Implications of AI, Blockchain, Cloud & Digitization in the Fintech Industry

Implications of AI, Blockchain, Cloud & Digitization in the Fintech Industry

Kishore Seshagiri, Chief Digital Officer, Broadridge India, 0

An IIM Calcutta alumnus, Kishore is a well-renowned industry professional with over two decades of experience in capital markets and wealth management areas. He has been associated with Broadridge for 24 years now and has been instrumental in framing efficient business strategies for the company’s Innovation journey. In a recent conversation with Bimlesh Prasad (Correspondent, CEO Insights), Kishore shared his insights on the current fintech ecosystem in India and how various cutting-edge technologies are impacting the sector lately. Below are a few extracts from the exclusive interview –

Tell us about the opportunities and challenges blockchain technology offers to the financial sector.
The integration of blockchain technology in the financial sector brings-in increased operational efficiency, reduces risk, enhanced security, and transparency. One of the major advantages of this technology is its streamlined and decentralized nature, which enables faster and more cost-effective transactions. Fewer intermediaries also reduce chances of errors and fraud, fostering a trustworthy environment for financial transactions. Focused on leveraging the potential of this technology, our Global Blockchain CoE has been collaborating with the broader capital market ecosystem and launched industry transforming solutions such as Distributed Ledger Repo (DLR) and Shareholder Disclosure Hub (SDH). The technology brings its own challenges with its complexity, our early adoption and deep expertise enable us to anticipate and capitalize on the opportunities.

Explain the impact of cloud technology on financial operations and addressing security concerns during adoption.
With the humongous arena of opportunities and benefits it offers an increasing number of organizations are transitioning their infrastructure to the cloud. From potential benefits such as accessibility to user-friendliness and rapid deployment, businesses are capitalizing on cloud technology to achieve improved efficiency, agility, scalability, and cost-effectiveness. In the context of security concerns during adoption, cloud service providers invest heavily in state-of-the-art security measures, often surpassing the capabilities of individual organizations. This includes robust data encryption, multi-factor authentication, and advanced threat detection systems. They also comply with all industry regulations and standards, helping organizations navigate complex legal frameworks and ensure that security protocols align with industry best practices.

Additionally, cloud platforms allow for a centralized and standardized approach to resiliency, security, ensuring consistent and up-to-date protection across all applications and data. This is particularly crucial in the financial sector, where data integrity and confidentiality are paramount. Lastly, cloud also facilitates real-time monitoring and auditing capabilities, providing transparency and visibility into data access and usage. This proactive approach enhances security posture by allowing rapid response to any suspicious activities. While Cloud providers offer highest levels of security, it is still important for firms to ensure that their internal security policies, compliance rules are in-place and regular Cloud Security Audits are performed.

How can financial organizations effectively manage regulatory concerns while adopting advanced technologies?
The interplay between innovation and regulation poses a perpetual challenge. As technology evolves, the need to integrate the same within an organization often outpaces the regulatory frameworks that are designed to act as rail guards. This raises the question of whether the value proposition that they are offering is aligned with ethical practices, or are they inadvertently engaging in regulatory arbitrage? Thus, organizations should conduct thorough risk assessments to identify potential regulatory challenges and ensure that whenever a new technology
is adapted, it is aligned with existing legal frameworks. Additionally, collaborating closely with regulatory bodies helps financial institutions stay informed about evolving guidelines, proactively adapting their systems to comply with the latest standards.

Robust cybersecurity measures must be implemented to safeguard sensitive data and maintain regulatory compliance. Also, continuous staff training and education programs further reinforce a culture of regulatory awareness. By fostering open communication with regulators and investing in cutting-edge compliance technologies, financial entities can strike a balance between innovation and adherence to regulatory requirements. However, organizations must don multiple hats and become advocates, educators, and contributors to the evolution of policies by building an ecosystem where advancements align with the greater good and sustainable progress. I will also strongly urge firms to look at Regulatory Technology solutions as Innovation opportunity.

By fostering open communication with regulators and investing in cutting-edge compliance technologies, financial entities can strike a balance between innovation and adherence to regulatory requirements.

How do you expect AI to reshape the financial sector in the near future?
Artificial intelligence is one of the most profound disruptive technologies and the realization of its potential is only getting started. Artificial Intelligence and its use cases have truly been a game changer in the fintech space. McKinsey in a fintech focused report highlighted that AI has the potential to generate $1 trillion annually for global banking. This technology holds the potential to disrupt business and operating models, enhance efficiency, risk management, and customer experience, from front to middle and back-office operations. Gen AI particularly is playing a pivotal role in the financial industry, enabling financial companies to analyze vast amount of data, provide tailored financial advice to customers, and help them make informed decisions. Additionally, Gen AI can also assist companies in analyzing patterns invisible to the human eye to forecast risk with unparalleled accuracy. Further, it can also generate financial models to streamline operations, allowing fintech professionals to focus on strategic thinking.

AI is also enhancing investment management and fine-tuning portfolio decisions through real-time monitoring and advanced pattern recognition. The integration of Natural Language Processing (NLP), Vision, and multi-modal models allows for the interpretation of unstructured data and images. This not only empowers intelligent customer assistants, but also significantly elevates personalized investment management advisory, optimized collateral management etc.

What initiatives promote skill development to utilize emerging tech in finance and fintech?
Skill development is critical to harnessing the full potential of emerging technologies. As an organization with deep understanding of the ecosystem, we approach skill development in a holistic manner, to empower wealth advisors, asset managers, and corporate governance professionals in harnessing AI, Blockchain, Cloud, and Digitization tools. A three-pronged approach – Simplify, Synthesize and Strategize – informs our strategy that is implemented through various platforms and tools.

Rigorous training and continuous learning are imperatives to building capacity for now and the future. Systematic documentation, training in compliance and security areas can boost learning platforms like webinars and seminars. Knowledge sharing through user communities and forums and creation of programs for workforce engagement can all add to building a comprehensive skill development program.

We are big believers in Experiential learning and we have adopted an innovative ‘sandbox labs’ concept where engineers and business SMEs can experiment with new concepts using AI, Blockchain and Digital tools.