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Indian BFSI industry: Surviving the age of disruption

Sejuti Das July 18, 2017

With enormous growth potential, India’s banking, financial services, and insurance (BFSI) sector is rapidly intensifying and transforming itself to be truly digital. Although a few banks in the country are still being weighed down because of their legacy infrastructure and processes, majority of them are in the midst digitization by aligning themselves to latest trends. Therefore, this is the most interesting time for the BFSI sector in India.

Innovations are taking place at the national level. Existing banks are adopting technology to expand their customer base and reach out to new consumers with efficient services. New entrants are offering differentiated offerings at lower costs, using the power of technology. Also, recent initiatives by the Indian government around demonetization and the move towards cashless transactions is further driving innovation into the industry.

The fear of missing out on blockchain is a huge concern for banks and therefore CIOs are looking forward to blockchain experimentation.

This not only allows banks to offer enhanced service levels, but when combined with IoT data, and robot advisors, it’s feasible to offer more personal, contextual and a unique banking experience for the customers.

As Indian BFSI industry is getting integrated with the global markets, it becomes imperative to have timely insights and real-time customer data in order to respond to dynamic market conditions as well as evolving customer expectations.

In fact, findings from a recent KPMG-CII report state that the Indian BFSI industry is currently worth approximately Rs 81 trillion, and banks are now utilizing the latest technologies to carry out transactions and communicate with the masses.

Another report by IDC states that the total spending on IT by banking and security firms in India is expected to grow 8.6 percent YoY to USD 7.8 billion this year. Banks in India are expanding their core technology to achieve digital transformation along with ease of managing data and maneuvering policies.

Transformational trends

Clearly, the rise of financial technology has huge implications for the BFSI sector in India, which not only impacts the banks’ infrastructure and systems but also their decision making.

The cloud is expected to be the most popular tool used by banks and financial institutions for upgrading core transaction platforms. Furthermore, banks are leveraging big data, predictive analytics, robotic process automation tools and cognitive intelligence, to offer enhanced services to customers.

Other technology trends to keep in sight include IoT-enabled payments, along with the increased use of social media bots, and various security-enhancing measures such as biometric and encryption. Artificial intelligence has also reached a critical threshold and is the key component of technologies like data science, optical character recognition, and natural language programming, which help banks and financial institutions in driving significant changes in the way they operate.

The blockchain is another such technology that has reached the peak of inflated expectations. This fear of missing out on blockchain is a huge concern for banks and therefore CIOs are looking forward to blockchain experimentation in their organization.

Security continues to be a concern

Privacy issues, compliance, and security have always been the major concern when it comes to adopting digital technologies in banks and financial institutions. Banks have always feared insecure application program interface, confidential data loss and data leakage, and malicious attacks.

While common cybersecurity threats remain, more sophisticated threats with potentially greater impact are also emerging. Along with distributed denial-of-service (DDoS) attacks, there are denial-of-system attacks, which make the information systems of banks completely inoperable.

Cloud is expected to be the most popular tool used by banks and financial institutions for upgrading core transaction platforms.

And, as the adoption of cloud increases, encryption and identity management are likely to rule the industry, which forces banks and financial institutions to focus more on predicting the threat rather than mitigating it.

Quest for greater efficiencies

With a huge customer base, BFSI sector in India always undergoes immense flow of diverse information, security threats, and fraudulent activities, which lead to accumulation of overwhelming amounts of data. With such a huge amount of data along with increased customer expectations, banks need to re-imagine their core business module and identify new opportunities to provide a better customer experience.

Financial institutions are investing strongly in big data technologies, with technology leaders leveraging analytics for improving trading strategies, managing portfolio, reporting regulations, driving sales, boosting retention, improving service, and targeting clients.

Big data has even far-reaching effects. Study of data properly can also add great value to banks and financial institutions by helping them in finding patterns and indications which have increased the probability of fraud.

CIOs serve their clients on the basis of multiple data sources, and data science can help in strengthening risk management in areas such as cards fraud detection, financial crime compliance, credit scoring, stress-testing and cyber analytics. It analyzes customer data to achieve customer intimacy by providing a best remedial solution. It is in fact opening up whole new opportunities for BFSI sector in the country.

Future of BFSI sector is digitization

BFSI sector in India has a lot of problems to deal with—shifting demographics, newer trends and technologies, rising customer expectations and changing regulations. But, with new technologies trends emerging daily without a break, flexible banks need to keep up with the growing expectations of customers. Banks also have to make sure that they are way ahead of the emerging competition.