New players and a lot more easily available data have accelerated change in the industry.
The banking and financial services (BFSI) sector in India is on the cusp of a change. Over the last few years, in addition to various types of non-banking financial companies (NBFC), we have seen the emergence of several fintech players or organisations that are primarily digital platforms offering financial services. We’ve also seen techfin, big tech companies, and large digital players like Google, Amazon and Apple disrupting the financial services space. The Indian government too has done its bit by launching the United Payments Interface (UPI) to accelerate digital transactions. By connecting Aadhar to bank accounts and with UPI use picking up, there is a lot more data available for players in the BFSI sector to tailor products to customers based on their credit profile and requirements. Here’s how digital disruption and adoption of digital technologies by traditional players will transform the financial services landscape in India.
Fintech and biztech players will continue to thrive on disruption
A favourable regulatory regime has fuelled the proliferation of fintech startups. Over a 100 startups were launched in this space in 2018. Fintechs have moved on from payment services to providing remittance services, retail investment services and peer-to-peer lending services. Being primarily built to cater to the digital universe, these players are offering faster turnaround times in lending services than traditional players. Armed with natural language processing technology we will see many of these foraying into Tier-2 and Tier-3 cities. They will also be looking to make deeper inroads into the small and medium business sector as traditional banking institutions have not been able to cater well to their specific needs.
Traditional players will enhance digital footprint
Digitalisation is the order of the day for traditional banks and NBFCs. They will look to process improvements that will drive digital transactions as opposed to the more expensive branch or ATM-led transactions. They will also try to deliver a host of new services.
Partnerships will be the new mantra
The BFSI sector will see a slew of partnerships that will help fintechs leverage the nationwide footprints of larger players. Traditional players would also be looking at partnerships with technologically advanced players with robust digital platforms.
Personalisation will assume new significance
Personalisation in the delivery of banking services on digital platforms is still in its infancy as data quality and analytics deployed by financial services institutions are not up to the mark. This will change as banks and fintechs have access to multiple data sources that could include Aadhar, PAN Card, social media profiles and mobile user profiles among others.
AI and ML will drive new efficiencies
Banks will increasingly deploy artificial intelligence (AI) and machine learning (ML) to automate numerous internal processes for better accuracy and cost optimisation. Customer interfaces will also be largely driven by technologies like AI, ML and Natural Language Processing (NLP).
Information security will present new risks
The financial services industry will be the biggest target for cyber criminals and frauds. Putting in place filters and security checks at every level, while allowing faster and smoother transactions will be one of the industry’s biggest challenges.