By Abhishek Mithal . April 29, 2022 . Blogs
A decade ago, the banking and finance sector had unwavering control over the way people approached organized financial discipline in their lives. Even on the B2B front, banks exerted their dominance and refused to break their legacy lending frameworks, and often denied businesses flexible access to capital to spur their growth.
But moving into the 2010s and later, the BFSI sector is witnessing a massive paradigm shift in the way it exercised influence over the public and global markets. The unthinkable transfer of autonomy happened when technology made finance an open pillar of modern economic transformation. The Fintech revolution has created an ecosystem of tech companies that now enable billions of consumers to access core banking and financial services from the comfort of their homes on their smartphones.
Technology has democratized and decentralized the banking industry and made it more accessible to the needy. By eliminating piles of manual processes and bureaucratic hurdles in traditional banking environments, fintech companies made banking a more customer-centric business that focuses on maintaining standards in both services and customer experience. The startup ecosystem worldwide is also seeing a dominant representation for Fintech enterprises as they gobble up a large part of the capital flowing into the ecosystem.
In 2021, nearly USD 210 billion was poured in as investments in Fintech startups alone globally.
With the Fintech action rising exponentially, does it signal the end of traditional banks and established financial institutions? The answer is “No”. In fact, the BFSI sector has several lessons to learn from the success of Fintech companies worldwide. As the world is slowly picking up pace in normalcy after the COVID-19 pandemic, banks can play a bigger role in empowering economic growth by pushing capital to money-starved markets.
But to ensure that their efforts in stimulating growth trickle down to every single consumer irrespective of their location, banks and financial institutions need to embrace the strategies conceived and executed by Fintech companies. In fact, we have already seen howdigital-only banks or neo banks are gaining immense popularity worldwide. It is only a matter of time before traditional banks will replace their legacy information systems with powerful Fintech solutions.
Let us examine the top four strategies that players in the BFSI sector can replicate from the Fintech industry, to stay relevant and grow in a highly competitive industry.
Bringing customers into the heart of their operations will be a critical strategy that BFSI organizations can emulate in their products and services by taking cues from the Fintech industry. Every digital asset that a bank or financial enterprise creates needs to be thought out and designed from the groundup based on how customers will perceive its functionality. This customer-centricity helps in cementing the foundation of a better customer experience across all touchpoints that a bank or financial institution has with customers today.
By digital infrastructure, we mean both the physical infrastructure that BFSI players need to integrate into their computing and technology landscape as well as the applications and virtual environments they must empower for a better customer experience. From mobile apps that allow seamless on-boarding of new customers to AI-enabled loan recommendations to customers, there is a host of digital capabilities that banks can bring into their daily routine. However, to achieve the change, they need to make considerable investments into building their digital ecosystem on a flexible and mature infrastructure like the cloud and choose the right technology platforms and tools to empower seamless digital management of their business. When core business processes take a leap into a more flexible paradigm like the cloud, other aspects like security and geographical performance need further focus for enhancement.
One of the biggest differences between traditional BFSI enterprises and fintech companies is the high degree of automation across fintech operational processes. By eliminating cumbersome manual data entry and manual intense compliance processes and replacing them with self-service options with automated compliance and monitoring, BFSI players can help deliver a more streamlined experience for their customers. Besides, automation of core processes eliminates biased decision-making as well as improves efficiency across the value chain of banks and financial institutions. Automated workflows and processes make it easier for future additions in capabilities as well as integrating new features as underlying services and components will automatically sync up with their respective counterparts in the new feature.
The secret to the success of the Fintech ecosystem is its openness to become a collaborative economy where different players can co-exist with one another. Banks can also take this route to create a more organized and defined market that offers opportunities for them to expand business by integrating with other banks or fintech players via APIs. When building the digital infrastructure of the bank, it is important to ensure that every major system is expandable via an API. This makes it easier to plug in modular services that other 3rdparty fintech vendors or banks develop and sell via a SaaS model.
We are witnessing a future where banks and financial institutions will share a very thin boundary in terms of their digital aspirations. From customer experience to collaboration, a digital backbone will decide the future of how the banking industry will serve billions of customers worldwide.
Get in touch with us to know more about how your BFSI business can reap better ROI from its digital initiatives.