require banking, but without the physical bank itself – is this still a possibility

[Vinod] – This is no longer a future, it’s happening now, particularly over the last seven months. I cannot remember visiting any bank for my financial needs, it has all been cashless through my phone.

What are banks doing in response to this?

[Vinod] – Banks, in their terms, are doing a lot but on a wider scale of the industry, these efforts are not enough, so competition to fintechs is almost nil.

Almost every player in the fintech space came out of a financial industry with an attitude towards growth; you grow, I grow. A bank’s mind set is; to do business with us you need to be matured and stable.

How has the pace of innovation impacted the financial industry?

[Vinod] – With the advancement of technology, our computers start simulating our actions, interactions, perception and will be equipped with cognition abilities very soon.  Intelligent machines are no longer science fiction with experts divided as to whether artificial intelligence should be feared or welcomed. AI is going to cover all industries like banking, fintech, payments and almost every single business domain.

Financial services websites provide tips as a site banner or blog posts for its customers, but the content that comes out is dependent on customer’s activities, including their spending/saving/investment habits and how they interact with the apps.

Descriptive analytics is all about using cutting edge tools meant for data science to understand what has happened in the past and how this will predict the future.

What are some of the current trends?

[Vinod] – The future is more scientific. Rather than simple analytics, AI will help fintech market as it’s all about descriptive analytics, predictive analytics and prescriptive analytics. These will guide fintech businesses on where, when, and how to invest. What’s important though, is that cost is king of controlling these trends.

What do you think the future African financial space will look like?

[Vinod] – The African financial space is still very new and bears so much potential. Advancement of technology, financial services, machine learning for business excellence and customer centric solutions will allow services providers to penetrate the segment. Other factors like financial inclusion, financial innovation and financial technology will allow service providers to serve customers with more and more solutions at a lower cost.