Digital transformation in the BFSI segment – Evolve or Perish

Digital_TransformationAs in the case of every other sector and industry worth a mention, the BFSI sector has been undergoing digital transformation. In fact, the very evolution of fintech companies is a testament to this emerging trend.

The advent of the digital revolution in the space has enabled companies in the BFSI sector to reach potential customers in hinterlands, improved acquisition rates, enabled more accurate customer profiling, facilitated customisation in product structures and much more. It has also enhanced various processes such as operations, data analytics and risk & compliance, which are crucial to the BFSI sector.

Under the changed environment, brick and mortar offices have begun to play a diminished role, along the entire process chain from sourcing clients and on-boarding/sales to servicing and eventually cross-selling. While the need for the ‘human touch’ in the BFSI sector can never be undermined, the use of digital technology enables the productivity per man to increase substantially.

Layers of Digitalisation

There are broadly four facets of BFSI companies that lend themselves to digitalisation:

  • Products: With digitalisation, greater product innovation and customisation has become possible. Further, greater value can be generated from products and their reach can be increased. So, for instance, SME loans can be constructed so that repayments match the cash flows of the borrowers.
  • Consumption: Online sales with easy to use features have made it possible for people to purchase BFSI products online, reducing the cost of intermediaries as well as increasing the speed of purchase. Today, mutual fund aggregators as well as AMFI provide investors with all the information that they require to choose an investment and purchasing it online has become rapid and simple.
  • Service: The digital revolution has changed service parameters for the better. It has facilitated the ability to solve queries and concerns with greater speed and accuracy, create differentiated strategies for more effective engagement, better feedback inclusion mechanisms, etc. has transformed the BFSI sector, which was built on the cornerstone of service. While there has always been copious data available within the sector, now with Big Data Analytics, it can be put to better use to profile customers better and accordingly, provide better services. Simultaneously, the existence of multi-media presence amongst customers and potential clients has enabled companies to provide an omni-channel experience to customers and prospective clients.
  • Customer Experience: Understanding the customers’ needs has enabled better products and services. Customisation of communication, especially in audio-visual formats, has enabled better engagement and elicited customer delight.

Caveats during digitalisation

Mindsets: Digitalisation could face resistance at various levels in a company’s hierarchy as it requires a fresh mindset. When the top management intrinsically accepts a digitalisation roadmap, it is usually easier to ensure that it percolates through the company.

Suitability: Very often, companies adopt a ‘cut-and-paste’ approach to digitalisation, copying a successful model. This has resulted in sub-optimal results. While it is prudent to benchmark technology to the best in the world, customisation to suit the unique requirements delivers best dividends. For instance, while Inditrade has bench marked its agri-commodity lending platform to the best in the world, it has built in numerous modifications to tailor the app to the unique needs of its potential users.

  • Security: Digitalisation could be a double edged sword. If it is undertaken without adequate security and due diligence prior to the transition, it could compromise customers and bring about the downfall of the company. Engaging suitable network security vendors could mitigate security risks.
  • Complexity and Pace: There is an optimal level of complexity that any situation calls for. Similarly, while the move towards becoming more digital must be an on-going process, the pace must be suitable as it could lead to disruptions of the existing system before the new ones are in place.
  • Costs and Skill Sets: Quite often, as the digital transformation within a company required a change in skillsets, re-skilling and bringing new talent on-board is a requirement. The need for technology, hardware as well as additional human resource costs could take a toll on the company. Taking consultants on board could be an interim solution.

In the year ahead and those that follow, digital transformation is inevitable and those that accept and adopt it successfully will gain advantages in terms of market share and customer loyalty. Those that hesitate to climb on board the digitalisation train could be left behind forever.

Views expressed in this article are personal views of Sudip Bandyopadhyay, Group Chairman, Inditrade group of companies.

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