Transformative Trends and Innovations in the BFSI Sector
Integrating new automation systems with legacy core banking systems can be complex and may lead to operational disruptions and hence a well-planned integration strategy
1. What are the current emerging trends in the BFSI industry?
The market is continuously evolving with customer behaviours, their expectations and change in consumption patterns. This is added by the tough talent availability and ability to adapt to changing technologies. This has increased the need for large financial organization to undergo disruptive transformation while synergizing a Fintech culture.
It has brought in a radical thinking of how organizations modify existing business model, culture, improved customer, and employee experiences through adoption of digital techno- logies. At the same time there is an increased need than ever on cyber security and ESG initiatives in the financial organizations.
2. What are the latest technological advancements in the FinTech space, and could you provide some use cases for their application?
There is an increasing need to exploit the digital technologies which can enable a robust new digital business model for financial institutes. Fintech has played a pivotal role until now, while large organizations are now invested in the same.
Digital Traceability & Blockchain-
- Banking - Smart contracts based on blockchain are used to issue agreements used in trade finance.
- Insurance - Blockchain can expedite the claims settlement process by enabling secure & automated transactions. Insurance companies are also using blockchain to verify the identity of policyholders securely and efficiently (KYC).
- Financial Services - Tokenisation of physical assets via NFT, trading crypto currencies etc.
3. How is data security addressed within the BFSI sector to ensure the protection of sensitive information?
Data security is paramount for any BFSI org and repercussions are high. As mentioned earlier one method is to use biometric authentication such as facial recognition, firms have adopted data storage on cloud thus limiting data hacking instances, deployment of RegTech solutions.
"The adoption of digital payment methods, including mobile wallets, contactless pay- ments"
4. What are the potential risks and challenges associated with the implementation of automation in core banking functions?
Having automated multiple core banking functions and systems we have firsthand idea of the risks & challenges. We place increased vigilance while executing such projects. Our experience says that below are some of the risks –
- Legacy Systems Integration – Integrating new automation systems with legacy core banking systems can be complex and may lead to operational disruptions and hence a well-planned integration strategy, including testing and gradual deployment, is essential to minimize disruptions and ensure a smooth transition.
- Vendor and Technology Risks - Banks often rely on 3rd party vendors. Vendor disruptions, security vulnerabilities, or a lack of system compatibility can pose risks. Choosing the right partner is of utmost importance. Indium takes pride in positioning itself as a matured and trusted partner having BFSI domain experts who know the nitty-gritties.
5. Why is regulatory compliance crucial for ensuring the success of fintech innovations?
BFSI orgs are back bone of an economy and compliance is not an option. We have seen firms being fined heavily for non-compliance with financial regulations.
Bank data stolen sends shivers down the spine of both institutions & their customers, reminding us of the regulatory compliance and data protection in the digital age.
By complying with regulation, fintech innovations foster market stability, investor confidence, ethical standards etc. These in-turns ensure smooth functioning of financial markets and economy in general.
6. What do the future prospects look like for the BFSI sector considering ongoing technological and market developments?
The future prospects for the BFSI sector is highly influenced by ongoing technological and market developments. Advancements in BFSI tech will further boost the sectoral ROI which in turn will create employment opportunities and boost to economy.
I am very upbeat about certain developments like -
Each of these has potential to generate positive outcomes. Though at times, we have noticed resistance to tech advancements(bank union strikes / employee upskill gap/customer resistance etc.) and hence appropriate communication along with education is needed while adopting tech enhancements.