The Banking, Financial Services, and Insurance (BFSI) sector in India is set to enter a transformative era, driven by technological advancements and evolving consumer needs. As fintech continues to reshape the financial landscape, several key trends are emerging that will define the future of this sector. Here’s a closer look at what lies ahead.
Independent Payment Business will Lack Profitability
While digital payments have surged in popularity, the independent payment business is facing significant challenges in achieving profitability. Intense competition and low transaction fees have created a landscape where many players struggle to maintain sustainable margins. As a result, companies will need to innovate and diversify their offerings to find viable revenue streams, moving beyond just payment processing.
Central Bank Digital Currency (CBDC) will Gradually Take Centre Stage
The introduction of a Central Bank Digital Currency (CBDC) is set to revolutionize the financial ecosystem in India. As the Reserve Bank of India (RBI) explores the implementation of a digital rupee, CBDCs will provide a secure and efficient means of transaction, enhancing financial inclusion and reducing reliance on cash. This shift will likely streamline payment processes and improve monetary policy effectiveness.
Tokens will See Widespread Adoption
The adoption of tokenization in financial transactions is expected to gain momentum. By replacing sensitive data with unique identifiers, tokenization enhances security and reduces the risk of fraud. As businesses and consumers become more aware of data privacy concerns, the demand for tokenized solutions will rise, making transactions safer and more efficient.
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Reconciliation Platforms will Evolve and Become Intelligent
Reconciliation processes, which are often time-consuming and prone to errors, will undergo significant transformation. Intelligent reconciliation platforms powered by artificial intelligence and machine learning will automate and streamline these processes, reducing manual intervention and enhancing accuracy. This evolution will enable financial institutions to focus on strategic decision-making rather than administrative tasks.
Recurring Collections will Find More Use Cases
The trend of recurring collections is set to expand beyond traditional subscription models. As businesses increasingly adopt automated billing solutions, recurring collections will find applications in various sectors, including utilities, healthcare, and education. This shift will improve cash flow management for businesses while providing consumers with convenient payment options.
Phygital Journeys and Offline Assisted Digital Touch
To penetrate unbanked segments, the integration of physical and digital experiences—termed “phygital” journeys—will become crucial. Offline assisted digital touchpoints, such as kiosks and agent networks, will help bridge the gap for those who may not be comfortable with fully digital solutions. This approach will enhance accessibility and foster greater financial inclusion across diverse demographics.
Regulatory Technologies will Dominate Compliance in Data Privacy and Cybersecurity
As the fintech landscape evolves, so too does the need for robust compliance frameworks. Regulatory technologies (RegTech) will play a pivotal role in ensuring adherence to data privacy and cybersecurity regulations. By leveraging advanced analytics and automation, RegTech solutions will help financial institutions navigate complex regulatory environments, minimizing risks and enhancing operational efficiency.
The views expressed by Rohit Kilam – Chief Technology Officer, HDFC Life are personal.
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