Just as any opinion or commentary, I advise you to take this blog with a mild filter of skepticism as the opinions are based on my experience, exposure, and knowledge about the industry. And things change overnight – as many like myself may be feel an unease for looming disruption but may fail to predict the nature of such change or revolution. Furthermore, some disruptions are touted and greatly overvalued such as Dotcom bubble as well as crypto currencies, while others quietly lay their foundations and start booming exponentially before the world notices.
Today technology is revolutionising and any business or industry that can benefit from the change is considering adoption – some may rush while others may wait and watch. However, amidst this creative chaos one must remember that technology is an enabler – by definition. Despite having flourished into an industry by itself, its primary goal is to enable other industries. Hence, new technology is bound to use-case and regulations, setting the tone for any future trends.
Returning to BFSI Tech Trends in 2024 and the rest of this decade.
AI – Artificial Intelligence
Though AI is being touted recently, use cases – especially the low hanging fruits – such as RPA – Robotic Process Automation solutions and ML – Machine Learning engines have been there since a while. But we are merely scratched the surface of Deep Learning applications. New explorations in Deep Tech will not only create use cases saving expensive man hours but also serve certain ML use cases much better. However, the challenge will be with decoding ‘how’ as most regulations in BFSI require some sort of trail – not knowing the how may limit use cases.
Shrinking Margins, Surging Volumes
Perhaps the term ‘Razor’ in the name ‘RazorPay’ stands for Razor thin margins. Though the industry already exhibits characteristics of perfectly competitive market, further deterioration in unit margins is anticipated. However, as India stands to become the most populous country for the next few decades along with majority population in the workforce age group – millions will enter the organised economy, fuelling the growth by volumes. You might have noticed the double digit growth in bank and NBFC (Non Banking Finance Corporations) assets in recent years.
If you’re curious about how, read Tech Adoption Drivers in Indian Banking and Financial Services
NEW Engines, NEW Tech Stacks
BFSI solutions are integrated across the market, as multiple players and service providers need to interact on realtime basis. Same is the situation with airline ticketing industry, still powered by the legacy systems of Sabre and Amadeus. Such spread makes it difficult to upgrade, especially with lack any incentives leading to lack of interest. However, the shrinking margins in BFSI will compel players to improve efficiencies and reduce costs – leading to a cost leadership approach. This opportunity is massive and anyone with a next-gen solution delivering 10X improvement will undoubtedly be the disruptor. Given the limitations of legacy technologies, this disruptor may perhaps be a startup such as QNX to BlackBerry OS or Symbian to Android.
Platform Solutions and Micro-services Startups
However, prior to this disruption, in the near future most banks and financial services companies will shift to platforms that can configured and re-configured in-house as per their rapidly evolving business needs. This flexibility of platforms will also make room for multiple micro-services leading to integrated solutions that can incrementally evolved and altered. This will lead to new use cases as well as services, further digitising the consumer journey.
Moreover, this will create an avenue for new start-ups to emerge as such micro-services may have into their own business model. For instance, an ML or deep learning powered Financial Product (eg: Mutual Fund, Insurance, etc.) suggestion application that can instantly process the transaction using API integrations for payment and e-KYC .
You may find more use cases here: BFSI Technology Growth in India and Developing Economies
Redefining the Status Quo
With all aforementioned occurrences, the financial services industry will not be the same. As the Visa and MasterCard duopoly is on the verge of being shaken by RuPay and UPI payments, other financial products may also progress through their product lifecycle. Perhaps, one can draw clues from the new product line of LIC (Life Insurance Corporation) India. Preference for Mutual Funds may soon be replaced by ETFs, or Real Estate Investment Funds may be overtaken by fractional investment products even before encountering the glamour days. As mentioned in the disclaimer, these need to be read with a tint of skepticism – as opinions tend to be biased.
Regulatory Interventions
And lastly, since we live in a society we need regulations. Many fail to understand that capitalism is not pure capitalism, but rather regulated capitalism – where regulations are meant to set societal norms that separate us from the rest of the animal kingdom. Hence, any new solutions, and new methods will draw regulatory attention. For instance, the 2024 PayTM fiasco! However, with this being said, regulations are not meant to clip wings but rather meant to ensure that the greater good is not lost in the pursuit of profits and shareholder appeasement.
Moreover, another trend that will accompany – especially in India and China – is nationalisation or indigenisation of tech. This may not only be out of concern for national security and resilience of financial systems but also from protectionist perspective of stopping tech royalties to Uncle Sam. In the long run, India may become a pioneer stance in FinTech, exporting solutions across the globe, enabling us to use UPI at Eiffel Tower and The Louvre.
Feature Image Photo by Nejc Soklič on Unsplash
Savvy Munshi 