The National Payments Corporation of India (NCPI) launched the Unified Payments Gateway (UPI) in April 2016. In October 2019 alone, more than 50% of all India’s digital payments were done over UPI, bypassing cards, net banking, and bank transfers by a healthy margin. One year back, in October 2018, Paytm reached a total valuation of US$ 10 billion, and recently the company said that it would go public in the year 2022. The shift in banking and fin-tech organizations is now clearly visible. Customers, increasingly becoming tech-savvy, are demanding convenience in financial services and what the fintech companies are already doing, the big banks are gradually recognizing.

A Deloitte report has already shown back in 2017 that 58% of banking consumers were willing to shift to mobile banking entirely, and 49% were comfortable with digital transactions. The numbers would have naturally grown since then, and banks and fintech companies are naturally stepping in to find their customers where they are dwelling. Innovation is the secret sauce for both, and they are striding forward in the following ways. Here are some trends in the industry that is helping them respond to the changing market dynamics: 

  • Adding value through personalization

Banks and financial institutions have realized that they cannot compromise on customer service and must anticipate the financial needs of their customers to serve them better.

Today, modern banks go much beyond maintaining accounts and offering loans. They are one-stop consulting institutions that help to devise a savings plan, create an investment portfolio, and provide advice on home and car purchases that add value in their customer’s journey. Banking and financial services today are hyper-personalized and all players are tweaking their services to meet their customer’s specific needs instead of business as usual.

For instance, banks today offer extremely specific investment advice, based on the risk appetite and life goals, usually without any additional cost. They provide curated suggestions by experts and leaders that will be in alignment with your needs and goals.

  • Using predictive data analytics

How are banks and fintech personalizing their services? The answer is data analytics. Banks already have access to hordes of financial data from their existing customer base. Fin-tech organizations have further consolidated these trends and also helped financial institutions build their database over time, often by providing free services. Today, all big institutions sit on a pile of data that is analyzed to provide information on the personal finance habits of each customer. Thus, the investment suggestions and recommendations you recieve are data-backed.

Another area where the industry is playing to its strength with data is its sharing between different service providers. Banks are collaborating with third-party service providers and allowing you the convenience of accessing your finances from anywhere. You no longer have to visit the bank to check your balance and are able to carry transactions, investments, apply for instant personal loans and everything else 24X7.

  • Providing instant collateral-free loans

Debt has long been inaccessible to a majority of Indian consumers. And even when it was accessible, the processing delay kept it out of reach as the consumer-end struggles continued. Private fin-tech players have disrupted the debt market significantly in the last few years and removed traditional obstacles to obtaining credit.

Organizations like PaySense have come up with instant collateral-free unsecured loans that are not only processed immediately but also disbursed timely. Furthermore, considering that many Indian customers do not own a significant collateral, such quick loans consider your monthly income to be the collateral. And finally, the fact that they have digitized the entire process and made it paperless has helped speed up the process as well.

The rising popularity of new-age fin-tech lenders has forced banks to catch up and innovate as well. For instance, banks have the resources to digitize their loan processing and started using artificial intelligence (AI)-based tools to evaluate loan applications.

  • Integrating AI into customer service

Let’s take a closer look at the above example, of AI-driven tools helping bankers and lenders make credit-related decisions. When you apply for a loan, the AI system reads your financial data, available from the bank and credit agencies, compares it with historical information to predict your eligibility and approves (or rejects) your request based on that. With minimal to zero human intervention in the processing, loans are reaching consumers almost instantly.

Next, intelligent chatbots are interacting with customers and helping save time and effort in query resolution. Programs are reading, storing, and analyzing these interactions continuously to make better suggestions in the future. There is little doubt that automation will drive faster customer service in the near future, and the BFSI industry is likely to be the biggest beneficiary.

  • Digitizing and going cashless

The Digital India campaign was the first stride towards creating an economy that was not reliant on cash. Developed countries have been moving towards online transactions for a while, and India has also started catching up with its peers. Globally, impressive advancements are being made in the payment industry as well. An interesting example is the Chinese city of Shenzhen, where a chunk of the population says that they do not carry cash anymore to make their daily payments. Right from ordering lunch to hiring a bicycle happens over mobile applications, and cash has become mostly obsolete in the city limits.

The rise of fintech services like digital wallets in India showS that the market is also ready to embrace this trend. Today, both banks and fintech organizations have tie-ups with restaurants, ride-hailing services, supermarkets, and e-commerce vendors where their customers do not need to go through a third-party payment gateway to make a transaction. These players are also incentivizing their customers to give up cash and stick to online payments as a preferred choice.

  • Partnership between banks and fintechs

Leading banks recognize that new players and start-ups that do not carry baggage and understand modern tech well are outpacing them in designing customer-friendly solutions in the industry. This has steadily given rise to bank-fintech partnerships where the banks are tapping into the innovation of fintech in return of opening up their customer data to smaller organizations.

What does this mean for the customer, though? You can now buy your bank’s insurance from the payment app you use on your phone. You can also pay your EMIs from your digital wallet. A partnership is how both can work together to provide a seamless experience to their customers. Take the example of Standard Chartered; the bank enabled seamless international payments by partnering with Alibaba’s Ant Financial. This partnership gave the British bank access to the markets of Hong Kong and the Philippines while Alibaba reached the UK shores; a win-win situation for both.

  • Leveraging Blockchain

The rise of digital banking has also meant that there has been an uptick in online frauds and scams. Thus, banks and financial institutions, new and old, realise the need to continually upgrade their security apparatus and protocols to stay one step ahead. This has facilitated collaborations with leading cybersecurity firms and experts, among investing heavily in newer technologies that assure higher privacy and security.

In particular, the finance sector is aggressively exploring blockchain technology, an unalterable ledger that can only be viewed but can never be edited. This holds the potential of securing banking data, providing the customers to permit the transfer in the first place and reduce the risk of fraud. Blockchain can mitigate data-breach risks and minimize the chances of leaks as well.

  • Diversification of products and services

Banks have long been institutions that only provided accounts, insurance, and credit in the B2C market and financing, cash, and capital management in the B2B services. However, in an evolving market, banks must expand beyond their core services and offer something more that their customers want. As explained earlier, banks are providing comprehensive financial management services to their customers, but that’s not all they’re doing. Increasingly they are also foraying into subscription management and health services, along with real estate and mobility services.

Banks already have a wide customer base and thus, diversification is relatively easier for them as is introducing new products to existing customers. More and more banks are recognizing the non-banking opportunities and launching products that they never used to manage. This is where they can really leave the fintech disruption behind. The changing market requirements almost demand that banks expand their ecosystems and step into zones that are flooded with unresourceful players.

Most global corporations still view Indian consumers as being conservative. But this country has seen some of the smartest and quickest digitization of financial services in the past decade. The sheer scale of the population that is entering the workforce every year presents an opportunity for banks and fintech enterprises to amplify their reach. Thus, only institutions and organizations that innovate and change as per the changing market requirements will be able to drive the transformation that will define how we live in the future.