Since a long
time, India has been striving hard to extend the purview of its formal economy.Thankfully,
the task has become rather simple with the influx of technology. In order to
understand, today, internet adoption in India has crossed the 500-million mark
and is continuing its growth trajectory with a double-digit growth rate. According
to a report by Cisco, the figure is forecasted to jump to 907 million by 2023. This
development will pave the way for optimal transmission of financial services to
the last mile.
So, let us have
a look at how the BFSI sector is transforming at present and what role does
technology has to play in it.
The New India: Banking services penetrate all
households
Today, the
penetration of banking services has reached all households in India. Launched
back in 2014, PM Jan Dhan Yojana became a key driver in this change and has led
to the opening of 38.06 crores bank accounts to date. The trend was further
catalyzed by key initiatives such as UPI and RuPay debit cards. On similar
lines, the BharatNet mission is driving internet penetration across remote
regions, thereby also paving the way for tech-driven BFSI services amongst
them.
Modern Banks: Available at the touch of a button
With the growing
base of internet users in India, banks no longer receive high footfall across
their retail touchpoints. They now largely receive it on their digital ones,
i.e. smartphone applications. It is empowering customers to conduct transactions
without specifically taking out the time for the same. The technological marvel
of UPI (including its interoperability across bank and non-bank providers) has
further reduced the cost of transactions as well as the turnaround time. India
is also witnessing a surge in biometric transactions driven by AePS
(Aadhaar-enabled Payment System) amongst remote regions. AePS currenly has
monthly transactions to the tune of over 200 million every month.
Changing Investment Patterns
Earlier, Indian
investors largely relied on traditional investment instruments including FD,
RD, and real estate investments. This has started changing of late with the
infusion of digital technology in day-to-day lives. Retail investors even in
tier 2 and 3 cities have now begun to tap advanced investment products such as
Mutual Funds and stocks. NSE investors have steadily grown with a CAGR of 11% for
the past decade and are now around 2.78 crores. On the other hand, there are
about 4.58 crores BSE investors at present, a figure that has grown by 26% in the
past year. This is largely because it’s easier to invest using trading
applications as well as robo-advisors (investment engines that give
personalized investment advices using data analytics and Artificial
Intelligence).
Open Banking: A Culture in Making!
India is also
opening up to the idea of open banking. Today, while banks have a large
customer base and historic datasets available, tech-driven startups and NBFCs
have developed the technological capabilities to utilize them. Thankfully, a vast
majority of these stakeholders can be seen joining to address the core challenges
of the market. This trend will further catalyze the extension of financial
services in India with superior profiling, credit underwriting, and the development
of modern customer-facing products.
Steadily Increasing Adoption
Adoption is one
of the most crucial factors that drives the penetration of digital services.
Thankfully, we have seen a positive trajectory on this front in India. Certain
broad events have also shaped this trajectory. For instance, the digital
payments adoption accelerated after demonentization. The same trend has been
observed in the COVID-19 lockdown. At the height of COVID outbreak, AePS has
been used by postal service professionals to assist people across remote
regions to withdraw cash from their homes. During such events, the
technological capabilities of FIs play the most pivotal role in shaping the
market trend.
These were some of the key transformations that
the BFSI sector has been experiencing of late. Today, the world’s
second-largest population is digitizing rapidly. We know that the market’s
future is as promising as it can get.