BFSI gearing up for a digitally transformed future | The Financial Express

BFSI gearing up for a digitally transformed future

There also has to be a good perspective on the compliance needs of BFSI organisations. Data, analytics and visualisation technology may be used to reduce the complexity of business workflows, spot emerging risks and improve the effectiveness of the compliance function.

BFSI gearing up for a digitally transformed future
Banks are under severe pressure from new entrants who are aggressively taking market share and winning over new customers with digital-first banking solutions. Image: PTI

By Anoop Gala

The financial services industry is changing rapidly. Digital wallets are replacing cash; online lending is growing faster than bank loans; challenger banks are gaining market share from established players; robo-advisors are auto piloting investment portfolios; and traditional financial services outfits risk becoming mere middlemen within the industry landscape.

Embracing Disruption

As we continue to be in a phase where disruption is ultimately a constant, it becomes imperative for financial services companies to enhance the customer experience, improve revenue and improve return on investments in an ever-increasing competitive scenario.

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It is important for banks, capital markets, wealth & asset management, payment providers, insurance companies and fintechs to embrace disruption by combining engineering and design thinking with a holistic understanding of the issues currently facing the sector. There is a dire need to use advanced technology, including AI, NLP, automation and predictive analytics so that financial institutions can increase profitably, improve return on investments and significantly enhance the overall customer experience.

There also has to be a good perspective on the compliance needs of BFSI organisations. Data, analytics and visualisation technology may be used to reduce the complexity of business workflows, spot emerging risks and improve the effectiveness of the compliance function.

Cards & Payments

In a curious reversal, big players in cards and payments are mostly playing catch-up with boutique and niche players on the newer solutions like Buy Now Pay Later (BNPL), Real-Time Payments (RTP), Cross Border Payments, Open Banking, and Embedded Fintech. Their response has been to increase acquisitions and consolidations and they need to be nimble to integrate the newer systems. All players are racing to take advantage of newer solutions coupled with existing services to gain further market share.

As technology advancements and expanding global networks become more pervasive, organisations face major problems protecting the systems and data. Consumers continue to embrace new payment methods, increasing cyber security threats for businesses.

Large enterprises continue to be burdened with complex platforms and legacy technologies that inhibit their ability to innovate quickly and at scale. Those failing to embrace cloud computing, enhanced customer experiences and automation face the threat of falling behind more agile players.

Wealth & Asset Management

The COVID-19 pandemic has created new challenges for all business across all industries and the wealth and asset management sector within financial services is no exception. The effort to meet the challenge of creating a ‘new normal’ is driving firms to focus on business resiliency and seek innovative technology solutions that will provide optimisation and security. Wealth and asset management firms are also responding to increased pressure on their revenue and margins resulting from intense competition, as well as negative interest rates and the rise of passive products. All these factors have accelerated digital transformation in this sector, with firms building new digital channels and capabilities across the value chain.

Banks

Banks are under severe pressure from new entrants who are aggressively taking market share and winning over new customers with digital-first banking solutions. With lower costs and a digital-native mind-set, fintechs are rolling out new products and services that undercut the competition and grab new deposits. For banks, the challenge is how to adapt to this new environment and win back customers who are looking for more convenient, simple, and personalised services that meet their current financial needs. Financial institutions have an opportunity to leverage their strong balance sheets and brand recognition to modernise their banking infrastructure to better compete.

Fintechs

Global venture funding reached a record $621 billion in 2021, more than double 2020’s total of $294 billion, according to CB Insights. Fintechs are quickly going from stealth startups to multibillion global financial institutions. As these businesses scale and add new features, having the right team and technology to support their growing operations is critical. At the same time, fintechs are charged with balancing their ambitions and fast-moving approach with the changing regulatory environment. They are also seeing a renewed focus on their services from traditional banks who are eager to mimic the services and features being offered by fintechs.

Insurance

Creating and delivering value in insurance has drastically changed. While some insurance carriers have made significant investments toward digitalisation, most traditional players trail behind. Forward thinking insurers are digitising much of the process, from application submission to claims management and loss prevention. This is reducing costs and friction, allowing the industry to attract new customers.

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Capital Markets

Legacy frameworks can be a significant challenge for companies in the capital markets. Modernising back office, middle office, and front office applications while operating in a highly regulated environment, can put a tremendous strain on any business and limit its growth prospects. Yet, organisations in the capital markets embracing innovation are seeing new opportunities.

Last Word

Successful financial services companies are evolving to meet the changing needs of their respective customers and internal audiences. By adopting and executing a digital-first mindset, financial institutions will have the opportunity to build on their long-term legacies, and in doing so, better position themselves for the future.

(Anoop Gala is the global head – financial services at Orion Innovation. The views expressed are author’s own.)

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First published on: 04-12-2022 at 10:20 IST