With the advent of new technology and its rapid adoption, many sectors have transformed completely. Banking and insurance are two such sectors that extracted the best out of the limitless potential of technology. People are wondering what the future of banking will look like in a developing country like India.
Banking today is quite different and easier than it used to be a couple of decades ago. You can now do most of the banking activities without even going to the bank’s branch. Likewise, the insurance sector has witnessed a drastic transformation because of deeper technology penetration. You can now compare insurance policies online and buy any policy with just a few clicks. There is so much that has changed, and there is so much to change in what will be the future of finance.
In this piece, we will throw some light on the trends that will shape the banking and insurance industries in India.
Trends to Watch Out in the Banking Sector
Cloud-based Infrastructure: Many banks are still brainstorming about how to migrate their existing system to the cloud. However, a significantnumber of them have made progress on this front to define the future of banking. Hybrid Cloud will be trending going forward owing to lower capital expenditure involved in its deployment as the setup is on-premise. Public Cloud will also participate in this trend with better security measures.
Blockchain Technology: Blockchain has been instrumental in offering data security for banks globally. Fraud detection and mitigation of risk are taken care of, along with faster payments and KYC (Know Your Customer) verification. Thus, this technology for future finance has the power to optimize the operational cost structure of banks in India.
Open Banking: Today, we live in an interconnected world where you have multiple options based on your preferences. Open Banking or API-based Banking is another revolution in this regard that offers a broad range of third-party services using APIs (Application Programming Interface). This API-based banking, wherein banks can partner with Fintech companies, will unarguably be the face of the future of finance in the coming years.
Artificial Intelligence (AI): AI or Artificial Intelligence has been a buzzword that kept everyone in the business talking in the decade gone by. According to one researchby Business Insider, by 2023, banks can save up to $447 billion by employing AI in their operations. This future of banking technology finds applications in data analysis, mobile banking, chatbots, credit risk management, and data protection, to name a few.
Branchless Banking: This will be a huge stride from how banking activities have been done by far in India. It involves providing banking services outside the traditional brick and mortar branches. Banks will reach out to customers wherever they are via their sales agents, mobile phones, and other channels. This is the future of finance that everyone has been waiting for, for many years now. Union Bank of India, for instance, has come out with itsidea of branchless banking by reaching out to people in remote areas via business facilitators.
Increased Fintech Partnership: This trend was quite evident in Europe and the US, where stalwart banks are collaborating with Fintech start-ups. This is a win-win situation as banks will innovate with the help of Fintech companies, and these Fintech companies will get access to a customer base and more business. This trend will play a significant role in the future of banking, as collaboration is the way forward.
Trends to Watch Out in the Insurance Sector
If the current pandemic has taught us one thing, it is the need and importance of having insurance for sailing through such an unprecedented crisis. Insurance has remarkably changed today compared to traditional LIC policies sold to your grandparents. Let’s see some of the upcoming future finance trends that will revolutionize this sector in India.
On-demand Insurance: People prefer products that cater to them at the time they need those products the most. As a response to this preference, insurance companies are planning to come out with what they call Switch-onand Switch-off insurance. ‘Usage-based vehicle insurance or Pay as you Use policy’ is exemplary here. In this policy, the insurance is only for the approximate miles you drive your car. These products will drive the future of finance in the upcoming decade.
Digitalization:Insurance no more means negotiating with an insurance agent and understanding the policies from him. All the terms and conditions regarding an insurance policy are available online. You can buy the policy from these digital channels as well. Defining the future finance capabilities, there are now online websites that let you compare different insurers on vehicle, term, health, and life insurance policies.
Role of Technology: New technologies like Machine Learning (ML), Artificial Intelligence (AI), and Robotic Process Automation (RPA) will contribute significantly to what will be the future of finance in the insurance industry. For instance: ML can offer customized solutions tailored to the needs of individual customers. AI-enabled chatbots can help in quick query resolution of customers that will drive the growth. RPA is the key to reduce human errors in redundant processes in the likes of document verification, processing of claims requests,
This is all we had for you in this edition of the future of the banking and finance industry in India. There are many other trends that will play a vital role in the BFSI industry. However, we have chosen the most significant ones. Banking and insurance will be completely different in 2030 vis-a-vis how it is now.
We hope you get a fair idea of the trends in banking and insurance and how they will impact the business models of the existing players in this game. The businesses will have to adapt to stay ahead in the game.