Next-gen technologies for India’s financial services market

Today, India is seen as one of the most rapidly expanding Fintech markets on the global stage. As per a recent industry report, the fintech market was valued at Rs. 3.70 Trillion in FY 2023 and is expected to reach Rs. 11.36 Trillion by FY28, expanding at a CAGR of ~24.95% during the FY 2024-FY 2028 period. In this era of rapid growth, technological advancements have been at the top of the priority list for financial institutions, including the Non-Banking Financial Companies (NBFCs), who are inevitably embracing next-gen technology to remain competitive in a dynamically evolving landscape. Financial institutions are fast realizing that technology is key to their business and will play an important role in getting them to the next level of growth and are putting their best foot forward to leverage this to their advantage.

A recent report by Broadridge Financial Solutions, Inc. titled 2023 Digital Transformation and Next-Gen Tech study, underscores the growing recognition of leveraging next-gen technology among financial institutions. Out of the respondents, 71% said artificial intelligence (AI) is now significantly changing the way they work, and 60% agree that within ten years, blockchain and distributed ledger technology (DLT) will become the core of financial markets infrastructure. Additionally, adapting to a digital world and embracing the potential of new-age technologies now score over the organizations’ core business strategies, with over 50% of digital Leaders (53%) viewing higher revenue growth as one of the most important benefits of digital transformation.

The Digital Imperative in India

In the fiercely competitive Indian financial landscape, institutions are realizing the imperative of modernizing their technology functions. Businesses are moving from a ‘good to have’ technology to a ‘must have’ approach- and building digital-first products to cater to the evolved customer base and also be future-ready. Digital transformation is viewed as essential to business success, with many institutions in India looking to the next wave of technology to maintain their competitive edge and also be able to harness the full potential of a diverse customer base.

Digitalization in India has been progressing steadily over the last few years, first covering large urban areas, and then moving to the smaller urban areas and rural areas. There are numerous drivers for this including increased penetration of the internet, rise of smartphones, cheap data access, and black swan events like the pandemic. Today, traditional financial firms in India face stiff competition from Digital Natives – online banks, brokers, robo-advisors, and digital wealth management firms established in the last 15 years. Digital Natives prioritize digital transformation as their most important strategic priority, investing more heavily in digital initiatives. This competitive pressure is compelling traditional Indian financial firms, including NBFCs, to accelerate their digital efforts.

There are a whole bunch of new-age technologies that will lead the way for tech innovation in the times to come. These include:

Artificial Intelligence and Data Analytics
The future will see AI and data analytics emerging as the key components of financial decision-making. Machine learning algorithms will aid businesses to conduct real-time analyses of extensive datasets, thereby churning out interesting trends and actionable insights that will be crucial for a variety of tasks including fraud detection, management of risk, and customer service. The robo-advisors will become more common and will deliver personalized financial advice to customers, in turn ensuring a better customer experience. 
AI will also find its relevance in driving business efficiency and hence, financial institutions are expected to invest a lot more to scale up their AI capabilities in the coming times. By leveraging AI, financial services companies can detect fraudulent activities at an initial stage, get valuable insights into customer behavior, and streamline routine tasks, thereby gaining significant cost and efficiency advantages.

Rise of blockchain
Blockchain technology is expected to play a vital role in the financial services sector by establishing transparent, secure, and decentralized systems. Smart contracts, facilitated by #blockchain, will optimize processes, diminish fraud, and enhance transaction efficiency. Blockchain is also finding semblance in facilitating secure and efficient transactions, lending, and asset transfers, amongst others.

Leveraging the power of quantum computing
The rise of digital payments has also led to an exponential increase in fraud and cyber crimes. Hence, there is a need to have a robust infrastructure in place to address them. Quantum computing can be leveraged to handle this issue. Quantum algorithms can be implemented to discover abnormalities and detect fraud in huge volumes of financial data on a real-time basis. Globally, there are a large number of fintech companies that are leveraging the power of quantum computing to make financial transactions fraud-resistant. 

Disruption is the key
India has witnessed a huge surge in digital payments, with the rise of UPI. There are a host of new and innovative products in the offing like CBDC and credit on UPI that are expected to drive the next stage of tech and digital transformation in the country.
Also, the financial services sector is witnessing a revolutionary development in the form of the Account Aggregator (AA) architecture. This innovation could reshape the national credit landscape, enabling Indian financial institutions, including NBFCs, to securely share customer data with competitors in a digitally signed, low-cost format. This could unlock new avenues for financial empowerment for individuals and small businesses in India.

Tech will lead the future
As financial institutions in India and across the globe continue to navigate the evolving landscape of digital transformation in the financial services sector, one thing remains certain: technology will be at the forefront of this journey. With the advent of ground-breaking technologies like artificial intelligence, blockchain, and quantum computing, the future holds immense promise for financial services. It will be essential for financial institutions to stay agile, embrace innovation, and adapt to the changing needs of customers in this era of rapid technological advancement. The path ahead is challenging, but with the right strategies and a commitment to harnessing next-gen technologies, financial institutions can position themselves for a future of unparalleled opportunity and growth.

The 2030 Technology Landscape for India

The future looks promising. Digital growth in India is getting a further fillip now and will become a major factor in sustaining India’s long-term growth story. Financial institutions in India are looking ahead to the technology landscape of 2030 with optimism. Advancements in AI, data analytics, and blockchain are driving momentum.  The year 2030 will see digital banks playing a key role in the overall financial ecosystem. A large number of customers will move away from the brick-and-mortar model of banking to the digital banking format, driven by the rise of personalized experiences and new-age products and financial management tools.

(Pankaj Goel is the new Chief Technology Officer of BharatPe)

Pankaj Goel