Transforming Finance: Exploring Fintech Solutions and the Future of Automation

Amit: Hello all, welcome to another insightful episode of our digital dialogue podcast by Cigniti Technologies, where we talk about digital transformation and other latest trends with IT leaders. We at Cigniti believe in driving thought leadership and collectively learning from everyone’s experiences and insights. We have developed thought leadership initiatives to help global enterprises win the digital landscape. I, Amit Kapoor, help drive thought leadership initiatives at Cigniti, and I’m your host for today’s episode. With great pleasure, I welcome Bharat Puppala to the podcast. Bharat is the co-founder of Numerize, an accounting automation platform. He is a chartered accountant, a management accountant, and an economics student. As a thought leader, he has spearheaded the global shift in accounting and finance automation. He believes the world is pivoting from revenue-centric management and decision-making to profit-centric management. And Numerize is driving the much-awaited change. Welcome to the digital dialogue, Bharat.

Bharat: Thanks, Amit. Thanks for the warm introduction. I’m really happy to be here and share my insights with you all.

Amit: Great to have you with us today. And with your deep experience, Bharat, today we would like to hear your views on FinTech solutions, the most innovative and disruptive FinTech solutions, the key technologies to watch out for, the relevance of automated financial analysis, and much more.

Bharat: Sure. Definitely, Amit. Looking forward.

Amit: Okay. Let’s get going. And here comes the first question of the session. Bharat, do you think growing companies also need to invest in automation and FinTech solutions? Is there a justifiable ROI?

Bharat: Right. So, that should be a climax question. The short answer to that is yes. I personally believe that companies, even growing companies, should invest in automation and FinTech solutions. Primarily because it doesn’t cost much. Most of the solutions don’t require much initial capital. They’re all pay-as-you-go solutions, like what Numerize also offers. However, the substantial investment that I think, especially for growing companies, comes in terms of the bandwidth and resource time, whether at a founding team level or CXO level. That’s the primary investment that they have to make. And, of course, the ROI, I personally think, is very justifiable, especially for investments in FinTech and accounting automation. Not just the direct cost advantage in terms of how much direct cost it saves, but it also impacts the quality of outputs. First, there weren’t these outputs the management wanted to consume. But after the automation in FinTech and accounting, these outputs are now possible. The ROI is multifold, not just cost advantage. There is also a quality advantage. Even for growing companies, I personally believe there is a justifiable ROI. And yes, the investment has to go into automation.

Amit: Very interesting. You talked about some startups and all. With the rise of FinTech startups, what are some of the most innovative and disruptive FinTech solutions currently in the market? And how do you think they’re changing the financial landscape?

Bharat: Got it. FinTech is one industry that is at quite an accelerated pace compared to other industries. You see, across the last 10 or 15 years, there has been quite a good acceleration in new FinTech organizations. Even in the startup community, you are viewed separately if it’s a FinTech. You are regarded differently. Also, the demographical changes, meaning what technology is there in North America currently versus what is there in China, how is India catching up? There is still some catching up between the demographics themselves. India is pretty advanced in payments, for example. Because currently, it might not be there in the geography that you are in. But I’m pretty sure these technologies will come into your business and lives in the next five years. The first one, I think, is payments and payment processing. There is much relief. The new-age startups have added many conveniences to payments. So net banking itself was one demographic shift. Before net banking, it was all checks or paper money. It used to be quite tricky. But after net banking, it’s a shift in how soon the money was transacted globally. But with the new age of financial startups, FinTech startups, the money movement has become much more straightforward. Payments and payment processing, I think, are going to disrupt and are going to be there. In the next ten years, it will become definite that even traditional businesses will be forced to use payment gateways, are forced to use international gateways for transacting, are forced to use banking companions. I mean, not just Internet banking, net banking. You will also be forced to use some third-party applications for simpler payments. Payments and payment processing are the first ones, I believe. The second one is loans and credits. Multiple FinTech startups are disrupting the loan and credit industry. Erstwhile, only banks are allowed to accord loans. The new-age FinTech startups have taken that over. They’re restricted and regulated. But growing organizations, again, will take much help, and benefit, in terms of accessible working capital from these startups. And finally, the third one, in the space that even our organization is in, is automated accounting, reporting, and CFO solutions, I would say. There is accounting and reporting, which is the bloodline for any business, which is soon to be automated, either in bits and pieces or in comprehension. These three technologies, sorry to add one final thing, banking automation. There is very good banking convenience that is going to come up. There are automated escrow accounts and payments and cross-border transactions and facilitation. These four domains, these four sectors, I would say, are on the rise, and you will see them everywhere in the next ten years, I think.

Amit: Interesting. Definitely, a lot of ground is being covered in terms of the whole digital landscape in terms of the fintech industry. A lot of technologies are there to be looked out for.

Bharat: Also, to add to the point that you just said, Amit, so finance is a transaction that is a result or a consequence of an operation. We buy and sell goods, and a financial transaction is a consequence. Most of these fintech organizations will eventually integrate with the operations and regular businesses. There will be digitization all across. We are there already. I think we’re already ten years late, and I’m pretty sure we’ll be soon there, that there will be complete digitization, full automation of all operations, of all finances concerned with it.

Amit: When we talk of businesses, and while we see a lot of growth, of course, it is ongoing, and it will come in due period. Do you think that adopting fintech and technological innovations such as what we discussed, and let us add on conversational AI and you talked about automated financial analysis and AI-driven analysis, how is relevant in times of recession when a lot of companies are facing such challenges?

Bharat: Right. So again, see the cycle of recession, this is more of an, I mean, me as an economist answering this. The recession cycle has become shorter and more uncertain of late, Amit. There used to be a recession every 25, 30 years, probably 100 years back, but now there is a recession every ten years. There is a recession for one industry every seven years, eight years. The cycles have shortened. But anyway, to your question, how are these technologies relevant in times of recession? Let me answer that by wearing the hat of a growing organization or a startup. We tend to be very focused on the relevance of what we are doing as a business. And for that, we need, you know, mirrors all around us. We must always stay reflected to keep doing the right thing. All these technologies can help us get that reflection better. Not all technologies are fancy. Most of these technologies you discussed are conversational AI, automated financial analysis, or AI-driven analysis. They’re all primarily utility-driven technologies, which will help me and help any startup founder or a growing business founder stay significantly reflected. I keep getting feedback on what my function is doing, how my profitability is, and where I am losing money.

How can I save my cash burn? These things are something that I need information on at least a daily basis, weekly basis so that I have to sail through recession. And as I said, recessions come more frequently than they used to. And they come for different reasons. Something happens in some countries, war, crisis, and the recession hits. You cannot predict them. The world has become one global village, and the interconnectivity has increased. That triggers recession from unexpected sources. We’ll have to be prepared for it. And these technologies that we spoke about should be constructively used, smartly used, and act as perfect reflection points. They act as perfect mirrors in our daily struggle to stay afloat, keep ourselves, and sail through the recession.

Amit: So basically, in order to be effective enough to get the correct information and do the right thing based on the data that has been collected.

Bharat: Correct. All the tools, especially in finance and accounting, are primarily to throw me the correct decision-driving information. To make good decisions, I need to be supplied with this information.

Amit: OK. If I go back a little and say, there are still multiple traditional financial institutions, right? How can these institutions adapt to the changing fintech landscape and remain competitive? What might be, if I can say, some critical partnerships and collaborations between fintech and traditional financial institutions that we can utilize and continue growing on the whole digital journey?

Bharat: Got it. Traditional financial institutions, be it insurance companies, banks, or formal institutions, are way too traditional, and things are that way for a reason. They are very highly regulated. Insurance, for example, world across is a highly regulated business. Banking is a highly regulated business, and there is beauty in this traditional thing. There is a sense of security that a customer gets. However, while having that security and authority from these conventional institutions, organizations would also don’t want to compromise on convenience; they don’t want to compromise on speed. Financial institutions have realized the importance of collaborating or trying to give both offers on the same platter. Most banks are trying to coordinate or collaborate with some fintech organization to ease their payments, and there is something called KYC in India; it’s Know Your Customer. All the initial documentation, the screening part of it, et cetera. These are more formalities. People have realized that it’s a necessary thing to live with it. But if there is something that can automate it, that can ease in itself, then nothing like it. How can financial organizations, especially the traditional ones, use the new age fintech startups is that, again, taking a page from successful books. People do have a separate program for partnerships. They keep partnering with promising startups to give their customers a collaborative solution. Their customers get the convenience advantage, the speed advantage, as well as the traditional security and authority that they always want in these types of transactions.

Amit: Maybe going a step ahead beyond this. What might be some of the ethical considerations around using fintech solutions that companies and regulators can use to ensure that these solutions are developed and implemented responsibly and transparently? Because that I think is a very critical consideration.

Bharat: Correct. That’s a very relevant question as well, Amit because there is currently data security and privacy issue all across the globe. And these laws change from geography to geography. There is a particular data framework within the USA, for example. There is a specific framework for European Union, for example. There is a detailed framework for different countries, and data is one part of it. Of the ethical consideration that you talked about, data primarily occupies, but there are non-data-related ethical aspects as well. If you ask me how should the fintech solutions or be aware of or how they should be developing solutions responsibly and transparently, which you asked me. The information, the knowledge about, what are the prevailing rules, what are the set of standards that somebody has to follow is still something that not many fintech organizations or not all fintech organizations are very abreast with or something that they are significantly updated with. But they’re trying to do that. How do they build this responsibly and transparently? I think the practical solution would be to understand all the legality of that geography, to understand all the standard benchmarks of that geography, and then try to stick to that. If you are legally correct, that’s the first step towards keeping things within the framework. That will; today, most data laws require you to do a lot more and need you to be all the more transparent and disclosing. And the problem is not with the intent of not following that legality. The problem is with the difficulty of knowing. There are 100 laws applicable to me. How do I be compliant with all that? If I start something today, I will not know all the data privacy laws. I’ll take my time. I’ll take six months. It’ll take one year to understand the framework. And most growing organizations, startups, and fintech solutions also cannot invest much in understanding this research. It will take the necessary time to keep the intent and legality right. I think that’s the first practical step towards it. And be extremely sensitive about data. Something that you don’t foresee today might multiply, amplify exponentially, maybe a year later, maybe two years later. You know, somebody who has been there, done that, can be of effortless and insightful help to you in terms of what you should be doing, should not be doing, and how you should be doing it. So, yeah, those two suggestions practically. The first one is to research the applicable legality and benchmark standards and tries to adhere to them. And the second one is having good mentors who will guide you in this direction.

Amit: Definitely. Security, cyber security, and all sorts of ethical laws are critical, especially in the financial world where everybody is involved.

Bharat: The cost of non-compliance is also high in this domain, Amit. Compared to other domains, the cost of non-compliance and the penalty for non-compliance is relatively high here. There are organizations, Cigniti as well, for that matter, who provide cyber security and consultation services. If you can afford that, I think you should; you will get to an inflection point where you should afford that and have that solution on board. You are unsure because you forget the legality, even for your own sake. Is my system safe? There is a lot of data that’s flowing in my systems of hundreds of clients. And how do I keep it safe? How do I keep it secure? So you need people with that authority, people with that credibility and pedigree to ensure, to give you, this is again a continuous thing, not something that, I get a certificate today and that stays relevant for five years. If my system is safe, I have to continue going through that process of continuous checks. It’s something that most organizations, even if they’re growing, even if they’re at a starting stage, that bandwidth, that investment, that outflow is needed to ensure that you are braced up for unreasonable or exceptionally high penalty costs.

Amit: Correct. The certain challenges, basically. Would you like to throw some light on what you think is the role of digital assurance and digital engineering related services in the world of FinTech solutions?

Bharat: Sure. See, the fundamental technology we are all using, or the technologies we are using, is being refined or improved by the thought leaders like Cigniti. For example, we use a lot of machine learning. We use a lot of OCR, optical character recognition. We try to use a lot of AI now. We are reliant on Cigniti or competent service providers to provide AI services. How I make a business out of it is what I focus on. I don’t focus on how I make my machine learning technology better. At the same time, we use our internal tech teams, if we have any, with the functionality part of it, meaning, how do we design it for the customer, you know, the business aspect. However, the fundamental technology, the underlying technology, the strength on which we are building our solutions, I personally think should be outsourced. Because we don’t have enough resources, we don’t have enough direction to improve the technology. But Cigniti or somebody like Cigniti is already doing that for us. While technology is the building blocks of our business solution, I think the world is at a stage where we can conveniently, securely, happily outsource it to somebody with that pedigree and use it to build a good solution for the world.

Amit: That’s a lot of solid information there. That brings us to the closure of the questions that I had in mind to discuss with you. And to all of those listening to the podcast, if you have enjoyed the experience and knowledge shared today in our podcast, do visit cigniti.com to explore our other thought leadership collaterals. And do write us and share your sessions and feedback. Bharat, thank you so much for your valuable time and insights you shared today.

Bharat: Thanks, Amit. If I may add one final point, to add my final perspective to the podcast. I believe that the world is pivoting from revenue-centric to profit-centric decision-making. 50 years back, 40 years back, especially growing organizations used to make decisions based on intuition, gut feeling, primarily on the sales numbers. How do I increase my sale? How do I optimize my sale? But today, the decisions are very data-driven. And the focus is shifted from revenue to profit because that ultimately matters. The findings are being taken around how I increase my profit. How do I optimize my profit, etc. So, a call for the listeners. If you are a growing organization, even an established one, shifting your focus overnight from revenue-centric to profit-centric is not easy. But I urge users to understand to spend some time with it while it is not very comfortable initially because the focus has been only on sales and revenue. To actually look at your profit numbers, however difficult it is, I think you need to face that moment. It would help if you met that moment of courage. Shift the focus to profit-centric management and profit-centric decision-making. And you will see that things will make more sense to you. And in order to do that, as I said, some technologies will enable you with the correct information. They will allow you with timely and accurate information. That’s my final message to the listeners, Amit. Thanks for the opportunity.

Amit: Awesome. That was bang-on and very important. Thanks once again, Bharat. And dear listeners, thank you again for spending your time and joining us on our podcast with Cigniti. And see you next time. Till then, take care.