THE ADVANTAGES OF TECHNOLOGY IN BANKING

Many banks have begun to offer customers the option of online-internet banking, a practice that has
advantages for both all parties involved. The convenience of being able to access accounts at any
time as well as the ability to perform transactions without visiting a local branch, draw many people
to be involved. Some of these advantages of internet banking but are not limited to, include:

 Customer’s convenience

Direct banks are open for business anywhere there is an internet connection. They are also 24 hours
a day, 365 days a year open while if internet service is not available, customer services is normally
provided around the clock via telephone. Real-time account balances and information are available
at the touch of a few buttons thus, making banking faster, easier and more efficient. In addition,
updating and maintaining a direct account is easy since it takes only a few minutes to change the
mailing address, order additional checks and be informed for market interest rates.

 More efficient rates

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest
rates on savings and charge lower mortgage and loan rates. Some offer high-yield checking accounts,
highyield certificate of deposits (CDs), and even no-penalty CDs for early withdrawal. In addition,
some accounts can be opened with no minimum deposits and carry no minimum balance or service
fees.

 Services

Direct banks typically have more robust websites that offer a comprehensive set of features that
may not be found on the websites of traditional banks. These include functional budgeting and
forecasting tools, financial planning capabilities, investment analysis tools, loan calculators and
equity trading platforms. In addition, they offer free online bill payments, online tax forms and tax
preparation.

 Mobility

Internet banking also includes mobile capabilities. New applications are continually being created to
expand and improve this capability or smart-phones and other mobile devices.

 Transfers

Accounts can be automatically funded from a traditional bank account via electronic transfer. Most
direct banks offer unlimited transfers at no cost, including those destined for outside financial
institutions. They will also accept direct deposits and withdrawals that the customer authorizes such
as payroll deposits and automatic bill payment.

 Ease of use

Online accounts are easy to set up and require no more information than a traditional bank account.
Many offer the option of inputting the customer's data online or downloading the forms and mailing
them in. If the customer runs into a problem, he has the option of calling or e-mailing the bank
directly.

 Environment friendly

Internet banking is also environmentally friendly. Electronic transmissions require no paper, reduce
vehicle traffic and are virtually pollution-free. They also eliminate the need for buildings and office
equipment.
THE DISADVANTAGES OF TECHNOLOGY IN BANKING

Internet banking seems like an obvious choice to leave the hassles of traditional money
management behind in exchange for it. However, there are potential problems associated with
banking over the internet of which customers may not be aware. Consumers need to weigh the
advantages as well as the disadvantages of internet banking before signing up. Some of the
disadvantages of internet banking include:

 Bank relationship

A traditional bank provides the opportunity to develop a personal relationship with that bank.
Getting to know the people at your local branch can be an advantage when a customer needs a loan
or a special service that is not normally offered to the public. A bank manager usually has some
discretion in changing the terms of customer's account if the customer's personal circumstances
change. They can help customers solve problems such as reversing an undeserved fee. The banker
also will get to know the customer and his unique needs. If the customer has a business account, this
personal relationship may help if the customer needs capital to expand. It’s easier to get the bank’s
support if there is someone who understands customer's business and vouch for his operating plan.
 Transaction issues

Sometimes a face-to-face meeting is required to complete complex transactions and address

complicated problems. A traditional bank can host meetings and call in experts to solve a specific
issue. Moreover, international transactions may be more difficult (or impossible) with some direct
banks. If a customer deposits cash on a regular basis, a traditional bank with a drive-through window
may be more practical and efficient.

 Service issues

Some direct banks may not offer all the comprehensive financial services such as insurance and
brokerage accounts that traditional banks offer. Traditional banks sometimes offer special services to
loyal customers such as preferred rates ad investment advice at no extra charge. In addition, routine
services such as notarization and bank signature quarantee are not available online. These services
are required for many financial and legal transactions.

 Security

Direct banks are subject to the same laws and regulations as traditional banks and accounts are
protected by the FDIC. Sophisticated encryption software is designed to protect your account
information but no system is perfect. Accounts may be subject to phishing, hacker attacks, malware
and other unauthorised activity. Most banks now make scanned copies of cleared checks available
online which helps to avoid and identify check fraud. It enables verification that all checks are signed
by the customer and that dollar or euro amounts have not been changed. The timely discovery of
discrepancies can be reported and investigated immediately.

Here are five ways Insurers can stay ahead in the

market and successfully to fulfill high customer
expectations. 
1. Lower Insurance rates:
 – Fitness apps or wearable devices:
Staying fit has many perks. Some of the fitness apps like Wysa and wearable devices
help maintain weight, and food habits and boost energy and mood. And most
importantly they can help save a huge amount of expenses related to health insurance
costs. Numerous insurance providers have tapped into wearable devices to keep
motivating their customers to stay fit and healthy and offer them discounts and
benefits based on fitness levels.
– Self Driving car:
Self Driving cars can help in reducing the chances of accidents and lower life
insurance rates. Since road deaths are a significant percentage of deaths in the entire
world, any slight downward change will ultimately lead to lower deaths and hence life
insurance claims.
2. Fraud Prevention:
Insurance fraud costs companies billions of dollars per year across the globe.
Insurance companies should establish a technology framework, tap into advanced
automation and analytics, and take steps to prevent it.
– Digital Signature:
Digital signature technology is without a doubt lowering fake insurance account
activation and hence a fraud. For example, a digital signature can prevent fraud-
insurance purchased after the accident can be brought down with digital signatures
verifying the actual date.
– Data analytics:
The technology involves data mining tools and quantitive analysis. Data analytics can
be applied to detect fraud. Predictive analytics is useful to improve the fraud detection
process, helping prevent claims payouts. Analytics on claims and fraud transactions
helps enhance risk management.
3. Lower underwriting cost:
–IoT
According to IoT Analytics, the global number of connected IoT devices is likely to
grow at 9%, with 12.3 billion active endpoints. By 2025, there will likely be more
than 27 billion IoT connections, which will have a significant impact on the
availability of real-time information that insurers can use for better
pricing/underwriting. Drones are satellites on steroids at least as far as underwriting is
concerned. Satellites have dramatically changed how home insurance policies are
written due to fire. Everything can be captured via drone footage even the houses that
get covered behind the trees. Captured data can be used for underwriting purposes.
4. Billing efficiency:
Billing systems are not only integrated but now can accept varied forms of payments
allowing ultimate flexibility to the customer and thereby making the billing systems
efficient. The automated systems inform and remind customers of approaching due
dates for premiums thereby lowering unintentional defaults.
Digital wallet has become one of the most widely used platforms for payment
systems. Insurance companies are leveraging payment gateways like Google Play to
sell insurance to users. Last year, SBI General Health Insurance launched Arogya
Sanjeevani on Google Pay Spot to offer standard coverage at affordable premiums and
improve the penetration of health insurance in the country.
5. Specialized insurance:
Each type of insurance is different from the other and the factors that are suited to one
are not suited to the other. This requires the insurance agents to have specialized
knowledge and the internet helps. however, Machine learning is vitally important
here. It has the capability to learn and analyze billions of patterns and identify suitable
underwriting clauses as well as identify specific customized plans for the customers
based on the data provided. This can change the customer perception of the insurance
company and provide an engaged customer who is likely to stay longer. 
Dinghy, is a pay-by-the-second insurance provider that customizes coverage for
freelancers and businesses where customers may switch their policies on and off as
needed without any upfront premiums, interest, credit checks, or fees. 
6.  Smart and Faster Claim Processing and Settlement: 
–AI-Powered Chatbots:
Claim settlement has been one of the pressing issues in insurance. With intense
competition looming in the market, delay in the claim settlement gives a bad
experience to the customer who prefers to switch to another brand. Insurance
providers worldwide have been investing in AI-powered insurance chatbots to
enhance customer experience. Metromile can validate 70% to 80% of claims instantly
using AVA, an app based-claims assistant.

The Pros and Cons of Digitization In insurance sector

Every strategic change comes with its own upsides and downsides. Technology is a
necessary change if insurers want to remain relevant in the current digital era.
However, before diving in head-first, here are some pros and cons to be aware of:
PROs
Digital infrastructure will change your customer strategy forever, for the better
Insurers sit on a mound of useful data. Insurers can leverage digitization to quickly access information,
perform analysis with agility, and implement useful strategies. For instance, predictive data analysis can
tell you how many claims are likely to be filed under specific circumstances. Technology can help
insurance aggregators formulate effective acquisition plans, improve underwriting, speed up policy
purchase and renewal, as well as improve the claims process.

Technology can be a massive cost saver

While digital transformation involves a substantial financial and time commitment, in the long run, it will
boost your bottom line. A McKinsey report shows that automation can reduce claims cost by over 30%.
Technology can also enable the personalization of insurance products, thereby allowing insurers to price
and underwrite policies more accurately for individual customers. This will open up a world of longer-term
growth opportunities while cutting costs.

Digitization will earn you customer loyalty

Digitization enables more meaningful customer engagement through multiple channels, provides
personalized experiences, and above all, enables online claims processing within minutes. In insurance, it
can cost five times more to acquire a new customer versus converting an existing one. Satisfied customers
are 80% more likely to renew their policies than unsatisfied ones, for obvious reasons. Digital policy
application and renewal can be quick, hassle-free and available 24/7, making the process seamless for
insurance buyers. Support services can also be answered more quickly and efficiently online.

CONs
The transformation is time-consuming
For an industry rooted in traditional practices, the switch to technology cannot happen overnight. Creating
a digital infrastructure involves complex back-end processes, familiarizing employees with these changes,
as well as educating customers on how to deal with new interfaces. It is also essential to find technologies
that work for your company. All of this takes time.
Digitization will require increased security
Data and payment security are major concerns when it comes to digitizing insurance. Identity thefts and
hacking can increase with greater digital interventions. An insurance company that is adopting the
technology will have to ensure that background checks are thorough, claims are genuine, and that their
online infrastructure has the best protection against needless attacks.

Implementation may be challenging

Transitioning from an existing physical system, especially in the insurance industry that handles heavy and
sensitive paperwork, to a digital platform can be challenging. Apart from ensuring accurate data and client
transfers, an insurance company going digital will also have to train existing staff on navigating a new
interface as well as guide customers on how to access services online. Digitization is also a dynamic
landscape where new technology crops up often, making it a continuous evolution as opposed to a one-
time transition.

The Pros and Cons of Big

Tech’s Move Into Finance
Pro: Convenience

Uber is a good example of how tech companies plan to make

consumers’ lives easier by adding financial services to their
platforms. The famous app-based ride-hailing service has expanded
into food delivery and recommendations, vehicle tracking, and
alternative transportation. With the addition of banking, users
would enjoy a more customized experience and access numerous
lifestyle services from one “super-app.” 

Pro: Partnerships

To offer the best of both worlds, Big Tech companies are partnering
with financial giants. As mentioned above, Google will offer its bank
accounts in collaboration with Citibank. A California-based credit
union will also be involved in this offering. Apple’s credit card was
developed in partnership with Goldman Sachs. And Amazon is
reportedly exploring the possibility of partnering with J.P. Morgan
if it decides to offer checking accounts in the future.

Pro: Financial Inclusion

Adults without bank accounts are known as “unbanked” individuals.
Reasons for being unbanked include a lack of convenient banking
locations nearby and wanting to avoid banking fees. Unbanked
persons are at a disadvantage when it comes to the convenience a
bank account can provide. For example, they may only be able to
pay utility bills with cash. 

Con: Lack of Regulation

CNBC quotes fintech consultancy research head Sarah Kocianski as

stating, “The big tech firms will continue to add services that are
peripheral to banking…without going full-stack banking. The
headache of getting, and maintaining, a banking license would likely
be considered too big a risk for these companies.”

Still, as technology companies skirt the edges of behaving like

banks, regulators want to ensure they’re subject to the same rules as
banks. In China, tech companies are required to link some internet
bank accounts to traditional accounts and keep 100% of their float
in reserve at the central bank. The EU has led a debate about
competition policy including calls for antitrust enforcement. 

Con: Potential Effect on the Economy

Another concern about Big Tech in finance is the effect this trend
might have on the economy. An article published by The
Guardian states, “As the big banks, big tech uses its lobbying muscle
to try to avoid regulation. And like the banks, it tries to sell us on
the idea that it deserves to play by different rules.” 

The Financial Stability Board, an international regulatory group,

has warned that tech companies’ financial activities present risks,
including reducing the resilience of traditional financial institutions
due to competition, the potential for failure of financial partners,
and the consolidation of financial services in some locations.

 
Con: Use of Personal Data

Finally, one of the biggest concerns about Big Tech in finance is the
potential for misuse of personal data. Because tech companies make
their money from advertising and targeted advertising is based on
personal information, these firms want to delve as deeply as
possible into users’ personal lives. What better way to do so than to
learn what consumers buy, where, and when they buy it, and how
much they spend?