MESSAGES ALUMNI ARTICLES Emergence of Conversational

AI and impact on Transforming

Directors Message 1 My Experience post MBA 16
the Banking Sector 38
Chairmans Message 2 Cryptocurrency: Next
Fintech- Block Chain Revolution
Big Thing 18
COVER STORY in Remittance 40
STUDENT ARTICLES
Paytm Leading the Fintech Fintech: Revolution or Evolution 43
Revolution in India 3 Robo Advisory and HNIs 20
INTERNSHIP EXPERIENCES
FACULTY ARTICLES Future of Cryptocurrency
Internship at ICICI 47
& Digital Disruption 23
AI and Disruption 6
Internship at SEBI 48
Algorithmic Trading in
Trends and Prospects in
India 27 CROSSWORD 49
Digital Retail Payments 9
Artificial Intelligence: FINATIX EVENTS 51
INDUSTRY ARTICLES
Transforming the Financial
Future of Artificial Service Sector 31
Intelligence 11
What next in Block chain? 34
What Next in Block chain 13
 DIRECTORS
MESSaGE

DR. BHARAT
BHASKAR
Director
IIM Raipur

The third edition of Atharva 2017-18, Finance Magazine of IIM Raipur, brought to you by students
members of Finatix, the Finance club, is a great effort. Atharva, the magazine was stared 2 years back
with the objective to allow professionals from across the financial domain to interact and exchange their
knowledge and expertise in various sub domains of finance. As we are undergoing digital transfor-
mation of the financial sector, our Banking Industry is in midst of digital revolution. Today, customers
are interacting and carrying out transactions through various digital platforms and mobile Apps. The
technology enabled interaction through Internet Banking, Digital Wallets, Mobile Apps and Prepaid
Cards is beneficial to both. The customers are already experiencing anywhere banking and ease of pay-
ment, while bank are deriving power of centralized customer information, reduction in transaction cost
and better MIS for planning.

The current edition of Atharva has aptly focused on the issues that are transforming the finance sector.

I applaud the enthusiasm and hard work put in by Finatix team towards the enhancement of financial
literacy of the people of this nation. It shows their commitment towards giving back to the society which
is one of the objective of IIM Raipur. I hope the hard work of club members in releasing this magazine
pays off and they continue to work towards it with the same enthusiasm.

My Sincere Appreciation and Best Wishes!

1
 CHAIRMANS
MESSaGE

DR. VINAY GOYAL

Assistant Professor
Finance & Accounting

It is indeed great to see the enthusiasm and hard work the students have been putting in, working for
Finatix. Their effort is really appreciable as in a very short period of time Finatix has conducted several
events and is going strong with more creative and innovative ideas.
With the advent of the digital era, technology is becoming the transformational agent in Financial Services
around the world. Hence embracing and adapting to disruptions like Block chain and Fintech is the need
of the hour and financial services firms need to adapt themselves to be future ready. Given the current
scenario, Digital disruptions in Financial sector is a relevant topic for the magazine.
I believe that this years edition will serve the ideology with which it was started, to quench the finance
enthusiasts thirst and provide a platform to interact and share with each other their views and have a dis-
cussion over them.
I believe that you will enjoy reading this years magazine too, as much as you have enjoyed the previous
editions of the same.

Best Wishes!

2
 STORY

PAYTM- leading the FINTECH

revolution in INDIA

India has joined other countries in the digital payment revolution a lot faster than the past where we often
lagged behind in adopting technology, especially in the financial sector. This is set to have a transforma-
tive impact on our country, especially as digital payments spread into rural areas. By 2020, we shall be
making digital payments primarily for purchases in the organized sector, which is set to account for 34%
of all payments. Next most popular options are likely to be bills, recharges, and utility payments (20%),
modern trade (12%), and, surprisingly, payment of rent and other professional services (11%).

If there is one company that has shaken up Indian e-commerce in recent times it is Paytm. The Noida-
based company, which took a mobile-first and wallet-first approach to e-commerce, now boast a total of
170 million unique users, 80 million monthly active users. Paytm, which started in 2014 as a wallet service,
is currently valued at a whopping $6 billion.

Step ahead of traditional banks

For years, the Indian finance sector has been under the control of government bodies and the running of
money market funds has been limited to state-owned and private banks. However, having received a
banking license, Paytm is now looking to receive a license for setting up a money market fund. Providing
competition to banks, this fund will help consumers store and earn interest on cash. PayTM is also offer-
ing services like gold trading, insurance premium payment, online and mobile banking.
In May 2017, the companys blog stated that customers will be benefiting from services such as insurance,
loans, and mutual funds, that are offered by its partner banks. While the bank accepts customer deposits,
it doesnt have financial products of its own, and hence has partner banks. Even though the interest rate
hasnt been revealed, it has been said to provide better returns than the traditional banks. Moreover, the
companys founder, Vijay Shekhar Sharma will develop services like wealth management and loans to
businesses, by investing $1.6 billion for the next five years. Hence, while striving for financial inclusion,
PayTM is preparing to offer the aforementioned range of services to build a larger audience.

3
 STORY
Indian entrepreneur and founder of mobile payments company, Paytm
Paytm Disrupting the Indian Financial Sector
The firm is seeking out a license to set up a money
market fund, and it's planning to go live on Indias
Unified Payment Interface (UPI). Also,
Paytm recently became the second nonbank to lev-
erage India's payment bank initiative, which works
to give more consumers access to mainstream fi-
nancial services. As part of the initiative, Paytm
will be able to accept deposits, issue debit cards,
and facilitate online transactions, but it won't be
able to lend money to consumers.
These moves are aimed at helping Paytm reach its
goal of 200 million accounts within the next year,
and 500 million by 2020.
Disrupting the financial services industry could
prove to be quite fruitful for Paytm. The mobile
wallet company hopes to obtain its money market
fund license so its users can hold cash while earn-
ing interest. This follows the lead of Chinese finan-
cial service giant Ant Financial an investor in
Paytm which introduced its own money market
fund five years ago and has seen tremendous suc-
cess. Ant's Yu'E Bao is now the world's largest
money market fund, with $165 billion in assets.
This is likely only the beginning of Paytm's en-
croachment on traditional financial services. Paytm
was able to successfully leverage the Indian gov-
ernment's removal of several banknotes in Novem-
ber these banknotes represented 86% of cash in
circulation to boost adoption of its digital offer-
ings. The firm added 20 million users in the first
month after demonetization, and more than 50 mil-
lion by February to surpass 200 million users. With
the backing of this massive user base, Paytm is able
to introduce new features that can immediately
trump that of traditional players
Present rivals
Banks like HDFC and SBI have come up with their
own peer-to-peer platforms like PayZapp and SBI
Buddy to catch up with the growing trend of digi-
tal payments and rival PayTM. Recently, Hike
Messenger also came up with Hike Wallet that sup-
ports UPI, through which consumers can send and
receive money from non-Hike users as well. As a
part of its Digital India programme, the govern-
ment launched the Bharat Interface for Money
4
 STORY
(BHIM) app in December 2016, which contributes to 40% of UPI transactions. BHIM aims to reduce the
use of plastic cards and is deemed more reliable.

Road Ahead
There are various obstacles that PayTM might face along the way. The digital payments sector comes with
the challenge of cyber security. The preference of several Indian for paper currency owing to its un-
traceability is another impediment for PayTM and other mobile wallet providers. Furthermore, merchants
might not benefit much from electronic payment, as it affects their margin more than a payment in cash
would. The industry is under pressure to meet the expectations of different segments of the socie-
ty. However, despite these challenges, a report by the Boston Consulting Group states that by 2020, half of
the Indian internet users will make digital payments. It also predicts that the size of the digital payment
industry will be $500 billion. If things progress suitably and as planned, there is no telling what this devel-

opment may hold for the digital payment industry in the coming years.
Above data shows the impact of Digital Financial Services on a country's GDP. while Paytm is just a play-
er in the new emerging digital services, read on the magazine to find out the other disruptive technologies
that have the potential of changing Financial markets completely.

FIN-FACT
Blockchain is a distributed database stored on multiple computers as a massive number of identical
copies. These copies are constantly being synchronized due to which any new entries to the database
are instantly distributed throughout the entire network. New entries are being saved by informational
blocks from a unified continued chain, together making the blockchain.

Not a single entry getting into a blockchain can later be removed or altered by an abusive minority of
users since it would take changing all nodes in the network which is practically impossible. This is why
the data once written into the blockchain is practically not falsifiable and irremovable by intention.

5
 ARTICLES

AI and
DISRUPTION
The development of technology may cause more than 30 of banking jobs in the next
five years. Robotics and AI may reduce the need for staff in back office functions, au-
tomating the operations, and other functions of the banks. Similarly, Jamie Dimon,
CEO of JP Morgan Chase & Co. stated the impact of technology and its impact of type
of job creation. Several Chairman, Directors & CEOs of top companies of the world
have stated the disruption which the technology is creating in banking and finance
sector as depicted in the below chart. Accenture research on the impact of AI in 12 de-
veloped economies revealed that AI could double annual economic growth rates in
2035 by new relationship of man and machine and changing the nature of work. AI is VINAY GOYAL
collection of multiple technologies that enable machines to sense, comprehend and act Assistant Professor
Finance & Accounting
- and learn either on their own or to augment human activities. AI has become a new
factor of production and has the potential to introduce new sources of growth,
changing home work is done and reinforcing the role of people to drive growth in business.

Trading in market has become predominantly dependent on the use of AI. NelloCristanini, a Professor
stated, trading is one of the top of 10 places where AI can make a difference. The advantage of AI
which is commonly discussed amongst the corporates and academicians is that AI can help banks finance
teams reimaging and restructure operating models and processes. It provides banks, capital market firms
and insurers with an enormously powerful set of tools to transform and streamline some of their most
fundamental financial processes.

6
 ARTICLES

Financial institutions are aware of the potential of AI. They have observed massive disruption in other
industries, as digital start-ups and Internet giants use AI to streamline operations and to entice customers
with more personal, relevant offerings and experiences developed upon new, technologically-enabled
platforms. As a result, banks are investing heavily in new technologies and in recruiting and developing
the talent needed to implement and work effectively with AI solutions. Artificial intelligence can help
banks dramatically improve operational efficiency and gain a much clearer understanding of where they
are going, but it is still up to humans to make the big strategic decisions and set the course for AI and re-
lated technologies to help deliver profitable growth.

Machine learning has already helped a lot to solve complex problems in the domain of natural language
processing, image and speech recognition, etc. Recently, deep learning or neural networks have emerged
as one of the most popular and powerful methods for learning tasks. The financial sector is also not left
untouched by the current wave of machine learning and artificial intelligence.

The present financial market is already comprised of humans as well as machines. There are machines out
there doing trades of billions of dollars every day in a response time measured in microseconds popularly
known as high-frequency trading. According to stats, nearly 73% of the everyday trading is executed by
machines. Every major financial firm is investing in algorithmic trading because the level and volume of
trade carried out by these machines is out of human bounds to process and execute. Based on a very com-
plex model, these machines take into account the past historical financial data available as well as other
information available on the internet such as news. These systems make real-time trade decisions that
maximize their returns.

Flooded as the market is with such artificial trading systems, it is becoming more and more sophisticated
day by day. These systems compete in real-time for trading, and as part of these competitions, these sys-
tems often indulge in flooding market with false data to slow down competitors and get an edge over
them. Also, there might be times when algorithm may behave abnormally. One of the famous examples is
the Flash Crash of 2010, where the market fell down abruptly and recovered in a short span of 36 minutes.

Machine Learning in Finance Current Applications

Below are examples of machine learning being used actively today. Some of these applications leverage
multiple AI approaches not exclusively machine learning.

Portfolio Management- The term robo-advisor was essentially unheard-of just five years ago, but it
is now commonplace in the financial landscape. The term is misleading and doesnt involve robots at
all. Rather, robo-advisors (companies such as Betterment, Wealthfront, and others) are algorithms built to
calibrate a financial portfolio to the goals and risk tolerance of the user.

Algorithmic Trading- With origins going back to the 1970s, algorithmic trading (sometimes called
Automated Trading Systems, which is arguably a more accurate description) involves the use of
complex AI systems to make extremely fast trading decisions. Algorithmic systems often making thou-
sands or millions of trades in a day, hence the term high-frequency trading (HFT), which is a subset
of algorithmic trading.

Fraud Detection- Combine more accessible computing power, internet becoming more commonly
used, and an increasing amount of valuable company data being stored online, and you have a perfect
storm for data security risk. While previous financial fraud detection systems depended heavily on
complex and robust sets of rules, modern fraud detection goes beyond following a checklist of risk

7
 ARTICLES

actors it actively learns and calibrates to new potential (or real) security threats. This is the place of ma-
chine learning in finance for fraud but the same principles hold true for other data security problems.
Using machine learning, systems can detect unique activities or behaviors (anomalies) and flag them for
security teams.

Loan / Insurance Underwriting- Underwriting could be described as a perfect job for machine learn-
ing in finance, and indeed there is a great deal of worry in the industry that machines will replace a
large swath of the underwriting positions that exist today. Especially at large companies (big banks
and publicly traded insurance firms), machine learning algorithms can be trained on millions of exam-
ples of consumer data The underlying trends that can be assessed with algorithms, and continuously
analyzed to detect trends that might influence lending and insuring into the future (are more and more
young people in a certain state getting in car accidents? These results have a tremendous tangible yield
for companies but at present are primarily reserved for larger companies with the resources to hire
data scientists and the massive volumes of past and present data to train their algorithms.

Customer Service- Chat bots and conversational interfaces are a rapidly expanding area of venture
investment and customer service budget Companies like Kasisto are already building finance-specific
chat bots to help customers ask questions via chat such as How much did I spend on groceries last
month? These assistants have had to be built with robust natural language processing engines as well
as reams of finance-specific customer interactions. Banks and financial institutions that allow for such
swift querying and interaction might pick up customers from stodgy banks that require people to log
onto a traditional online banking portal and do the digging themselves. This kind of chat experience is
not the norm today in banking or finance, but may be a viable option for millions in the coming five
years. This application goes beyond machine learning in finance, and is likely to manifest itself as spe-
cialized chat bots in a variety of fields and industries.

Security 2.0- Usernames, passwords, and security questions may no longer be the norm for user secu-
rity in five years. User security in banking and finance is a particularly high stakes game. In addition to
anomaly-detection applications like those currently being developed and used in fraud, future security
measures might require facial recognition, voice recognition, or other biometric data.

Sentiment / News Analysis- Hedge funds hold their cards tight to their chest, and we can expect to
hear very little by way of how sentiment analysis is being used specifically. However, it is supposed
that much of the future applications of machine learning will be in understanding social media, news
trends, and other data sources not just stock prices and trades. The stock market moves in response
to myriad human-related factors that have nothing to do with ticker symbols, and the hope is that ma-
chine learning will be able to replicate and enhance human intuition of financial activity by discover-
ing new trends and telling signals.

Sales / Recommendations of Financial Products- Applications of automated financial product sales

exist today, some of which may not involve machine learning (but rather, other rule-based systems). A
robo-advisor might suggest portfolio changes, and there are plenty of insurance recommendation sites
this might use some degree of AI to suggest a particular car or home insurance plan. In the future, in-
creasingly personalized and calibrated apps and personal assistants may be perceived (not just by mil-
lennials) as more trustworthy, objective, and reliable than in-person advisors.

8
 ARTICLES

Trends and prospects in DIGITAL

RETAIL PAYMENTS
Retail payments cover myriad of options ranging from traditional payments such as
cash, cheques, to modern payment options such as cards, internet banking and mobile
banking. Among various banking functions, it is observed that payment business is
witnessing increased innovation. Payment business is advantageous to both banks
and customers. While banks benefit from reduction in operating cost, customers gain
from enhanced convenience. Most of the countries have followed the bank led model
in payment business with the exception of countries like Kenya which has deployed
telecom led model. The success of M-Pesa has emphasized the role of telecom compa-
DR. DHANANJAY nies in banking. Central banks of other countries adopted cautious approaching allow-
BAPAT ing telecom companies in payment business because of perceived relaxation in Know
Assistant Professor
Marketing Your Customer guidelines. However, Kenyan experience has put pressure on central
Management banks to allow a level playing role to telecom companies. Such experiments have
proved that some countries have potential to leapfrog to newer technologies, resulting in higher coverage
of citizens to formal financial system.
Although the presence of non-banks was not new to banking arena, the entry of non-banks through pay-
ment banks is a recent development in India. Non- banks existed in the form of direct sales agents, loan
monitoring agencies and recovery agents. There was growing interest in payment business when many
entities responded to application for payment bank license. Payment banks are expected to leverage digi-
tal technology with an objective to innovate new processes, acquire and retain customers, improve cus-
tomer experience, expedite decision making and use the capabilities to cut across various functions. There
is a realization that revenue and profitability will be attracted to financial entities which embrace digital
technology. In present times situation is conducive with the developments such as formation of National
Payment Corporation of India (NPCI), and Unique Identification Authority of India (UIDAI), demoneti-
zation, implementation of GST, and continued support from regulator and government.
The major objective of granting license for payment bank is to foster financial inclusion. Although pay-
ment products were offered since a long time, the concern was that both the payment products and basic
financial products were beyond the reach of the majority of population which paved the efforts for finan-
cial inclusion initiatives. Payment banks aim to reach through small savings account and usage of pay-
ment and remittance services. The objective is based on emerging need for providing universal access to
banking that is efficient, secured, and customer centric. The payment banks are envisaged to play a
dominant role in financial inclusion and fulfilling the objective is an expectation. Financial inclusion
needs an active collaboration with various stakeholders who contribute effectively in improving the
standard of living.
Recently, the financial inclusion initiative was Pradhan Mantri Jan Dhan Yojana (PMJDY) which resulted
in mobilizing deposits of Rs. 66601 crores through an opening of 302 million new accounts by September
2017. PMJDY involved the participation of public sector banks, private sector banks, and regional rural
banks. The PMJDY differs from other facility as it offers Rupay Debit card with inbuilt accidental insur-
ance along with the provision of social security benefits. Although the amount may appear minuscule
when compared with its contribution to total savings amount, the future seems to be promising as majori-

9
 ARTICLES
boosting the account activity, resulting in close bank-customer relation. Concerted efforts are required to
increase saving deposit amount by offering the value-based solution for universal financial inclusion. The
orientation needs to change from opening accounts to increase in the balance of savings account and pro-
vision of universal banking facilities. Recognizing the importance of payment and credit facilities, the
scheme intends to ensure that provision of payment services can improve the proportion of active ac-
counts. Existing banks can respond through a focused payment strategy such as product differentiation,
new product development, fees, distribution, and cross selling. Since payment banks are allowed to collect
the deposits to the extent of Rs. 100000, there is a likelihood of the reduction in low cost deposits of exist-
ing banks which are in the form of current account and savings account (CASA) deposits.
Payment banks entered at a time when Nationalized banks are facing significant erosion in low cost de-
posits (CASA )from 38 percent in the year 2006 to 30 percent in the year 2015. Presently, payment banks
are allowed to retain customer deposit to the value of Rs. 1,00,000 . In a very short time, with the unique
customer proposition, newly entered payment banks could attract customers. For example, Paytm, a pay-
ment bank player, has been able to attract 200 million customers in a short time. Assuming that 200 mil-
lion customers keep an average deposit balance of Rs. 2000 which is a conservative figure, it results in sav-
ing bank deposit of Rs. 400 billion. Paytm started as a mobile recharge and utility bill payment company
and offers a full marketplace to its customers who can transact on a mobile phone. It is predicted that In-
dia has an estimated 500 million mobile internet users but many are still reluctant to transact online. To
encourage cashless payments, the government is introducing its digital payments tools with options such
as BHIM app, Aadhaar Pay and BharatQR. There are varying business models that will be adopted by
payment banks. The question is how the payment banks generate revenue. Payment banks, since its in-
ception, operate in the form of wallet wherein no interest is offered to the customers for the account bal-
ance in a wallet as against most of the banks which offer the interest of 4 percent. Payment banks are re-
quired to keep the funds in government securities as required by Reserve Bank of India, the lower cost of
funds helps the payment bank to generate a margin.
As payment banks are likely to leverage digital capabilities, existing banks need to upgrade the existing
time-consuming manual and paper-based process, improve capabilities in payment business, and enhance
digital capabilities across all functions, including human resource, operations, marketing, credit, forex and
other areas. In case the existing banks loose the perspective of digital transformation, situation will be
similar to past when some banks left behind the race of technology adoption in banking. It is observed
that some of the banks which left behind are grappling with the problems of non-performing assets. There
is move from the existing banks to move from banking focus to a payment bank focus. HDFC Bank, a new
generation bank, claims that it is already a payment bank with a transformation to digital banking and
focus towards payment. HDFC bank is in the process of aggregating merchants and has offered a PayZ-
app applications which offers online marketplace at internet and mobile. In addition, more than 180 prod-
ucts are offered through internet banking and 80 products are offered through mobile banking. Leverag-
ing Immediate Payment service (IMPS) from NPCI, HDFC Bank has offered mobile applications enabling
the person to person payments using contacts on the phonebook.
Existing banks need to transform payment business and there is a realization that if the they do not trans-
form, they will lose to payment banks. In case existing banks embrace digitization, it can lead to competi-
tive advantage. Existing banks need to provide customer value proposition better than what payment
banks. There are certain advantages that payment banks do not offer and existing banks can offer distinct
value proposition on various products such as opening fixed deposits, recurring deposits, personal loans
using algorithms, loan against fixed deposits, loan against shares, managing tax deductible at source, per-
manent account number (PAN) detail updating, Know your customer (KYC) update, submission of 15 G/
H form, utility bill payments, bill payments and person to person transfer using diverse channels.

10
 ARTICLES

Future of ARTIFICIAL
INTELLIGENCE
Increases in capital and labor are no longer driving the levels of economic growth.
The world has become accustomed to desires. Fortunately, a new factor of production
is on the horizon, and it promises to transform the basis of economic growth for coun-
tries across the world.

With the recent convergence of a transformative set of technologies, economies are

entering a new era in which artificial intelligence (AI) has the potential to overcome
the physical limitations of capital and labor and open up new sources of value and
RAUF BHAT growth. To avoid missing out on this opportunity, policy makers and business lead-
Manager ers must prepare for, and work toward, a future with artificial intelligence. They must
Axis Mutual Fund do so not with the idea that AI is simply another productivity enhancer. Rather, they
must see AI as the tool that can transform our thinking about how growth is created.

The new factor of Production

Across the globe, rates of gross domestic product (GDP) growth have been shrinking. Moreover, this has
been true for three decades. Key measures of economic efficiency are trending sharply downward, while
labor-force growth across the developed world is largely stagnant. It is even in decline in some countries.

Economists have always thought of new technologies as driving growth through their ability to enhance
TFP. This made sense for the technologies that we have seen until now. The great technological break-
throughs over the last centuryelectricity, railways and ITboosted productivity dramatically but did
not create entirely new workforces.

Today, we are witnessing the take- of another transformative set of technologies, commonly referred to as
artificial intelligence. Many see AI as similar to past technological inventions. If we believe this, then we
can expect some growth, but nothing transformational.
But what if AI has the potential to be not just another driver of TFP, but an entirely new factor of produc-
tion? How can this be? The key is to see AI as a capital-labor hybrid. AI can replicate labor activities at
much greater scale and speed, and to even perform some tasks beyond the capabilities of humans. Not to
mention that in some areas it has the ability to learn faster than humans, if not yet as deeply. For example,
by using virtual assistants, 1,000 legal documents can be reviewed in a matter of days instead of taking
three people six months to complete.

Three channels of AI led Growth

With AI as the new factor of production, it can drive growth in at least three important ways. First, it can
create a new virtual workforcewhat we call intelligent automation. Second, AI can complement and
enhance the skills and ability of existing workforces and physical capital. Third, like other previous tech-
nologies, AI can drive innovations in the economy.

Intelligent automation
The new AI-powered wave of intelligent automation is already creating growth through a set of features

11
 ARTICLES

unlike those of traditional automation solutions. The first feature is its ability to automate complex physi-
cal world tasks that require adaptability and agility. Consider the work of retrieving items in a ware-
house, where companies have relied on peoples ability to navigate crowded spaces and avoid moving
obstacles. Now, robots from Fetch Robotics use lasers and 3D depth-sensors to navigate safely and work
alongside warehouse workers. Used in tandem with people, the robots can handle the vast majority of
items in a typical warehouse. Whereas traditional automation technology is task specific, the second dis-
tinct feature of AI-powered intelligent automation is its ability to solve problems across industries and job
titles. For instance, Ameliaan AI platform by IPsoft with natural language processing capabilitieshas
supported maintenance engineers in remote locations. Having read all the manuals, Amelia can diagnose
a problem and suggest a solution. The third and most powerful feature of intelligent automation is self-
learning, enabled by repeatability at scale. Amelia, like a conscientious employee, recognizes the gaps in
her own knowledge and takes steps to close them. If Amelia is presented with a question that she cannot
answer, she escalates it to a human colleague, then observes how the person solves the problem. The self
learning aspect of AI is a fundamental change.

Labour and Capital Augmentation

A significant part of the economic growth from AI will come not from replacing existing labor and capital,
but in enabling them to be used much more effectively. Also, AI augments labor by complementing hu-
man capabilities, offering employees new tools to enhance their natural intelligence. For example, Prae-
dicat, a company providing risk modeling services to property and casualty insurers, is improving under-
writers risk-pricing abilities. Using machine learning and big data processing technologies, its AI plat-
form reads more than 22 million peer- reviewed scientific papers to identify serious emerging risks. As a
result, underwriters can not only price risk more accurately, but also create new insurance products.

Innovation diffusion
One of the least-discussed benefits of artificial intelligence is its ability to propel innovations as it diffuses
through the economy. Take driverless vehicles. Using a combination of lasers, global positioning systems,
radar, cameras, computer vision and machine learning algorithms, driverless vehicles can enable a ma-
chine to sense its surroundings and act accordingly. Not only are Silicon Valley technology companies
entering the market, but traditional companies are building new partnerships to stay relevant.

Factoring in AI
There could even be significant social benefits. Driverless vehicles are expected to reduce the number of
road accidents and traffic fatalities dramatically, making the technology potentially one of the most trans-
formative public health initiatives in human history.

AI has the potential to double annual economic growth rates across the countriesa powerful remedy for
slowing rates in recent years.

Clearing the path to an AI Future

Entrepreneur Elon Musk has warned that artificial intelligence could become humanitys biggest existen-
tial threat. The more optimistic view of futurist Ray Kurzweil is that AI can help us to make major
strides in addressing the [worlds] grand challenges.

The truth is, it all depends on how we manage the transition to an era of AI. To full the promise of AI as a
new factor of production that can reignite economic growth, relevant stakeholders must be thoroughly
preparedintellectually, technologically, politically, ethically, sociallyto address the challenges that
arise as artificial intelligence becomes more integrated in our lives. The starting point is understanding the
complexity of the issues.

12
 ARTICLES
Encourage AI-powered regulation
As autonomous machines take over tasks that have exclusively been undertaken by humans, current laws
will need to be revisited. For instance, the state of New Yorks 1967 law that requires drivers to keep one
hand on the wheel was designed to improve safety, but may inhibit the uptake of semiautonomous safety
features, such as automatic lane centralization. In other cases, new regulation is called for. For example,
though AI could be enormously beneficial in aiding medical diagnoses, physicians avoid using these
technologies, fearing that that they would be exposed to accusations of Malpractice. This uncertainty
could inhibit uptake and hinder further innovation.
AI itself can be part of the solution, creating adaptive, self-improving regulation that closes the gap be-
tween the pace of technological change and the pace of regulatory response. In the same way that intelli-
gent solutions combined with massive data can guide decision making in areas such as urban, healthcare
and social services planning, they could also be used to update regulations in light of new cost- benefit
evaluations.

What next in the

BLOCKCHAIN?
As blockchain applications from finance to healthcare sweep the market, govern-
ments are beginning to wonder how this new distributed ledger will factor into legis-
lation. Many experts are claiming that block chains distributed ledger technology
(DLT) could be a magic bullet for economies recovery in the wake of the 2008 finan-
cial crisis. However, this may be a case where the great power of an all encompassing
digital financial ledger comes with great responsibility.

Unless youre hiding under the rock, I am sure youd have heard of Bitcoins and
Blockchain. After all, they are the trending and medias favorite topics these days
ROHIT KHATANA
Software Manager the buzzwords of the year. Even the people, whove never mined a cryptocurrency or
Turtlemint understand how it works, are talking about it. I have more non-technical friends than
technical ones. They have been bugging me for weeks to explain this new buzzword
to them. I guess there are thousands out there who feel the same. And when that happens, there comes a
time to write something to which everyone can point the other lost souls tothats the purpose of this
postwritten in plain English that any regular internet user understands.
Blockchain: why do we even need something this complex?
Instead of first defining the Blockchain, well understand the problem it solves.
Imagine, Joe is your best friend. He is traveling overseas, and on the fifth day of his vacation, he calls you
and says, Dude, I need some money. I have run out of it.

You reply, Sending some right away, and hung up.

You then call your account manager at your bank and tell him, Please transfer $1000 from my account to
Joes account.

13
 ARTICLES
Your account manager replies, Yes, sir.

He opens up the register, checks your account balance to see if you have enough balance to transfer $1000
to Joe. You call Joe and tell him, Ive transferred the money. Next time, youd go to your bank, you can
withdraw the $1000 that I have just transferred.
What just happened? You and Joe both trusted the bank to manage your money. There was no real move-
ment of physical bills to transfer the money. All that was needed was an entry in the register. Or more pre-
cisely, an entry in the register that neither you nor Joe controls or owns. And that is the problem of the
current systems.
To establish trust between ourselves, we depend on individual third-parties.
The problem is that they are singular in number. If a chaos has to be injected in the society, all it requires is
one person/organization to go corrupt, intentionally or unintentionally.
What if that register in which the transaction was logged gets burnt in a fire?
What if, by mistake, your account manager had written $1500 instead of $1000?
What if he did that on purpose?
Think about it for a second, what does transferring money means? Just an entry in the register. The better
question would then be
Is there a way to maintain the register among ourselves instead of someone else doing it for us?
And the answer is what you might have already guessed. The blockchain is the answer to the profound
question.
It is a method to maintain that register among ourselves instead of depending on someone else to do it for
us.
Yes, but tell me, how does it work?
The requirement of this method is that there must be enough people who would like not to depend on a
third-party. Only then this group can maintain the register on their own.
How many are enough? At least three. For our example, we will assume ten individuals want to give up on
banks or any third-party. Upon mutual agreement, they have details of each others accounts all the time
without knowing the others identity.
Lets think about 9 people who want to try the above distributed approach. And the above approach is
solved by these steps:
1. An Empty Folder

Everyone contains an empty folder with themselves to start with. As well progress, all these ten individu-
als will keep adding pages to their currently empty folders. And this collection of pages will form the reg-
ister that tracks the transactions.

2. When A Transaction Happens

Next, everyone in the network sits with a blank page and a pen in their hands. Everyone is ready to write
any transaction that occurs within the system.
Now, if #2 wants to send $10 to #9.
To make the transaction, #2 shouts and tells everyone, I want to transfer $10 to #9. So, everyone, please

14
 ARTICLES
make a note of it on your pages.

Everyone checks whether #2 has enough balance to transfer $10 to #9. If she has enough balance, every-
one then makes a note of the transaction on their blank pages.
3. Transactions Continue Happening

As the time passes, more people in the network feel the need to transfer money to others. Whenever they
want to make a transaction, they announce it to everyone else. As soon as a person listens to the announce-
ment, (s)he writes it on his/her page.
This exercise continues until everyone runs out of space on the current page. Assuming a page has space
to record ten transactions, as soon as the tenth transaction is made, everybody runs out of the space.
4. Putting Away The Page

Before we put away the page in our folders, we need to seal it with a unique key that everyone in the net-
work agrees upon. By sealing it, we will make sure that no one can make any changes to it once its copies
have been put away in everyones foldernot today, not tomorrow and not even after a year. Once in the
folder, it will always stay in the foldersealed. Moreover, if everyone trusts the seal, everyone trusts the
contents of the page.
So, It allows for the permanent and immutable transparent recording of data, essentially, and transactions
specifically. That can be used to exchange any number of things that have value, whether thats an actual
item [or something else]. It could be tea leaves making their way to the final tea maker. Or it could be me
sending you a payment person to person without the need for intermediaries.

Future of Blockchain
Blockchain beyond Bitcoin
Blockchain technology is a distributed ledger. I think of Bitcoin as being the entry point to a digital future
where everything of value can and likely will be exchanged in digital format. Central banks will look to
the Bitcoin experience to build central-bank-backed digital assets.
Crypto Hedge Fund
The whole crypto ecosystem is in its infancy and volatile. But volatility can only be noticed if you look at
an individual crypto asset over a short period. In the long run, the whole crypto market can be seen to be
always growing. This feature of this market makes is a ripe one to build a hedge fund for. For investors,
the best strategy would be to invest in a lot of crypto assets (thus hedging the risk) and trade fiercely to
convert the volatility in profits. But not everyone can do it because it simply is too much of work for an
individual. It makes it a huge market of investors who want their money to be invested but do not have
enough time and resources to do it on their own. Moreover, every coin or token requires to be stored in a
wallet securely. It adds up to a headache.
Exchanges will become a source of scrutiny
Regulators will keep a light touch on the technologies behind cryptocurrencies, but they will look more
closely at exchanges, which is where traditional banking meets the new world of cryptocurrencies. While
exchanges are an excellent resource, allowing people to conveniently buy and sell digital currencies with
ease, they also centralize risk. This makes them a virtual honeypot for hacks and thefts. So increasingly we
will see governments stepping in to oversee how they operate with an eye on consumer protection. Some
regulation will include new ways to confirm identities and block money launderingand in extreme cas-
es, block exchanges all together.

15
 ARTICLES
MY EXPERIENCE
post MBA
I take this platform to share my views on how
you should plan your campus life. My primary
focus of the discussion is placements. I would
also try to cover some of the aspects that should
keep in mind to prepare yourself for the
corporate life ahead.
Most of us join the B-schools in expectation of
the hefty placement packages. In pursuit of the
same, we prepare hard when the placement
season starts. However, I believe that the
preparation should not begin just before the
start of the placement season. The preparation
should begin when you have finalized your
specialization and the profiles you would like to
pursue your career with. The placement
interviews assess us thoroughly on our subject
knowledge and understanding of the industry.
And the deep analysis of the same cant be done
in just a month or two. So it is very imperative
that we should start exploring the various
options as soon as we enter the B-school and
target the specific option we find the best
possible for ourselves. Once we are done with
this phase, we should start planning on how to
achieve the same. .Generally, after we have
completed our summer internships, we are quite
clear about our career aspirations. So when we
come back from our summer internships, all of
our activities should be aligned towards getting
deep understanding of the profile, industry and
the companies we have targeted. We should talk
to the seniors, the faculties, our peers inside
outside the campus or alumni so that the things
we have planned bear us fruits.
For preparing for any placement process, you
should be well verse with the profile offered, the
company financials and the scenario of the
industry.
You should be able to speak enough for any
point you have mentioned in your CV. Your
summer internship project is generally the
main topic of discussion in final placement
interview. Do not speak lame lines. Try to
substantiate your thoughts with facts and
figures. You have few minutes to market
yourself in an interview.
Losing an opportunity which meets your
minimum requirements in expectation of
something better to come in future may lead
you in trouble
Try to substantiate your thoughts with facts
and figures. You have few minutes to market
yourself in an interview. Give the interviewers
a valid reason why they should hire you. Your
energy, enthusiasm, confidence and
professional etiquettes make great impact
during the interview. Make the interviews two
way interaction instead of a question-answer
session. And even after giving your 100%, if
you dont make it to any company placement
process, dont be sad as there is no dearth of
opportunities in your life ahead. It might take
time but it will definitely happen if you stay
focused.
At my interview with Yes Bank, I was grilled a
lot on my summer internship project. I was
asked why, how and what for every answer
that I gave.
16
 ARTICLES

That reminds me of the importance to frame the lines systematically before saying things. I was also
asked a lot of questions related to subject knowledge especially related to banking. I was lucky to have a
very cooperative interviewer who happens to be my boss now.

After the placement season is over, it is the time that you should start enjoying your life. The corporate
life waits for you as the lion does for its prey. It takes time in getting adjusted to the corporate life as it is
very different from the one you live in campus. In corporate life, we need support from a lot of people
from various teams inside the organization and also from outside the organization. That is why, after
you have left the campus, it is required that you should know how to network with people, manage
perception of yours in the mind of others and work under deadlines. It is very much necessary that you
like your work. If you dont, then try liking it. And if you cant, it is better that you look for opportunities
elsewhere.
All the things, I have talked about, have been a part of my personal experience. I was quite confident
about my subject knowledge and my career aspiration. But I needed to improve my communication,
leadership and presentation skills. I also wanted to try if I was ready to bear the pressure in corporate
life. So I decided to join placement committee and worked on all the aspects I was lacking in. I didnt
wait for the placement season to come closer to improve the things I needed to which helped me very
much. I joined a company through campus placement. The opportunity was really great. The work was
also good but not suiting my career aspirations. After all of my efforts to like the work had been vain, I
decided to look for opportunities outside. Luckily, soon enough, I got one and joined Yes Bank. My work
schedule is very hectic and demands a lot from me but the important fact that keeps me satisfied is that I
like my work.
Every person faces different kinds of struggle in corporate life. So my experience at my current company
cant be generalized for all. But one thing that remains common for all is the expectation from you
because of your IIM Brand. So after studying at an IIM, it is natural that you should be master in excel,
presentations, research projects and analytical tools. Our curriculum cant encompass everything
required in future. So, I would advise all of you to take up the collective responsibility for mastering
these things. You wont have time to learn how to extinguish the fire after you have already entered the
fire. JUGAAD wont help you much in corporate unlike the campus.
In the end, I would say that you are paying lakhs of rupees for this campus. Make every penny count!

Ajay Singla
IIM Raipur
PGP 2015-17

FIN-FACT
More than 200 million dollars - that is the amount of money used in transactions in Bitcoin network every
day. Turnover in Bitcoin network has recently surpassed Western Union circulation. Bitcoin is only slight-
ly inferior to the annual GDP of a country like Estonia.

17
 ARTICLES
CRYPTOCURRENCY:
evolution from electronic money
to the next BIG THING
Cryptocurrency is a form of digital money that is
designed to be secure and, in many cases,
anonymous. It is a currency associated with the
internet that uses cryptography, the process of
converting legible information into an
uncrackable code, to track purchases and
transfers. The word is derived from the Greek
kryptos, meaning hidden. Crypto currencies
have long been touted as a store of value when
money issued by central banks fails. So much so
that many investors have pumped in significant
share of their investible assets into these over the
last few years. The prospects of rapid uptake
have issuers lined up with a string of ICOs.
Bitcoins has rallied north of 700% over the past
year. And those who have not been a party to the
party are amazed and wanting to jump full
throttle onto the bandwagon, but for the fear of
the party getting over soon. But the interesting
fact remains, how did this party begin? Is this the
first attempt at cryptocurrency or whether there
were some attempts in the history?
What is a cryptocurrency?
Cryptocurrencies, intrinsically are digital tokens
which are built over cryptographic functions and
are sequence of encrypted bits transmitted and
stored over a network. They are entries about a
token in decentralized consensus-database and
since this consensus keeping process is backed
and secured by strong cryptography, they are
called cryptocurrencies. The coins in this space
are nothing more than publicly agreed records on
ownership and the entire mechanism works on
proof-of-work system. The cryptographic
functions over which different cryptocurrencies
are built differ from each other based on their
creation date, number of users, extent of network
and transaction volumes. What is same across all
cryptocurrencies is that they consist of a network
of peers in which every peer has a record of the
complete history of all transactions and thus of
18
 ARTICLES
the balance of every account on network.
From the pages of history
Interestingly, the evolution of electronic money itself was intertwined with elements of cryptography.
David Chaum, an American cryptographer, invented a scheme called DC Nets in early 1980s to allow
theoretically perfect anonymity within a group of computers. In 1989, he leveraged this to start Digicash
a digital currency that provided both anonymity to the users who spent it and security to the
merchants who accepted it. The blinding algorithm (which allowed electronic payments to become
untraceable by the issuing bank, the government, or a third party) used in his inventions laid the
groundwork for the future development of all types of digitalized currency transactions, be it alternative
currencies like Bitcoin or just plain old digitalized cash transfers. In the late 1990s, some online gaming
systems and websites decided to establish their own currencies that could be traded only within the
confines of their online games or web pages. Digicash, however, filed for bankruptcy in 1998 mainly due
to not being able to expand its user base. All these early developments laid the foundation for the next
phase of development of electronic money where Paypal enabled person-to-person transfer of money
over the web. The element of cryptography was somehow left behind in all related subsequent
developments, at least until 2008, when Satoshi Nakamoto (an unidentified programmer who called
himself by this name and claimed to be a 36-year-old Japanese male) presented his whitepaper on
Bitcoin. In the paper, Satoshi identified reversibility of transactions, need for identification of trans
actors, and the consequential high costs as the key weaknesses inherent in the existing trust-based
centralized electronic payment model. The solution he proposed consisted of a decentralized peer-to-
peer model based on cryptographic proof without the need for identifying the transacting parties or
relying on a trusted third party. The irreversible nature of transactions based on this model eliminates
the scope for disputing the transactions which in turn cuts the cost of mediation and hence overall
transaction costs. Satoshis endeavor marked a turning point in the evolution of money. It led to the
creation of a new form of money which is neither fiat nor commodity based called cryptocurrency.

Are they next big thing?

Drawing a parallel between the fiat currency system and the cryptocurrencies, a detailed insight reveals
both are entries in a database that can only be changed under specific conditions as specified by a either
a centralized body in case of former and decentralized network for the latter. Money, in both the systems
is all about a verified entry in some kind of database of accounts, balance and transactions. Today, when
everyone is talking about how cryptocurrencies could replace the centralized fiat currencies, it is early
days to infer this with concrete evidence. While both the sides have arguments in favor and against,
what is interesting is to watch out how things unfold from here at a time when all companies are
investing heavily in Blockchain, the technology which is the backbone of cryptocurrencies. The years to
come would for sure change many things especially in the banking space given if technologies like these
gain more acceptance.

Authored by:

Siddharth Sachdeva
IIM Raipur
PGP 2015-17

19
 ARTICLES

ROBO ADVISORY
and its suitability for HNIs
Technological innovations have led to the rapid expansion of the financial services space. However, can
it really eliminate the need for human intervention in the near future? There are multiple school of
thoughts trying to answer this.
Given the staggering growth witnessed in the recent years, the number of High Net worth Individuals
(HNIs) as well as their quantum of wealth rose significantly. The increased market size provided an
opportunity for the wealth management firms to expand reach and reduce service costs by leveraging
technology. This led to the advent of Robo-Advisory Services.
Robo-Advisory today is an online wealth management service that provides automated, algorithm-
based portfolio management advice without the use of human financial planners. It not only helps an
individual choose the right investment but also provides a platform to complete the transaction and
monitor the portfolio on an ongoing basis.

Robo Advisory:Snapshot

Robo-advisor, virtually a combination of technology and humans, uses the information provided to the
system by the client for offering investment advice and allocating portfolios. Investors risk-appetite, time
horizon of investment and customization requirements are perused while doing so. The financial advisors
often have discriminating policies for smaller/ retail investors, however robo-investing platforms treat all
investors at par. In addition to that, the financial and operational feasibility of such a service has increased
in todays data-driven world due to:

Growth in online transactions leading to analysis of usage patterns of customers as well as mapping of
their risk-appetite
Ubiquitously available financial data that allows the recommendation engines to evolve and cater to
tailored requests.
Mass market (middle segment of the financial pyramid) penetration by leveraging the power of AI
It being a low cost alternative, as robo-advisors charge less than 1% of the portfolio value compared to
traditional investment advisors charging 1% to 3%
Availability of 24*7 support facility with no minimum investment requirement

20
 ARTICLES

Functioning of a Robo Advisor

The benefits of Robo-advisory are not limited to reduced portfolio management fees and investment
advice for all. There is more to it.

Diversified services - The changes in asset categories either higher or lower distort the allocation.
Robo advisors ensure timely rebalancing of the portfolio. They are also programmed to minimize
capital gains taxation.
Consistent and instant advice -The algorithm-based asset allocation plan is purely devised on the
basis of the user's goals and the numbers provided to the system. As a result, one's portfolio is free
of the in-vogue sector fund that makes an ephemeral splash.
Affordable advice and transparent service - Robo advisory platforms offer an extremely economi-
cal alternative to retail investors. Robo advisors technically generate a programmed advice,
however it is customised to a considerable extent, based on the response of the investors to an
online questionnaire that tries to assess investment objectives and the risk profile of the client.
Easy interface - Financial planning for most beginners is a worrisome proposition and, as a result,
they shy away from investments early on in their earning lives. However, Robo-advisory plat-
forms armed with an easy-to-understand interface and sophisticated algorithms, which lay out the
path to attain ones aspiration come handy and thus financial planning gets easy and appealing.

21
 ARTICLES

Although, Robo-advisory is advantageous and innovative in many ways, there are disadvantages and
limitations of such a system that financial institutions need to grapple with. The major ones being:
Limited Customization - Robo-advisors mainly fill the needs of beginners and investors with
uncomplicated financial portfolios. Different individuals with varied personal situations may end up
getting allocated a similar portfolio based on their risk profile.
Trust issues - Financial services is a trust-based business and cannot be fully managed by technology
only. It also includes other aspects like building a relationship, understanding a customers context
beyond the few risk-based questions and, most importantly, hand-holding customers during times of
volatility.
Unsuitability for digitally averse individuals and Ultra HNIs -Senior citizens would prefer the
traditional advisor due to digital unfriendliness. Ultra HNIs would not risk their large chunk of
money for automation. The needs and deployment of their funds too would require human skill and
intervention and thus Robo advisory limits itself to a particular category of investors.

Last year, when the Indian Government announced demonetisation of high value currencies the stock
market indices plummeted. The consumer durables index went down by 11.7% and the Nifty Realty index
by 25%, thereby bearing commensurate losses for HNI investors as well. The amount lost was in billions.
Prima facie these robo-advisors are effective in multiple aspects but as yet are not capable enough to
tackle such a complex situation which makes human intervention necessary. Secondly, HNIs may lose
alternative investment opportunities such as investing in real estate etc.as these are not included in the
investment suggestions. Therefore, robo advisory services being in its nascent stage still have a long way
to go until they replace most of the human capital at wealth management firms around the globe.

Authored by:

Kasif Khan Devashree Gulgule

XIM, Bhubneshwar XIM, Bhubneshwar

22
 ARTICLES
Future of CRYPTOCURRENCY
:a DIGITAL DISRUPTION
In this spate of an agile environment where we are
surfing in the reign of the VUCA world, technology
has become an indispensable part and parcel of our
lives. Technology in turn has given rise to automation
and secured procedures which govern the way organ-
izations work and make critical decisions. Digital be-
ing the new dose of the day has revolutionized pay-
ment systems and technology has catalyzed to give
birth to a new form of currency called Crypto-
currency. Crypto currency is the new form of digital
disruption.
What is Crypto-currency?
The word crypto means something which is covert or
concealed. Currency on the other hand is a form of
money which is country specific. Crypto currency can
be defined as [4] A digital currency or decentralized
system of exchange that uses advanced cryptography
for security. In such form of currency, legible infor-
mation is converted into unbreakable code which is
difficult to be hacked. Crypto currency is virtual in
nature and is not issued by any central bank authority
which makes it resistant to government manipulation
thus relinquishing control.
Anatomy of Crypto-currency System
Public Ledgers: Public ledger is a central reposito-
ry where all confirmed transactions are recorded.
Identities of crypto currency owners are complete-
ly kept confidential by using advanced cryptog-
raphy techniques like Authentication and Key
Agreement (AKA) and Advanced Encryption Standard
(AES). The ledger enables digital wallets to calcu-
late a disposable spending balance. Authenticity
of coin owners can be verified by integrity checks.
This public ledger is called Block Chain since da-
ta between two parties is recorded in a sequential
block wise manner in a verifiable and permanent
way.
23
Transactions: It is defined as a sequence of
operations to transfer funds between digital
wallets. A transaction when made is submit-
ted to the public ledger where it waits for an
approval. This transaction is encrypted us-
ing advanced cryptographic techniques by
the wallet to justify that it is coming from
the owner of the wallet and not someone
else..
Mining: Data mining is an art of deriving
meaningful patterns from voluminous data.
In this case, it is a process of confirming
transactions and adding them to the block
chain. A miner is a person who solves an
increasingly complex computational prob-
lem and adds blocks of transactions to the
ledger to generate coins. This process is
highly covert due to its complexity and the
miners might. The miner receives a com-
mission to his account for every transaction
he mines or approves to the ledger. Mining
process thus gives value to these coins be-
cause of its high complexity and is known as
proof of work system.
Crypto-currencies: Based on the popularity,
four main crypto currencies are available of
which Bitcoin is most popular.
 ARTICLES

Bitcoin:[2]Founded by Satoshi Nakamoto in 2009 and enjoys the widest use worldwide.
Ethereum: [2]It is the second most valuable currency and was founded in 2015. Ethereum was hacked
in 2016 wherein it split into two currencies and thus its value dipped from $400 to just 10 cents. Ana-
lysts predict a huge potential for investments in this currency.
Ripple:[2]It was founded in 2012 and can be used to keep track of more types of transactions.
Litecoin:[2]It is very much similar to bitcoin but a lighter version which allows swift payments and
greater volume of transactions.

Properties of Cryptocurrency Opportunity Assessment

Key Value Drivers and Growth Potential

Immediate settlements of funds
Decentralized mechanism with complete ownership of account holder
Fraud Monitoring and control with greater risk mitigation
Lowered transaction fees
Gaining eminence within masses
Universal recognition
Demographic dividend
Clarity, consistency, stability and trust due to covertness

The Future Roadmap

Crypto-currency is the upcoming form and medium of digital exchange and has a scarcity premium.
They are created and mined using block chain technology. In todays world, crypto-currency can be used
to buy various items, trade, invest and also make payments. The current conversion rate is 1 Bit coin is
approximately USD 4,390 (September 2017).Following drivers catalyze the valuation and exchange rate
of crypto currencies:

Block chain difficulty level

Investors

24
 Limited supply and demand
Innovation index
Perception by public
Scams and Frauds

Global Paradigm
The existing nature and rising demand of crypto-currencies will cause it to thrive and flourish in future.
[11]As per BCG-Googles report, the number of fin-techs tripled and funding grew seven times over the

last 10 years. There were 1855 companies as of 2015 with a funding of USD 20 Billion. The rising de-
mand, financial literacy and price of bitcoins will certainly make this niche market lucrative. Following
are some examples where companies and banks have leveraged crypto-currencies which have disrupted
conventional payment systems.
Examples
Crypto-currency has started gaining prominence in education sector as well. University of Ohio has in-
cluded this subject in its curriculum and has also started accepting payments as fees.
A Subway franchisee in Buenos Aires accepted bit coins as a payment method making it the first city in
Latin America to adopt this mechanism. Even cities like Moscow, Allentown and Pennsylvania Sub-
way franchisees accept bit coins.
Word press; a leading blogging website has started accepting bit coins too. Companies in travel and hos-
pitality sector like Expedia and CheapAir.com have also moved towards using crypto currencies.

Analysts also predict that crypto-currencies will be widely used to trade bonds and securities in primary
and secondary markets respectively.[14]Bitcoin has risen nearly 900% in last two years. Even the recent-
Wannacry Ransomware attack brought this currency into lime light as attackers used it to demand ransom
in bit coins by encrypting critical files on the host system.

Indian Perspective
Bitcoin is gaining increased popularity in Indian markets. Demonetization on the other hand has dynam-
ically spurred the number of digital transactions.

25
 ARTICLES

There are many crypto-currency websites launched every day in India, which tells us about the growing
popularity of this mode of exchange. Indian start-ups are setting up crypto currency exchanges and
wallets to facilitate use of crypto currency. Coinsecure, Unocoin,zebpay are just a couple of exam-
ples.[16] As per a report by Deloitte.on block chain, this technology has been in keen adoption in various
sectors like Retail, Oil and Gas, Healthcare and Telecommunications apart from the Financial Services
industry.
Examples
The State Bank of India has also shown interest in developing its own block chain and has set up
research cells to develop one. It has taken a lead to curb online fraud and cybercrimes.
Steep growth and vision towards startups in India have geared up companies like KrypC, Trestor,
Prime chain technologies, Records Keeper and many more to leverage the power of block chain and
cryptocurrency.

Conclusion
Research and development in the crypto-currency sector has gained importance over the past few years.
The spike in digital footprint and emerging disruptions has fueled the way this mechanism has started
gaining eminence across various sectors. Bit-coin will certainly be the next frontier of digital payments
wherein companies will leverage and utilize it to seek competitive advantage. Existing and future op-
portunities will enable key decision makers to strategize and plan in order to deliver robust growth.
This market has enough growth potential as it is emerging and lucrative. However, it involves infra-
structure costs and niche talent to acclimatize people and decode complex algorithms for mining. The
overall perspective is indeed challenging but optimistic and can be seen as an investment by businesses
and individuals.

Authored by:

Suraj Kamath
SIES College of
Management Studies

FIN-FACT
In order to increase the speed and effectiveness of transactions of certain cryptocurrencies and, above
all, bitcoin, some developers offer to create a superstructure over the main blockchain. This
superstructure will be made from a separate network of nodes, ensuring the work of so called
sidechains additional blockchains are much more efficient when processing the bitcoin transactions,
although not independent like main blockchains.

Aside from keeping the entries on transactions and fund transfers, blockchain allows to contain any in-
formation that can be digitally stored. This includes executable computer code. The code can be written
in such a way that it would start its work when entering cryptographical keys by two parties that have
agreed to collaborate under predetermined conditions. This technology goes by the name of smart-
contracts and packs a huge potential for business implementation.

26
 ARTICLES

ALGORITHMIC
TRADING in INDIA
India is one of the very few countries in the world which have some mechanism for controlling
the misuse of algo. SEBI has been able to come out with some minimal regulations on algos. For
instance, we have provided for high order to trade ratio penalty system. We are reviewing wheth-
er that penalty should be enhanced further.
Shri. U.K. Sinha,
Former Chairman, Securities and Exchange Board of India (SEBI)

Algorithmic trading is an automated process of taking trading decisions by involving the use of preset
strategy based advanced mathematical models. The software programs enable spontaneous reactions to
arbitrage opportunities to generate large number of orders in a relatively small interval of time. The la-
tency-sensitive trading strategies facilitate High Frequency Trading (HFT) by deploying technologically
superior networks, co-location et cetera to connect and trade on the trading platform.
According to the International Organisation of Securities Commission2 (IOSCO), High Frequency Trad-
ing may be characterised by the following attributes3:
The use of sophisticated technological tools for pursuing a number of different strategies, ranging
from market making to arbitrage;
Employment of algorithms along the whole investment chain: analysis of market data, deployment
of appropriate trading strategies, minimization of trading costs and execution of trades;
A high daily portfolio turnover and order to trade ratio (i.e., a large number of orders are cancelled
in comparison to trades executed);

Flat or near flat positions at the end of the trading day, meaning that little or no risk is carried over-
night, with obvious savings on the cost of capital associated with margined positions. Positions are
often held for as little as seconds or even fractions of a second;

Mostly employed by proprietary trading firms or desks; and

Latency sensitive.
Technological advancements have led to a comprehensive overhaul of the market structures across ge-
ographies by enabling the use of sophisticated algorithms and machine learning. This has lowered la-
tencies across capital markets and made high frequency trade, co-location and co-hosting transactions a
reality on the transaction highways. At the same time, this has opened certain illegitimate avenues for
revenue by creating a high degree of asymmetry in information and in some egregious cases, disrupted
the fairness in execution of voluntary transactions on the trading platforms. Therefore, as legacy

27
 ARTICLES
systems become obsolete and get replaced by
technological disruptions, it is imperative to iden-
tify chinks at an early stage to prevent the col-
lapse of platforms, market manipulation, prolifer-
ation of dark pools, naked access, lack of confi-
dentiality.
At present, algorithms generate close to 80 per
cent of the orders placed on most of the exchange
traded products and contribute to about 40 per
cent of the trades on the bourses. Algorithmic
trading has improved liquidity in the market and
improved its efficiency by assimilating rapid in-
formation into traded prices. In fact, Algorithmic
trading intensity is another way through which
the smaller stocks obtain higher
Algorithmic Trading as Percentage of Total Trading
The securities and Exchange Board of India
(SEBI) vide circulars dated March 30, 2012 and
May 21, 2013 has put in place the broad guide-
lines for algorithmic trading in the securities mar-
ket. Further, it has mandated the provision of co-
location/proximity hosting in a fair, transparent
and equitable manner by the stock exchanges. At
the international level, IOSCO has recommended,
Regulators should require that trading venue opera-
tors provide fair, transparent and non-discriminatory
access to their markets and to associated products and
levels of liquidity, which would traditionally only
be expected to be found in the largest sized stocks
in a market.
However, it cannot be denied that it is discrimina-
tory to non-algorithmic traders and has exacerbat-
ed the issue of adverse section costs by increasing
the probability of flash crashes. Thus, in the event
of development of schisms between different par-
ticipants in the same market, the fear of rising ine-
quality of access, and subsequently a drop in mar-
ket quality also increases manifold. This ultimately
culminates in an increased mistrust of the market.
In such a scenario, it is imperative for the regulator
to take necessary corrective action8 and ensure in-
tegrity of the market so that the exchange of secu-
rities happen under explicit trading rules.
services. Let us explore the following market
mechanisms that can restrict inequitable access to
the trading systems of the exchanges.
Minimum Resting Time for Orders is defined
as the time between the receipt of an order by
the exchange and the amendment or cancella-
tion of the said order thereafter. In order to
eliminate fleeting orders, the amendment or
cancellation can be prohibited before a speci-
fied amount of time is elapsed (~500 millisec-
onds).
28
 ARTICLES

S.No. Risk Control Applicability

Algorithmic trade orders shall not be released in breach of

1 Price Check the price bands/dummy filters as defined by the Exchange
in respective segments.

Algorithmic trade orders shall not be released in breach of

2 Quantity Check order quantity limit per order as defined by the Exchange
in respective segments

Algorithmic trade orders shall not be released in breach of

the value per order (combination of price and quantity
3 Order Value Check
checks) as defined by the Exchange for the security in re-
spective segments

Algorithmic trade orders shall not be released in breach of

5 Trade Price Protection Check the bad trade price as defined by the Exchange for the se-
curity in respective segments

Market orders emanating from Algorithmic trading sys-

tem shall not be released beyond a pre-set percentage of
6 Market price protection
LTP. The limit thus set shall be less than the applicable
circuit limits

Order-level Algorithmic Trading Risk Management

Year Total Penalty Average Penalty Disablements

2014-15 6,96,097 58,008 9

2015-16 6,80,899 56,742 4

2016-17 1,76,963 58,988 NIL

Monetary Penalty Levied by NSE in Last 3 Financial Years

Financial Year Average Order to Trade Ratio

2014-15 8.91

2015-16 26.44

2016-17 12.26

Average Order to Trade Ratio for Algorithmic Trading Participants

29
 ARTICLES

Frequent Batch Auctions can address the problem of latency advantage by accumulating buy and sell
orders on the order book for a particular duration of time and setting a time interval for matching of
orders which is only sufficient to allow for opportunities for intra-day price discovery.

Random Speed Bumps in Order Processing/Matching can discourage latency sensitive strategies to
the disadvantage of co-located traders.

Randomization of Orders Received During a Period and forwarding of the revised queue to the order
matching engine with a new time priority can restrict the advantage traders enjoy because of physi-
cal proximity to the trading platform.

Maximum Order Message-to-Trade Ratio Requirement can reduce hyper active order book participa-
tion by mandating a market participant to execute at least one trade for a set number of order mes-
sages sent to an exchange.

Separate Queues for Co-location and Non Co-location Orders coupled with an order validation
mechanism can ensure equitable access to stock exchanges trading systems for all market partici-
pants.

Review of Tick-by-Tick Data Feed can provide a level playing field to the market participants irre-
spective of their technological or financial strength by providing structured data as real time feed.

The creation of a progressive and competitive trading ecosystem in the country by ensuring that the
technology and algorithms operate within the framework of integrity and fairness can have a transfor-
mational impact on the Indian financial sector. For embracing and adapting to disruptions in the finan-
cial sector it is essential to create forces of accountability through a reorientation of the regulatory frame-
work to act as firewalls to obviate market abuse.

Authored by:

Shreyans Jain
IIM Lucknow

FIN-FACT
The first commercial success can be considered Bitcoin Silk Road. On this site, work in TOR network, you
can buy a variety of illegal goods, drugs and weapons. Bitcoin, because of its anonymous nature, was the
only means of payment within the Silk Road.

30
 ARTICLES

ARTIFICIAL INTELLIGENCE
:transforming the FINANCIAL
SERVICE INDUSTRY

Introduction
Recently, Google developed a system to demonstrate how Artificial Intelligence can build its own en-
cryption which consequently will fuel research on encryption that becomes stronger as hackers try to
crack it. AlphaGo, an AI system developed by DeepMind technologies, defeated Gos (a Chinese board
game) European Champion Fan Hui 50 last year which startled the entire Go community. LendingClub,
a peer-to-peer lending platform is using its AI algorithm to offer the risk rating and the credit worthi-
ness on the spot. These are some very recent disruptions thats happening across areas with Artificial
Intelligence.
Recently, AI has witnessed renewed interest from both the academicians and the industry. It is touted to
bring a sea change across industries ranging from military and defence to humanitarian technologies. In
2015 alone, the giants of AI Google, Microsoft and Facebook spent $8.5 billion in acquisition and re-
search. In spite of these, the financial institutions have been slow to adopt and exploit AI as done by oth-
er technology companies. It may lead to extinction of some big institutions and at the same time pro-
vides ample opportunity for start-ups to disrupt the existing business models and build next generation
of institutions. AI is drastically changing models in financial services industry, be it by automating the
process, by crunching numbers through big data or by interacting to humans through voice.

AI in Financial Services
Artificial Intelligence is affecting several areas of Financial Services with varying impact and disruptive

31
 ARTICLES

capability. As per a global survey executed by use are sales and customer service which was
Euromoney along with the law firm Baker & agreed by only 14% respondents. This area in-
McKenzie to identify the areas of financial ser- cludes customized offerings to customers as per
vices where AI can be deployed in the coming 3 their requirement.
years, 49% of the respondents chose Risk Assess-
AI is actively pursued by many companies to
ment as the most popular application. This en-
provide superior services to the stakeholders. In
tails, solving internal management questions such
the payments space, DBS bank in India launched
as, whether or not to open a new branch in a new
its app Digibank which contains AI and natu-
location or whether or not to give the client a new
ral language recognition driving its virtual assis-
loan. The AI algorithm can easily process huge
tant application. In the insurance sector, services
data and quantify the various risks to arrive at an
like MyDrive &Metromile are coming up with
analytical decision. The 2nd most popular area
pay per use options which will be backed by its
was Financial Research. The AI algorithms can
IoT and Big Data & Analytics, bringing new in-
now read the annual reports, company filings,
sight into insurance risk. In the deposit and lend-
management news interviews etc. and process
ing sector, firms like Kreditech offers credit score
them quantitatively. Next in importance identi-
for applicants with no/very low credit history
fied were portfolio management and trading with
through data collected from its applicants smart
37% and 33% respondents voting for it. The argu-
phone. In the capital raising sector as well firms
ment here is that it is very difficult for a human
like Seedrs and Crowdcube are using AI to iden-
brain to figure out how the stock market is mov-
tify needs and understand the content and there-
ing. Also, due to its direct correlation with the
by serve the customers. In the Investment man-
income, the managers are optimistic to use AI in
agement field, start-ups like Frontier Solutions is
this area. Although, till date, only 1.0 generation
trying to spot good investment opportunities in
of Robo-advisers are introduced which are ama-
undervalued stocks through its AI system scan-
teur and less reliable, the next generation are be-
ning through companys financial statements. AI
lieved to be significantly superior in giving re-
is thus becoming increasingly relevant in the fi-
fined solutions. At the tail end was AI systems
nancial services.

The top five areas (in financial services) for AI invest- Role of AI in changing the structure of financial services
ment over the next three years

32
 ARTICLES

Obstacles in implementing AI in Financial These cases will give rise to very high corporate
Services liability risks. Not to ignore the cyber terror and
crime which could thrive through these systems.
The disruptions that these start-ups bring are not
To have a constructive ecosystem with proper
only changing the internal structure of the finan-
checks against rogue elements, the regulators
cial institutions, but the structure of the entire
themselves should make investments to be up to
industry. A survey conducted by Euromoney
date with the technology and be able to bring
Thought Leadership found that 56% of the execu-
sound regulations.
tives believe that AI will bring on the table more
small and medium sized participants. The major Conclusion
obstacle being faced in implementing AI systems
In the financial services industry, there have been
is the cost, which is significantly high due to the
some instances of operational errors in the past
reason that the human capital requirement con-
resulting in losses but there can be learning out
sists of skill from both technology and industry.
of these mistakes to build better checks in future
The requirement of huge data volumes and pro-
programs. The convenience AI brings to a con-
cessing ability also compounds the cost. Another
sumer who can now open a bank account sitting
significant obstacle is the specialist skill to main-
at the home through interactive KYC check or the
tain and operate the technology. Even though
transparency it brings to the banking industry by
companies are willing to recruit the talent pool, it
objective analysis of data and coming out with
is rare. It is very difficult to get the requisite hy-
credit worthiness of the client promises much
brid knowledge. Due to this, there has been more
more compared to the sporadic red flags raised
focus towards multidisciplinary teams. The last
in some areas. With better multidisciplinary
major obstacle is lack of senior management/
teams with the right mix of technology person,
Board Buy-in. The same is a result of low returns
industry expert, jurist and regulator personnel,
emanating from past investments into this field.
there will surely be creation of systems that will
Rather than actively pursuing AI, the companies
be a boon to humanity and ignite the next sea
are following a wait and watch strategy of poach-
change in way things are done by humans.
ing start-ups excelling in the field.
As a result of AI, there are some major concerns,
with mass unemployment being the primary one. Authored by:
With more and more services going digital, there
is lesser need to operate labour intensive physical
branches. In some conventional services, the re-
ductions have been 90%-100% as they can be eas-
ily automated with high reliability along with
producing significant cost reductions for the
company. Another major concern is that most of
the AI coders are male. As pointed out by
Bhavya Rastogi
Melinda Gates There is no way a sea of dudes IIM Shillong
will know how to appeal to female consumers in
coding no matter how long they work at it. Its
appropriate to have diversity in AI. Another is-
sue arises when increasing computation speed
and power combines with erroneous utility. The
system can make errors at high speeds and thus
result in irrecuperable losses. The same hap-
pened with Knight Capital losing $440 million
while trading due to a programming error.

33
 ARTICLES

Whats next in BLOCKCHAIN

TECHNOLOGY?
Blockchain technology gained recognition with the invention of bitcoins and has now become a buzz
word for the tech world, but what is this blockchain all about?
Blockchain is a chain of digital blocks or nodes denoting records or transactions. It can be also called
distributed ledger technology involving storing or dynamic transaction data or static data in distributed
registers. There is no need for the presence of a central authority to carry out the transactions in a
blockchain.
Every block in the blockchain consists of a time-stamp and a hash pointer acting as a link to the previous
block. A blockchain works on peer-to-peer network principle, that is, all transactions in a blockchain are
verified by all the stakeholders of that transaction who adhere to a proper protocol for validating new
blocks.

Working of Blockchain
Blockchain in Financial Services
Despite eorts towards simplification and integration of participants' transaction records, business
networks still rely upon exchanging data/messages amongst them to conclude transactions. This results
in an inecient, expensive, and vulnerable process. BCT can address the potential drawbacks of the
current process by a shared fabric of common information, hence modernizing, streamlining and
simplifying the traditional infrastructure design.
Blockchain technology has created ripples and is laying the basis for new business models to grow in the
field of payments, digital banking and nancial transaction technologies. It offers 3 broad advantages over
the traditional technology - cost savings, eciency, and transparency.
Cost Savings
Since BCT allows the sharing of information across parties and consensus during any transaction, it

34
 ARTICLES

saves cost of reconciliation between banks and helps to avoid losses due to documentary frauds.

As all transactions are based on Real time processing, the participants can successfully avoid any
losses due to forex volatility.

IT ensures simultaneous settlement of the transaction settlement information and the payment mes-
sages, in real-time. Hence, the participants save costs of delayed settlements and experience a lower
pressure on treasury management to keep their settlement accounts well-funded.
Efficiency
All participants can operate in the ecosystem as nodes of the BCT network. If there is an untoward
event (like war, oods, cyber-attacks), the consensus algorithms of BCT makes sure that the transac-
tions can be approved by the remaining players.
Reduces the processing time for transactions as compared to the traditional, linear and hierarchical
banking processes by speeding up the decision making process.
Here, the transaction is relayed to all the nodes simultaneously for approval. The information in the
ledgers at all the nodes is updated simultaneously once the approval is provided. Hence, BCT leads
to a lower processing cost and improved transparency decision making.
The Smart Contract feature enables high speed of processing and helps FIs to create and execute
complex business rules with minimal possible human intervention.
Transparency
Maintenance of Immutable Transaction records, in a chronological order, makes BCT a desirable
platform for financial transactions.
The nality of the ownership of the asset is assured by provenance, and it helps to avoid double col-
lateralization of the same asset.
As a ledgering technology, BCT cannot take the place of the payment systems deployed by FIs, but it
can connect to these systems and augment the current business networks, hence providing im-
proved discoverability and trust.

Areas of Application in the Financial Sector

To explore the potential areas of application, we first identify the various uses of BCT across the world,
and then identify whether it can be applicable in India.

Broad Advantages of BCT

35
 ARTICLES

Cryptocurrency
A cryptocurrency is a type of digital currency that works as a medium of exchange of value during
transactions. It includes Bitcoins, Litecoin, Ripple, Ethereum and Dogecoin. These allow control of trans-
actions by the users without a tradeoff with their privacy. Hence, merchants are secure from potential
losses due to fraud. Further, the added benefits of transparency and disintermediation make it an attrac-
tive medium. But the Committee on Digital Currencies established by Bank for International Settlements
(BIS) is cautious towards these currencies since they are not backed by any formal authority. To over-
come this, The Central Bank of Canada has announced that they are developing a digital version of the
Canadian dollar, called CAD-coin. The Bank of England is also experimenting with a similar idea.
Trade Finance
If banks decide to put the LCs on the BCT network, and the corporates are also on board with the idea,
then BCT can generate signicant advantages. For instance, Barclays and an Israel-based start-up carried
out the world's rst trade transaction on BCT platform set up by Wave. This helped them reduce a 10
day process to less than 4 hours, successfully.
Custody & Securities Servicing
Securities can be directly issued to the interested parties via an automated system that avoids duplica-
tion and processes fund subscriptions in real time, making accounting, allocations and administration
much simpler. NASDAQ has announced that it issued its rst investor shares on the BCT based plat-
form Link, to issue pre-IPO shares of companies. While Mizuho, a financial services giant, declared a
BCT trial focusing on syndicated loans.
Monitoring Consortium Accounts
IBA has suggested an innovative use of BCT Monitoring of Financial Transactions that are nanced by
a consortium of banks, to prevent diversion of funds by monitoring money movement and perform-
ing desired analytics to detect any deviations in the agreed patterns.
KYC
All banks must comply with Anti-Money Laundering (AML) and Know Your Customer (KYC), and up-
load the validated documents to a central repository, where a unique tag is assigned to each customer.
This is a highly time and cost intensive process.
A BCT registration can reduce these efforts by eliminating data redundancy, faster transactions and
providing encrypted and safe ledgers to customers.

Security, Privacy & Scalability of BCT Systems

The financial industry has started embracing the opportunities presented by the BCT technology, but
there are some critical concerns of security, privacy and scalability. Dierent BCT applications have
dierent architectural requirements. So, the design of each platform must be carefully analyzed to bal-
ance these concerns.

A Prospective Roadmap for Adoption of BCT in Banking and Finance industry in India
Intra-bank private BCT for internal purposes, train HR and become familiar with the technology. All
nodes of BCT use a historical 'chain' of transactions to maintain integrity, cryptographic keys ensure
condentiality of transactions and a network that is resistant to external attacks offers security
Interbank Proof-of-Concept testing as the number of stakeholders involved in transaction increase.
Centralized KYC between Fis to reduce duplicative eorts

36
 ARTICLES

Cross-Border Payments and Syndication of Loans

From a technological point of view, BCT has evolved enough and there is sucient awareness in the
market, which makes this an apt time to initiate digitization of the Indian financial sector via BCT.

BCT in Financial Markets

Authored by:

Ankita Mittal Aditi Singh

IMI, New Delhi IMI, New Delhi

37
 ARTICLES
Emergence of
CONVERSATIONAL AI and its
impact on transforming the
BANKING INDUSTRY
A lot of what AI is being used for today only scratches the surface of what can be done. It will
become so ubiquitous that we won't even call it AI anymore. Babak Hodjat
Artificial intelligence is just beginning to show its
future potential in the Financial service sector.
From improving productivity by making repetitive
processes faster to using AI to study customer be-
havior like the past data of their investment deci-
sions, credit card plans, funds, etc. to provide per-
sonalized services and financial advice, helping
with fraud reduction by implementing data analy-
sis techniques, for Algorithmic trading where
hedge funds are using AI systems to learn about
the deviations in the financial markets to help
make investment decisions, shifting from rule-
based systems to AI systems to detect anti-money
laundering patterns, using Chatbots in banking to
stimulate human chats, enhancing user experience.
According to the study done by Gallup in 2013,
fully engaged customers bring an additional reve-
nue of 402$ every year. They have 10% greater
share in deposits and 14% greater share in invest-
ments. Fully engaged customers are also more
likely to purchase from their primary bank for their
future needs and 71% are of the opinion that they
would stick to their current bank for the rest of
their lives. Personal engagement with customers
could prove to be extremely beneficial for banks.
Hence, Conversational AL has emerged as a pow-
erful tool for the Banking sector and Financial In-
dustry. Relationship banking is being re-
established through AI and the upsurge of messag-
ing apps. Conversational interfaces have enabled
banking engagements, as Chatbots have proved to
be a simple solution to traditional banking prob-
lems, giving modern banks a competitive edge. A
messaging interface enables user to get financial
information on demand. Customers can ask ques-
tions and get quick insight on their money.
The old-fashioned manner of banking of interact-
ing with customers in brick & mortar branches is
now being rendered useless through digital bank-
ing i.e. websites and mobile apps. Banks can now
reach out to their customers frequently, and cus-
tomers have easy access to their financial infor-
mation. It combines personal interaction with a
financial advisor with the swiftness of an auto-
mated just-in-time interaction. For instance At
the time of checkout, a client gets pinged by a bot
illuminating him that he's going to go over his
retail spending plan and offering an arrangement
that can enable him to remain on track. Without
the bot, that same discussion would require client
to watch out for his spending and any exceptional
offers inside the application, and he wouldnt
have had enough time to exploit the arrangement.
Conversational AI brings further value addition
to the table by engaging with clients instantly
while they are making their decisions. Say when
a customer is closing a deposit, they would get
pinged by a bot informing them that they would
get much higher returns if they would invest in
equity instead. They could then be provided with
investment alternatives which they could the ini-
tiate over the Chatbot.
Indian banking sector is also betting big on con-
versational AI ICICI is the first bank to intro-
duce software robotics, where more than 200 soft-
ware bots will perform 1 million transactions eve-
ryday and increase accuracy by 100% and reduce
response time by 60%.
38
 ARTICLES

Digi Bank is the first Indian bank to be staffed only by a Chatbot Kasisto. It takes care of more than
95% of the queries without human involvement. SBI is employing bots like IBM Watson for its digital
platform SBI INTOUCH.YES Bank has launched YES pay bot, which would be the first artificial intel-
ligence driven bot for a wallet. They have also launched a chatbot YES m-power that will give cus-
tomers information about their loan products and YES TAG that will allow users to carry banking
transactions through their messaging apps.
There have been further advances in conversational AI. Barclays is currently pursuing a technology
similar to Apples iPhone voice assistant Siri, where users will be able to vocally communicate with
computer systems to make money transfers and talk to a device to receive the information they want.
Physically touching a device to execute transactions would no longer be necessary. There is a potential
for designing apps that would allow customers to do banking by talking to their mobile phones. Bank
of America has followed suit with their own voice assistant Erica who will communicate with users
over mobile devices by giving suggestions to improve their financial affairs. JPMorgan Chase is using
bots to organize its operations in the back office. They launched a bot COIN that can break down
complex lawful contracts quickly and more proficiently than human attorneys can. It also analyzes
emails for employees, gives access to programming frameworks, and handles basic IT functions like re-
setting passwords. They have future plans to use bots to reduce expenditure, diminish risk and find
new revenue sources for the firm.
The scope of Artificial Intelligence and automation in the finance sector as well as other businesses is
enormous. We have only touched the tip of the iceberg, AI will be so integrated in our lives that it will
become the new norm rather than an anomaly. Human jobs that will be replaced by AI will have to rein-
vent themselves to sustain in the future.

Authored by:

Apeksha Kayal
Prin. L.N. Welingkar Institute
of Management & Research

FIN-FACT
8 years and $800 million gap

Few months after the launch of the Bitcoin cryptocurrency in 2009, it was traded at a rate of: $1 for
1,309BTC which is equivalent to less than $0,00076 per Bitcoin.
Assuming you had spent $300 in order to acquire 393 225 BTC, if you sell them today, knowing that a BTC
now cost $2,226.08, you would have a massive fortune of $875,350,308. It sounds unreal but its not, just
like the regret that I feel of not knowing that before.

39
 ARTICLES

FINTECH Blockchain
revolution in REMITTANCE

FinTech, the buzz word around the globe is the technology enhancing the financial services. FinTech
broadly includes sectors like Banking Tech, Investment Tech, Remittance, Lending etc. Other sectors like Fi-
nance and Accounting Software, Bitcoin shall
also fall under the purview of FinTech.1Venture
capital investment in FinTech companies grew
by 38% globally in the second quarter of 2017
from the same period last year, according to CBI
insights. FinTech firms raised $5.19B from 251
deals in three months ending in June, up from
$3.75MB a year earlier.
Remittance is one of the largest, oldest and
growing sectors. Remittance, simply put is cross
-border money transfer. As per the World Bank,
the remittance to developing countries amount-
ed to $429B in 2016 and global remittances,
which include flows to high-income countries
stood at $575B in 2016. The remittance market is
dominated by banks charging high exchange rates and over-
head prices, close to 15-20% of the money being sent. On an
average, a worker in foreign country sends $200, that would
mean paying $40 extra as payment charges. Apart from
banks, there are two incumbent players in the market name-
ly, Western Union and Moneygram. Between the two, they
operate more than 1.1M retail location across 200 countries.
The problem still persists as these incumbents charge up to
10% of the money being sent across.

FinTech to the Rescue

With the advent of FinTech, the remittance sector is flourish-
ing. One of the most famous and only Unicorn in the Remittance market is Transfer wise. It relies on
peer-to-peer model to transfer money; it matches currencies being sent across and make a net-off the
payments, reducing the exchange rate affect and fee charges. There are startups like WorldRemit, Remit-
ly who rely on setting up their proprietary bank networks and leverage the bank partnership to offer a
wholesale rate. Blockchain-based money transfer on the other hand reduces prices close to 1% or less
and within a day money transfer. Most of the FinTech startups argue to reduce the dependency on
banks for financial services and eventually for remittance, however they continue to heavily rely on
banks for partnerships and liquidity problems. Contrary to this, Ripple, a currency agnostic DLT user
aims to partner with banks and eventually improve the money transfer service of banks.

40
 ARTICLES

Blockchain is a distributed, decentralized ledger that acts as a database to store each and eve-
ry digital transaction. It has five principles underlying the technology; Distributed Database,
Peer-to-peer transmission, Transparency with Pseudonymity, Irreversibility of records and
Computational logic.

Blockchain in Remittance
The blockchain technology has disrupted the Remittance
market by far the most, and it is fair to assume that Block-
chain technology will turn Remittance market upside down.
There are primarily three ways in which Blockchain is being
used in Remittance market. First way is to use the Bitcoin to
transfer money, which requires computing power and
knowledge of Bitcoin. Second way is to leverage the Bitcoin
blockchain in back-end and not exposing it to the consum-
ers. The third and possibly the best application up till now
is to use blockchain which is not currency dependent.

Bitcoin DLT Bitcoin to Bitcoin

This process involves exposure of Bitcoin to users and rely
on their awareness of Bitcoin. The users send and receive Bitcoin. Bitcoin-based money transfer has vari-
ous drawbacks like mining power, associated cost, awareness and trust on Bitcoin, uneven fluctuation
of Bitcoin-fiat currency exchange rate.

Bitcoin DLT Fiat to Bitcoin to Fiat

The fiat-bitcoin-fiat is one of the new ways to transfer money eliminating the exposure of Bitcoin to the
consumers. In such a process, the users transfer fiat currency to the organization, and the receiver gets
the fiat currency, while the transaction is done over the bitcoin blockchain. The fluctuations and uncer-
tainties involved in such transactions are taken up the organization. Abra, an US-based, backed by Ra-
tan Tata deploys the fiat-bitcoin-fiat model with an on-demand Uber like service. The idea is that any
person can act as an agent (human ATM), users can locate them through an app, meet them, exchange
money and receive digital money in the app and transfer it to the person cross border; who can further
meet an agent and receive his/her money in their home currency. Abra uses bitcoin-based blockchain
technology to transfer the actual value.

41
 ARTICLES

Currency Agnostic DLT

The currency agnostic blockchain doesnt rely on single currency of Bitcoin rather it utilises a hip-hop
model to switch from one currency to the other. The leading company on this aspect of Blockchain is
San Francisco-based Ripple. Ripple relies on building partnership with banks, bringing them under one
umbrella and utilize the Ripples blockchain technology for efficient international money transfer. Rip-
ple is a distributed transaction ledger solution is currency agnostic, i.e it is not dependent on particular
currency like Bitcoin, Litecoin etc. Although, it has its own native currency called XRP, the end users
however, need not depend on volatility of a particular currency like in Bitcoin. It uses probabilistic vot-
ing to confirm transactions. The Ripple process involves two main stakeholders Gateway and Market
Makers. Gateways are the entry and exist points for the currency, usually the banks or companies using
Ripples technology. Market makers are hedge funds, HNIs who are on Ripples network and provide
the liquidity and currency exchange hopping option. On the Ripples DTL (distributed transaction ledg-
er), a cross-asset matching is done. The usual currency exchange from $ to will depend on the current
exchange rate, however, in case of Ripple, the DTL using consensus algorithm, finds the best path for
currency exchange. The market makers provide buyer/seller for the intermediate currency exchanges.

Conclusion
Remittance and Blockchain have close link and goes a long way hand in hand. Blockchain is transform-
ing the old, incumbent remittance market into an efficient and cheaper market. Blockchain offers lowest
cost and fastest way to transfer money. There are however, challenges ahead, the outdated regulations
find it difficult to meet the demands of the new wave of customers. Compliance and due diligence re-
main a top concern, but one of the issues that is regularly faced in the industry is the outdated require-
ments when it comes to identification. Digital identification innovation such as automated identification
and real-time transaction scanning can be used to improve the situation. Also, anti-money laundering
and funding for terrorism remains an issue to identify. Given the above challenges, several banks and
organization have joined Ripple and other consortiums realizing blockchains importance and incorpo-
rating the technology as soon as possible. The future for financial services and eventually for Remittance
market looks bright and advancing. Blockchain certainly looks to transform and revolutionize the remit-
tance market.

Authored by:

Rohit Bhattacharya
SPJIMR

42
 ARTICLES

FINTECH:
revolution or evolution

Introduction: Changing Trends

As a country just born into the globalized economic world, the primary concern of the Indian economy
was to facilitate growth by industrial development and thus legacy financial institutions such as IDBI and
SBI drove the activities of investments. Banks and financial institutions focussed on social and develop-
mental goals. Through stages of development of economy and with increased liberalisation the financial
institutions increasingly adopted the role of Growth facilitators to serve the needs of growing engagement
of borrowers and investors of nation, and this continued for a long time before the advent of an era where
the scarcity now is of consumer engagement and hence the disruption is born as FinTech.

Value proposition Process enhancement

Fintech provide a better consumer experience through smoothening of journey of consumer engagement
and increased personalisation of services leveraging the data of individual consumer accounts and
through the use of information analytics creating an interface in which the user is guided at every step to
the next window based on his needs much like the human guidance. Application program interface (API)
allows the developers to create a value both for the backend of a financial company and for consumer
transactions and services. The diagram shows how FinTechs have advanced machine learning models to
create a unique value proposition for end consumers and also for stakeholders in the supply chain of fi-
nancial services.

Value propositions added by Fintech Revolution

43
 ARTICLES

With radical simplification and speed of delivery, Fintech has created platform for engagements of end-to-
end customers with fully integrated and coherent channels. Fintech has provided complex product cate-
gories of financial institutions in very rationalized and comprehensible way with more transparent pric-
ing. Drastically reducing infrastructure requirements from retail branches to app simply available at
google play store or apple iTunes, Fintech has provided universal banking solution with greater customer
experience and put pressure on conventional banking institutions to look beyond the traditional value
chain of banking.

Area Disrupted

FinTech has developed basic building blocks of a software platform also known as API in majorly these 6
domains or these are broad themes of innovation in building of digital infrastructure.

Reference: Panorama by McKinsey & company

Area disrupted after fintech revolution

Value chain of a typical fintech firm

Although initially entered as elements and building blocks in financial service industry, Fintech compa-
nies are now exploring partnerships to offer complete value chain. Some parts of financial services like
payments products are quite crowded. Consumer identification and payments are easy option to start for
any fintech start-up but it is now becoming less attractive as most of banking institutions have already de-
veloped their own fintech platforms for the same. Fintech companies are now focused on to develop
whole value chain for delivering financial products to customers. The following is the underlying hierar-
chy of structures which are the basic building blocks of any fintech. Alongside are also highlighted the
partnerships that a fintech explores to provide a seamless journey to consumers by integrating with third

44
 ARTICLES
party services and sometimes a collaboration with a standard bank so as to leverage the existing huge da-
tabases of commercial banks regarding the KYC data and credit worthiness of a consumer etc. These part-
nerships that these fintech have to form for the aggregation of data and sustaining customer engagement
constitute the major costs of a fintech along with developing a workforce which is highly analytically ori-
ented and can convert huge amounts of data into comprehensible mathematical models and can generate
useful insights for consumers based on the recommendations of those models.

Value chain of basic fintech model

Sustainability of Revenue for Fintech
FinTech ventures use machine learning algorithms and alternative data points such as social media foot-
prints, call records, shopping histories, and payments to utility service providers to increase efficiency
and provide greater access to credit. The turnaround time is also much faster for the approval and dis-
bursal of loans by FinTech firms despite several banks digitizing and speeding up these processes mark-
edly. Since the world is quickly shifting to a data based advisory approach also supported by the fact that
more and more and more people who are financial savvy are also becoming tech savvy. The problem
with the IT infrastructure of banks is that the old mainframe computers - the workhorses of the global
banking industry - have been chugging away keeping tabs on all our transactions for decades now.
Theyre slow and reliable. But the world has changed. Weve gone mobile and online. We expect real-
time trans-actions and access to financial services around the clock. The new computer systems and pro-
gramming languages designed to cope with this fundamental shift in our behaviour dont interact well
with the old, slower back-office systems. Layers and layers of IT have built up over the years, gradually
hobbling banks ability to innovate and respond to this new world. Very often banking groups that have
grown by acquisition have never fully integrated their system. Thus, banks instead of competing are
looking forward to partner with fintech which provide flexible Apps and fully integrate their systems,
says Accenture.

Although banks are fighting with fintech disruptions by developing their own models but in a long run,
a successful and sustainable partnership with fintech will be appropriate option for banks.

45
 ARTICLES

Partnership is win-win situation

Future scope and government support

Evolution of Fintech has revolutionized banking penetration by closing high potential gap of banked and
unbanked people through banking made available by digital channels on mobile devices. Although High
income OCED (Organisation for Economic Co-operation and Development) countries such as USA, Scan-
dinavian countries are considered as model countries for development, 6% of adults are still unbanked in
the same due to inherent limitation of building infrastructure in conventional banking. This figure of un-
banked adults is 54% in case of south Asian countries. Countries like India are now taking step for
financial inclusion of all and fintech can be considerable partners for banks and governments in achiev-
ing the same.

Authored by:

Yoginkumar Vekariya Pragya Singhal

SPJIMR SPJIMR

FIN-FACT
Lamborghini was the first automotive company in the world, which dealers began to accept Bitcoin
Skycraft Airplanes were the first to sell planes for Bitcoins
927 people own 50% of all Bitcoin

46
 EXPERIENCE

INTERNSHIP
at ICICI
I got an opportunity to intern in the Corporate Banking Group, ICICI Bank. The SIP was a great learning
experience, which I would broadly categorize into three aspects: learning related to the assigned project,
academic learning and behavioural learning. In the initial 2 days of SIP, we had interactive sessions with
the business heads of each division (wholesale Banking, Markets Group, Retail, Risk Management Group,
HR Group) which gave a holistic view on the working of Bank and what was expected from us as summer
interns.
I was assigned the project, "Infrastructure Investment Trusts (InvIT) and Real Estate Investment Trusts
(REIT): Regulations, Challenges and Valuation Models". InvIT, as a financial product, had come up recent-
ly and though there were financial products similar to InvIT in other countries but not as specific as InvIT.
Also, no firm in India had gone for either an InvIT or REIT (till April 2017, when my Summer Internship
began). IRB was going for InvIT during that time and following it through these 2 months provided the
platform to learns guidelines, newspaper reports, consultancy reports, interviews of Analysts and the
Companys management, Companys offer document filed on SEBIs website were the starting point and
most crucial input for the project. Understanding a financial product requires one to understand the rea-
sons for its origin and how does it intend to solve those problems. An understanding of the Infrastructure
sector (especially the road sector as the focus was on the upcoming IRB InvIT) provided the necessary
foundation to proceed with the project. The project had three broad aspects: how did the product work,
what were the challenges associated with it and how did the product impact the various stakeholders
(Investors, Company, Banks, Government).
The SIP experience provided more clarity and understanding on the academic knowledge that I had learnt
during 1st year. Being an engineer, it was a good learning experience to decipher accounting statements
directly (it is quite different to see them in books and cases, where everything is segregated), learn more
on IPOs, Offer for Sale and Valuation. Also, the interaction with other departments (such as the Risk
Management Group) offered a more prudent way of looking at the problem. Moreover, it gave an over-
view on how to integrate class learning with the happenings in the corporate world.
Last but not the least, there was an enormous learning from interactions with my mentor assigned and
others in the team. Every review meet opened up new challenges and dimensions to work on, providing
more knowledge and clarity on what I was doing. The clarity, the senior management at ICICI had about
products and policies, their preparedness for the future business environment changes and diligence in
the work was motivating and an eye-opener to the way one should prepare oneself for the upcoming cor-
porate journey.

Parth Sahoo
IIM Raipur
PGP 2016-18

47
 EXPERIENCE

INTERNSHIP
at SEBI

When I got my internship offer from SEBI little did I knew that I was up for an immemorable two months
of life which are going to shape my professional career than none other. Yes, I did know that SEBI is the
regulator of capital markets in India but I could appreciate the important contribution it makes to the sta-
bility of Indian financial markets only when I joined the SEBI Head office SebiBahavan located in the
Bandra Kurla Complex( BKC) of Mumbai.

SEBI turned out to be a marvellous knowledge-driven organization where every interaction with the men-
tors and co-interns turned out to be an immense learning experience for me. SEBI encouraged us to intern
in an area of our interest and gave us live projects to work on which involved interaction with market par-
ticipants to understand the real issues and challenges in Indian financial markets. We were provided with
mentors and guides who were there to help us at every step. I interned in the Investment Management
department of SEBI in the field of fixed income securities. In these two months, I got to learn immensely
about the debt securities market of India, particularly a lot about the corporate bond market in India.

My project was broadly based on initiatives to be taken for development of the corporate bond market in
India. I made an attempt to research about two such developments made by SEBI EBP (Electronic book
building platform) and consolidation and re-issuance of debt securities.
The project turned out to be a huge learning experience for me, I enjoyed the work so much that I com-
pleted not one but two projects during my SIP. This opportunity equipped me with the literature, regula-
tory and practical aspects of the corporate bond market.

At the end of the project, I learned that reforms more often than not are a gradual evolution born out of an
interactive improvement process, not an immediate cascading effect of the implementation of suggested
policies.

Garima Bisht
IIM Raipur
PGP 2016-18

FIN-FACT
The Blockchain is not only used to send or receive cryptocurrencies value. For instance, it is currently
used to limit the voting fraud, for transfer of assets including real estate or securities concerning banks
and insurances, for track ownership, etc.

48
 49
Answers 6. Ten 13. Current Down 24. Earnings 31. Reporting
Across 7. Equity 14. Retained 9. Point 25. Revenues 32.Equation
1. Liabilities 8. Position 15. Income 19. Balance 26. Payable 33. Assets
2. Principles 9. Publicly 16. Stockholders 20. Treasury 27. Double 34. Debit
3.Standards 10. Dividends 17. Securities 21. Operations 28. Operating 35. External
4. Accepted 11. Credit 18. Financing 22. Audit 29. Investing 36. Cost
5. Accrual 12. Expenses 23. Financial 30. Capital
18 17
16
15 33 14
32 13
31 30 29
12 11
28 35 10
36 9
27
26 8
7
6
5
4 25
34 3 24
23 22
2
21 20 19 1
WORD
ACROSS
1. Obligations including customer deposits.
2. Cost, full disclosure, and matching are three of the basic accounting______________.
3. The FASB is responsible for developing new accounting _____________, which will become part of
GAAP.
4. GAAP is the acronym for generally ___________accounting principles.
5. Large companies must use the _________-basis of accounting, rather than the cash-basis of accounting
6. A corporation's annual report to the SEC is the Form _______-K.
7. The difference between the amounts of assets and liabilities is stockholders' _________
8. The balance sheet is also referred to as the statement of financial _______
9. If a corporation's stock is _________-traded, it will have additional financial reporting requirements
10. Distributions of some of a corporation's net income to the stockholders.
11. The word for an entry on the right side of an account.
12. Costs that are matched with revenues on the income statement.
13. Liabilities due within one year of the balance sheet date are ___________ liabilities
14. An important component of stockholders' equity is ____________ earnings.
15. The financial statement that reports on a corporation's profitability during a specified time interval is
the __________ statement
16. Other comprehensive income and dividends are two of the items reported in the statement of
________________' equity
17. SEC is the acronym for ____________ and Exchange Commission.
18. Changes to long-term liabilities will be part of the _____________ activities in the statement of cash
flows.
DOWN
9. The balance sheet reports amounts as of a __________ in time.
19. The financial statement that reports deferred revenues and deferred expenses, is the
_______ sheet.
20. A corporation's own stock that it repurchased but did not retire is __________ stock
21. The income statement is also referred to as the statement of _________
22. An _________ of the financial statements is required when a corporation's stock is publicly-traded
23. FASB is the acronym for _____________ Accounting Standards Board.
24. If corporation's stock is publicly-traded, its __________ per share must appear on t income statement
25. Two of the major elements of the income statement are ___________ and expenses
26. This word is often included in the title of liability accounts
27. ___ entry bookkeeping requires at least one debit and one credit for each transaction
28. The first section of the statement of cash flows has the heading of _____________ activities
29. Cash used and provided in transactions involving long-term assets are reported in the
______________ activities section of the statement of cash flows
30. Paid-in _________ is a component of stockholders' equity.
31. Financial ____________ includes both the financial statements and other communication of financial
information
32. A = L + OE is the accounting ______
33. Resources including prepaid expenses
34. The word for an entry on the left side of an account.
35. Financial accounting is focused on ______________ (external, internal) users of the information
36. The principle that prevents long-term assets from being reported at their appreciated market value

50
 EVENTS

EVENTS

Atharva , the annual Finance magazine of IIM Raipur was launched in October 2016. The articles were
invited from the students across the country on the theme The Upheavals in the Indian Banking Indus-
try.

It was a Panel Discussion of Industry stalwarts and practitioners on the Current Scenario of Indian
Banking Industry. It was our privilege to have Mr. Narendra Gallani, VP and Circle Head, Axis Bank and
Mr. V.C. Upadhyay, DGM and Zonal Manager, Dena Bank as the Panelists. We had Professor Vinay
Goyal, faculty and area chair Finance, IIM Raipur as the moderator of the discussion.

51
 EVENTS

Sanchayan is a financial literacy programme

organized in villages. Its purpose is to create
awareness about financial inclusion and various
government schemes among village mass.
This year a special session was also conducted on
cashless economy & digital payments during the
time of Demonetization under VISAKA (Vittiya
Saksharta Abhiyan).

Finatix conducts this event for those who aspire to
be the future investment banker. It allows
participants to make perfect pitch book for merger
and acquisition. We conduct this event during our
Cultural and Management festival EQUINOX.
Arthayaukti is another event that the club conducts
during EQUINOX. It tis an online trading event. for
finance enthusiasts.

52
 EVENTS
Arthagyan is a national level Finance quiz
competition conducted by Finatix. The win-
ners of the quiz were Manav Madaan and
Akshay Nayak from NMIMS, Mumbai.
Panel discussion was conducted on money demonetization and Donald Trump's big win in
the US Presidential election .
Mulyankan is an Inter college Equity re-
search Competition organized by Finatix.
The event saw participation from various B
-schools across the country The winning
team was HocEast Bellum from NMIMS,
Mumbai.
53
This is another event that the club conducts
during EQUINOX. The event is about Un-
ion Budget preparation. The winners of the
competition were Parth Sarthi, Suhas A.R.
and Jasojeet M. from IIM Raipur.
This years Open Floor Trading competition was
all about Forex market. The event gave students
an opportunity to learn how the real-world situa-
tions impact the currency exchange rates. The
winners of the competition were Arnab Ghosh,
Subhankar Nayak and Moon Moon Tiga .