The Digitisation of a nation and the birth of a cashless society

Much has been written over the years about the digital transformation of governmental and health services in the UK and US however very little disruptive change has been seen.  Whereas over the last 8 years India has made leaps and bounds with its governmental vision “To empower residents of India with a unique identity and a digital platform to authenticate anytime, anywhere” .  Did you realise that over 1.1 Billion Indian residents have now been issued with an Aadhaar number (ID Number) which contains the owners demographic information and is protected by their biometric information? (and not just a single fingerprint but Ten Fingerprints, Two Iris Scans, and Facial Photograph).

This Aadhaar number was also only the first phase of their India Stack project whose mission is to create APIs that allows governments, businesses, startups and developers to utilise an unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.  Since the Aadhaar introduction an aggressive delivery schedule has ensued and the following platforms also now exist.

  • In 2011 the Aadhaar Payments Bridge & Aadhar Enabled Payments System was launched which uses Aadhaar number as a central key for electronically channelising the Government benefits and subsidies.
  • In 2012 eKYC was launched to allow businesses to perform Know Your Customer verification process digitally using Biometric or Mobile OTP.
  • In 2015 eSign launched as an open API to facilitate an Aadhaar holder to digitally sign a document
  • In 2016 a Unified Payments Interface launched to revolutionise digital payments in India
  • In 2016 DigitalLocker was launched as a secure dedicated personal electronic space for storing the documents of resident Indian citizens. The storage space of 1GB is linked to the Unique Identification Authority of India (Aadhaar number) of the user, which can be utilised for storing personal documents like University certificates, Permanent account number (PAN) cards, voter id cards, the URIs of the e-documents issued by various Government departments.  Over 5 Million users already access this service.

In addition to India Stack project the government also banned (Nov 2016) the country’s largest currency bills to try to stem the flow of counterfeit money and to take aim at terrorist organisations that rely on unaccounted-for cash. It is also expected to help the government clean up a system that has relied on cash to pay bribes and to avoid taxes. This ban on large bills is very likely to hasten India’s transition away from cash as about 78 percent of all transactions in India are made by cash, compared with 20 percent to 25 percent in the United States, Britain and other countries (according to a report by Google India and the Boston Consulting Group).

The above now places India in a perfect position to embrace digisation as once you have subscribed to the above no longer does a Regulated entity, Bank, Payment or Wallet provider need you to provide your identity and Digilocker has been an accepted location of proof for even your driving license with police to negate your need to carry it.

Currently Smartphone penetration is only 28% in India and all of the current digital payment systems work on 2G to ensure that India Stack is embraced by the masses no matter what mobile handset they have.  However with the emergence of companies like PayTM (Pay Through Mobile)  Launched 2010 (2015 saw Investment from Alibaba and its Launch in Canada in 2017) you can see this quickly increasing to 100% especially as this is an enabler for all transactions to be made using biometrics through a mobile device and negate the need to carry cash.

It is predicted that Sweden could become the first cashless society by 2030 but could this crown be stolen by India? just think what advances could be possible when 100% of future generations are 100% digital?

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The FinTechs are coming but its different this time

If you ask anyone about Fintechs they will inevitably refer back to the Dot Com bubble (1995 – 2001) which fuelled the rapid growth of the Internet.

However, back then the investment was funding the building blocks of web technology with the most of the money going into Web Infrastructure, Security, Portals, Consulting, Marketing and Content. Unbelievably during this time there was no broadband and we were all having to deal with “Dialup” (In the UK Broadband was first introduced in 2000 and even by 2006 it only had 13 Million users compared to 2016 where 87.9% of adults have access i.e. 45.9 Million users), no real smartphones or tablets existed (The first iPhone arrived in 2007 and the iPad in 2010) so the main access to these technologies was via the desktop. The frenzy also saw massive investments in companies who were filing for IPOs without any revenue.

If we skip forward over 15 years we are now seeing an enhanced level of funding once again in FinTechs however this time its very different. In 2015 we saw the total level of Global deals reaching $14.8Bn and by Qtr. 3 2016 this had increased by 27% (this is in sharp contrast to only 5 years prior where only $2.59Bn was invested (2012)). In the UK $191m was invested in 2012 and by 2015 this had also increased to $1Bn (60% of investment in the UK are going to Challenger Banks, SME Financing, Money Transfer, FX, Digital Currencies and Blockchain).  Also companies filing for IPOs are now showing revenues in excess of $100m.

So why is it different this time? There are numerous reasons why a perfect storm is brewing and I will explain a few below.

  • FinTech Technology – During the Dot Com Bubble you needed to procure Servers, understand security and have funding to support and develop your offering. Now with the rise of Cloud Service like AWS, Azure, Google etc. anyone can build an application with a credit Card and pay by the hour.
  • Building Block Technology – Fintechs no longer need to create everything as you can plug and play the payment, billing, map software etc. (Think UBER)
  • Consumer Technology – During the Dot Com Bubble the barrier to entry was also on the consumer side as you needed internet connectivity (Dial up) and a Desktop. Now technology is widespread and its commonplace for people to carry multiple devices all with Internet Connectivity (Tablets, Smartphones, Wearables etc.)
  • Generational Changes – During the Dot Com Bubble 40 Million Gen Xers came of age. Now there are 85 Million Millennials, all of whom are digital natives.
  • Global Social Community – We are all now a global community over one world wide web
  • Regulation Changes – The regulators are now embracing emerging technologies and offering sandboxes and incubation to start-ups
  • Data is King – With the emergence of data Science and open data initiatives, Big Data and new modelling techniques are changing how we cost propositions and offer/sell insight.

In a recent report from McKinsey & Company entitled “Bracing for seven critical changes as fintech matures” they cite 30 emerging areas which are seeing Fintech growth.

So what should everyone do? Another article from Mckinsey & Company Cutting through the noise around financial technology suggests to some of the capabilities Banks should be making.

It’s all not doom and gloom though for the incumbents. Anyone can adopt FinTech methodologies and the Financial Services industry still needs regulation, oversight and to engender trust.  Everyone therefore needs to become fighting fit, embrace change and not forget a lot of these new technologies will come with a lower price point and enable greater automation with insight for the future.

Don’t just follow the Innovation, watch out for the aftershock

As technology continues to evolve and the realisation that those pesky unicorns are not so easy to find, most organisations are now starting to embark on a digital journey to embrace what the tech companies have been doing for years.  You can see this manifested in numerous industries where more announcements are being made at technology events like CES than the traditional venues.  One recent example is the automotive industry where in 2017 more Innovation was announced at CES (The Consumer Electronics Show) than their traditional venue of the Motor Show.  These disruptive vanilla applications will certainly ripple across the whole ecosystem so it is important to not just “look down” at the specific Innovation but also look laterally for the “aftershock”. If we look at a few examples it will become apparent how any Innovation can disrupt all industries.

Transport – This may be a way away however just think if there were autonomous cars driving around 24×7; why would you ever buy a car (it is also believed that children being born now may never learn to drive).  If you then think laterally at the aftershock there would be a knock-on into how you insure yourself, why would you need a garage in your house or even a drive, cities wouldn’t need car parks.  What effect would this also have on the logistics businesses if these vehicles could also deliver shopping or purchases?

Self Help – The wearable market is expected to be worth $34.6 Billion by 2020, so imagine what could happen if everyone became proactive to health rather than relying on the traditional reactive Doctors surgery?  Health insurance would change, hospitals and doctors would certainly change, a new product line of self testing and DNA would emerge plus the whole pharma industry would shift into preventative medicine.  Also 200 million consumer virtual reality head-mounted displays are predicted to be sold worldwide by 2020 so this will cause disruptions right cross industries from Health, to Training, Gaming etc.

UI – What will be the interface of the future? I have already mentioned above about VR however what about AR (Augmented Reality), Voice and Touch.  The Qwerty keyboard has been around since the 1870s so maybe a change is due.  What would this do to the world if interaction with a computer was no longer by a keyboard?

As you can see from the few examples above its not just the individual Innovations which will cause disruptions but also the aftershock, so look up, look around and suddenly the opportunities will be plenty.

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Fail Fast but have an exit plan just in case you don’t

In our data and regulatory driven world Innovation may be an essential element to disrupt the marketplace however how many failures should you expect before you find that unicorn and how do you account for these failures?

As more and more products migrate to the internet with SAAS and Cloud offerings becoming the fastest way to Innovate and “test and learn” one of the most important considerations in addition to does the proposition “work” is how do you exit (even if it is a success). As most Cloud offerings use proprietary software its not always in the interest of the supplier to make the breakup easy with the hope that you persist with the trial and continue your adoption however depending on your industry the extraction and preservation of the data or transactions history is probably the biggest consideration to a swift exit.

Therefore in addition to considering your success criteria in 2017 why not add another step and plan your exit from day 1. Most products allow you to extract a certain level of data however if your usage exceeds the basic; a retrospective archive is extremely problematic once you pass this threshold. Knowing how you will exit will not only help you if you “fail fast” but it will help drive your operational support procedures if the Innovation is a success as you will always have the sufficient level of data to exit in the future.

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Innovation over the last 10 years

For nearly 10 years I have been sharing my technology & Innovation observations through my blog.  To offer a retrospective over this period is not only interesting but can shape where the industry will go in the future and to support this I have compiled a list of the annual 10 technology trends produced by Gartner over this timeline. It is good to keep in your mind that the observations and trends are cutting edge rather than adoptive and most companies will lag a few cycles behind so the immediate future can be gleaned from the last few years and the most up to date trends will not reach consideration for a few years to come.

At the beginning “back in 2007” it was evident that the trend was Infrastructural and encouraged the move from traditional Data Centre hosting models to ones which involved Cloud computing, automation and design that was web enabled with collaboration and mobile in mind.    We then entered a  period which was more transactional (which is where most companies will be now) which exploited the previous advances in technology and saw the evolution of Business Intelligence to Advanced Analytics and visualisation, the use of Big Data and where all development was device agnostic and ready for the web.

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Even though Technology is moving at a tremendous pace I think the next 2 cycles will be extremely exciting.  I think initially we will have another infrastructural period where Cloud Technologies evolve into a hybrid state; we will understand more about how to exploit the data from connected devices and the internet of things including how to store it.  We will see advances in Artificial Intelligence and will start to hear about the first real time distributed ledger platforms being used.    Then comes the interesting stuff; the next period will show that we finally have the right technology in place to start exploiting all these new advances so Distributed Ledger applications will be common place, Augmented and Virtual Reality will come of age and start to become communication channels in their own right.  Machine Learning will also start to become intertwined in everything we do and appear everywhere from your home to your Car and even the workplace.

This last set of observations may seem a long way away however just look how far we have come in the last 10 years and remember Broadband is only just over 15 years old so in ten years anything could be possible.  We all just need to embrace the change and enjoy the ride.

Innovation is also about what you don’t do

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When Innovation is mentioned it always makes you think of disruptive or incremental change which then drives sales or increases consumption however one thing that is rarely accepted as Innovative is the removal of services or technology.  Most companies tend to keep their head in the sand with this and pay the extra costs to support an aging offering rather than to cannibalise their existing product lines for the good of everyone.  However sometimes having the power of your convictions for the greater good of the market not only increases customer perception but also allows for additional innovation. A glass half full is always better than one half empty.

There are numerous types of removal which are necessary ranging from the need to move the Industry forward, new standards set with counteract your products future and following a failed innovation.

The recent release of the Apple iPhone 7 showed this with the removal of the headphone socket where the media focussed on the loss rather than the benefits which were due to the increased space being available inside the body of the Mobile Phone.  The headphone jack has surprisingly been around since 1964 so maybe it was overdue for removal. However sometimes its better to move the market rather than sweat technology way beyond its useful life.  Just think of the auto industry, the engines and designs are constantly refreshed which are not that visible but how long was it before the cassette player was changed to the CD, the FM radio to DAB and manual controls or dials to touch screen and LED.

Some change can also just be cultural and cost nothing however even this can perceptionally move the dial.  In the UK to receive fixed line broadband you have to pay a line rental charge which is never mentioned in the cost of broadband.  This year Vodafone is advertising that it has abolished the line rental where in effect it has just increased the Broadband cost by the cost of the line rental, so even though it costs nothing,  more transparency is can also be seen as innovative.

In this new digital era Innovation should cover everything from Automation to Eradication  as by only doing both will you leverage the greatest economies of scale.

Cashless does not always need to be high tech

In the first world economy, we tend to automatically think high tech when we try to solve any problem and with regards to a cashless society (ignoring contactless cards)  we always start talking about Apple or Android pay via a smartphone as being the way forward.  Over the summer I visited a brand new theme park (Land of Legends Aqua) in Southern Turkey and was pleasantly surprised at its use of technology and the simplicity it offered. The theme park will eventually be vast and currently only the Aqua park is finished however it is totally cashless which is good for a waterpark and enables you to lock away all of your valuables when you arrive.  As you enter the park you are given a wristband (nothing special and the throwaway type you have at a festival) however it contains the technology which allows you to swipe in/out of the park, charge up with funds and pay for anything you need plus if you require a locker you just swipe the wristband on the reader of a flat screen monitor in the locker area, select you need a locker from the options on display and you are then allocated locker which will automatically open for your use.   The use of this throwaway technology reduces all the stress of damage and as it is attached to your wrist the issue of theft is removed.  Over the summer similar types of technology (albeit ones that actually debit your bank account) were also announced in other part of the world.

The RioCard was announced with its waterproof Celego Contactless wristband and its Celego Contactless Sticker both embedded with a contactless chip from Gemalto and certified by Visa and MasterCard enabling all the secure functionalities of traditional contactless EMV cards (Contactless transit cards were first adopted by RioCard in Rio de Janeiro in 2003 and they are now a part of daily life for millions of users) and in Greece a  PayBand (which is a first for the Mediterranean island nation) which uses the Optelio Contactless MicroTag, which is easily inserted in the wristband’s slot by consumers, and is linked to the user’s existing payment card.

Over the last few years there has been lots of talk around Smartphone payment applications and smart watches however will we now see a new era where the banks start offering alternatives to the standard debit card which will not only make peoples lives easier but also reduce fraud if our cards are around our wrists. Imagine if this could also be used in conjunction with Nymi Band technology which uses biometric authentication events as this would prevent others using it if it was lost or stolen.

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