India’s financial services ecosystem has witnessed significant transformation in recent years with fintech emerging as one of the fastest-growing segments in the sector.
In the last year alone, India has seen a surge in digital payments with an annual transaction volume escalation of 56% in FY 22-23 — a figure projected to quadruple by 2027.
That projection can only happen if the technology that underpins our digital payment systems continues to grow and develop securely — and at scale. As we head into 2024, here are some of the challenges — and opportunities — I see for fintech and the banking sector in the next 12 months.
- Real-time data will be pivotal to digital payment success in 2024
It’s said that money makes the world go round. I disagree. In today’s world, I believe it’s data. Without real-time data, the world as we know it would simply grind to a halt. And today’s modern digital payments systems would simply collapse.In the past, data has always been ‘at rest’ in a data store or data lake. Only when you can get that data moving can you create a world-class digital payments system that can be scaled. If you think about how we pay for goods with the tap of a debit card — or check our bank balances using an app — they have one thing in common. They are both driven by real-time data. These transactions happen and appear on your account in seconds. They simply couldn’t operate on a legacy back-and-forth approach. That’s why real-time data is so important now and will continue to be key to digital payment success. - Fintechs will continue to rule the roost in India’s startup ecosystem
Fintech startups were among the first to capitalise on India’s expanding digital infrastructure. And they have been instrumental in helping to revolutionise the BFSI sector. Free from traditional processes and ways of doing business, this new generation of banking and finance businesses has created customer-focused financial services such as digital wallets, peer-to-peer lending, and robo-advisors powered by artificial intelligence (AI). These digital native banking businesses — organisations that typically didn’t exist 10 years ago — are making technology a key differentiator compared to traditional banks. Since these digital natives don’t have a legacy approach to manage, they can move much faster. And their use of cloud-based services also brings tremendous velocity. - Traditional financial institutions could get left behind
The same cannot be said for traditional banks. While they have vast amounts of data at their disposal, their legacy IT systems and processes struggle to keep pace with more agile, digitally native fintech players. For them, their key to success lies in turning to data streaming by re-platforming or modernising their operations. This, though, is easier said than done since these organisations may have significant technology investments spanning many decades. As such, their ability to move quickly is hampered by the complexity of their overall systems and architectures. However, it can be overcome if they leverage real-time data to drive innovation and enhance customer experiences. By harnessing continuous up-to-date data combined with their existing wealth of data, financial institutions can develop a clearer profile of their customers to create personalised offerings, make accurate market predictions and combat fraud. - The BFSI sector will look to capitalise on AI
AI — and the large language learning models (LLMs) it relies on — is set to dominate the technology agenda for 2024. But there’s a problem. Today, too many AI learning models rely on large stagnant data lakes for their output. For those banks, insurers and finance companies looking to cash in on AI, they need a pipeline of current real-time data that can provide personalised loans, bespoke insurance products or favourable investments. By providing a real-time data pipeline, customer interactions are based on the latest information available and not on information that is out of date. - AI-driven change means businesses must empower employees to retrain and upskill
Most of the AI tools and applications we’re seeing in 2023 aren’t replacing jobs — they are driving significant productivity improvements. While it can’t replace the intentionality, creativity, or awareness of a human counterpart, AI is well equipped to automate swathes of the menial day-to-day. For the BFSI sector, workers could buy back time and focus on more valuable and meaningful tasks on their plate, rather than dealing with intensive admin-based tasks, like responding to frequently asked customer queries and focus instead on dealing with sensitive customer requests or personalised upselling. As such, for 2024, organisations must start to factor in AI-driven change to their workforce strategies. Workers will need to recognise that AI will impact their role — and this will put the onus on organisations to create opportunities for workers to retrain or upskill.
The BFSI sector’s plans to use AI to streamline operations, improve customer service, and deliver more personalised products is incredibly exciting. But it all hinges upon data. Setting data in motion — safely and securely — looks set to dominate 2024 and beyond.For the financial industry, the successful integration of real-time data is not just a phase. It is a fundamental step towards embracing the digital future. By bridging the gap between back-end processes and front-end customer experiences, financial institutions can foster innovation and capitalise on a whole host of opportunities that real-time data offers.
(The blog is written by Kamal Brar, Senior Vice President, APAC, Confluent. This is a Brand Connect Initiative. All views expressed are personal.)
