The Indian BFSI sector has been playing a critical role in driving the growth of the Indian economy and is considered the key enabler for the vision of India becoming a US$ 5 trillion economy in the coming years. The BFSI sector is undergoing a major transformation towards digitization on one side and containing NPA on the other side which leads to short-term turbulence. The outlook seems to be cautiously optimistic with a multi-decade low credit growth however improving corporate outlook on infrastructure and capital spending. There is no doubt that, like other sectors, the BFSI sector is also going through turbulent times. The Government and regulators are taking strong measures to strengthen the sector through favorable policies, the creation of new types of banks to promote financial inclusion, relaxation of FDI norms, etc.
The BFSI sector was always ahead in embracing digital. But in the past 20 months, they have reshaped their strategies and adopted a ‘digital first policy. They have already witnessed a remarkable digital translation. Just to add, a few private banks are opening 30-35% of bank accounts digitally, and more than 80% of their transactions are happening on digital platforms. Insurance companies too are witnessing a 25-30% jump in their digital sales and NBFCs and FinTechs are touching new highs every day with digital lending. BNPL and WhatsApp banking are growing rapidly and BFSI companies are strengthening digital connectivity for the future.
The BFSI sector is laying greater emphasis on providing improved services to their clients and upgrading their technology infrastructure to enhance customers’ overall experience as well as give a competitive edge.
Rise of Fintechs
Accelerated technology adoption, the rise of Fintech, and increased mobile penetration have been playing a pivotal role in re-shaping the BFSI sector in India. India’s digital economy is predicted to rise exponentially to US$ 800 billion by 2030. India is amongst the fastest-growing Fintech markets in the world. India has over 6,300 Fintechs, with 28% specializing in investment technology, 27% in payments, 16% in lending, 9% in banking infrastructure, and over 20% specializing in other industries. India has over 17 Fintech companies, which have gained ‘Unicorn Status’ with a valuation of over $1 bn.
As the sector continues to drive innovation, technology leaders find themselves looking for new ways to redefine their strategy comprehensively, outgrow competition and remain resilient. Customer-centric approaches, digitization, automation of processes, and data security continue to be priorities for IT leaders from the BFSI sector. Banks have experience, brand recall, legacy, and customers' trust, while Fintech brings in the new age expertise and nimbleness needed to leap into the digital space. Many banks are joining with fintech startups to upgrade their existing systems and enable smoother operations to deliver a better experience to their customers.
Sustainability is the most critical aspect of the fintech sector. In the next five years, the Indian fintech sector is expected to grow with a cumulative annual growth rate of around 22 percent. Today, the world is looking up to India, as we continue to innovate and lead the way seamlessly imbibing the new age technology without compromising on the safety and security aspects.
The Fintech sector in India is nudged by the government, fostered by the regulators, acknowledged by the industry, and accepted by the people. Fintech growth in India has been huge with a very high adoption rate as compared with other jurisdictions.
Cyberattacks in BFSI: The Dark Side of the Digital Era
BFSI is under increasing scrutiny to ensure they have the appropriate security measures in place, especially in the wake of the numerous data breaches that have taken place over the last few years. Cybersecurity in BFSI was valued at US$37.4 billion in 2021 and is expected to reach US$66.02 billion by 2026, at a CAGR of 11% over the forecast period (2021 – 2026).
They are now geared for new innovative ideas and opportunities to deal with any sort of disruptions. The industry is taking several steps to safeguard its IT infrastructure and they continue to be challenged by the pace of innovation and the rise in sophistication of the attacks. Currently, a strong cybersecurity posture involves more than just safeguarding sensitive data and systems from harmful external attacks. It also involves identity protection, greater data privacy, and effective vulnerability management.
By using the latest new-age hacking and invasive software tools embroidered around a cloak of anonymity and finesse, these cyber outlaws are seemingly bludgeoning the security systems and data-based infrastructures of the country’s banking and financial ecosystem and stealing assets worth millions of dollars. Armed with the latest revolutionary hacking technologies and cutting-edge innovations that are specially intended for such dark purposes, the ominous march of the cyber attacking legions, if unchecked and unguarded, will surely bring the entire BFSI sector of the country to the ground.
New technologies like cloud and IoT are increasing vulnerabilities for financial institutions, and attackers around the world are arming themselves to wage war. Now more than ever, it is crucial for organizations to heighten their level of preparedness and strive to achieve proactive resilience.
Digital Transformation is changing the Insurance Industry
The insurance industry is built on the understanding and management of risk; hence, the explosion of available data will result in a golden period of significant data-driven innovation. The pandemic has changed the way insurers operate. Several processes such as sales, service, and others have been moved across to digital channels. Transformation is motivated by various factors such as the need to adapt to a new generation of consumers, the constant technological evolution and digital innovation, the increasingly intensive use of data, the emergence of new distribution channels, and last but not least, the new generation of digital start-ups.
The digital transformation is quickly changing the rules of the game in the insurance sector. However, there are some challenges in its adoption. The insurance industry has traditionally been slow to modernize, but it is now clearer than ever that the time is now for insurers to embrace digital transformation. The digital transformation of insurance – powered by artificial intelligence, machine learning, predictive analytics, mobile service, live chat, etc. – is enabling insurers to do just that, and will keep changing the industry for years to come.