BFSI technology trends to win in 2020 and beyond
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A well-functioning financial system drives a well-functional economy. The modern economy and the modern financial systems have technology as one of the most powerful driving force. Today, the Banking, Financial Services, and Insurance (BFSI) domain operates out of our smart devices. Online transactions have become the norm.
Over the centuries, banks have evolved from being a secure place for storing valuables to a one-stop-solution for all transactional processes for a user. As we move deeper into the age of digital, we can expect to see more groundbreaking, technology-driven, innovative banking solutions with customers at the core of all strategic actions. As JP Nicols says, “If banks cannot truly be customer intimate, they are doomed to be just dumb commodities, acting behind the scenes, like utilities.
2020 is going to be remarkable for the BFSI domain. With digitalization and ever-evolving technologies, the industry is aboard the train of disruption, which does not seem to halt any time soon. For the organizations associated with the BFSI sector, it is the time to prepare themselves for the emerging and maturing technology solutions. Let us understand the biggest BFSI technology trends that will shape the industry for this year and beyond:
“Financial institutions must be able to deliver an easy to navigate, a seamless digital platform that goes far beyond a miniaturized online banking offering”, says Jim Marous. And, that is what FinTech is about. A recent McKinsey survey results indicated a skyrocketing growth for FinTech in 2020. The FinTech market is all set to exceed the worth of $30 billion this year.
Data-driven analytics and hyper personalization are among one of the consistent themes that lie at the core of the FinTech services. Gartner predicts that this year, chatbots will interact with the customers of 85% of banks and businesses. The increasing focus on conversational interface is to eliminate the human intervention as much as possible for higher productivity. Blockchain in FinTech is projected to touch $6700 million by 2023 in the U.S. It will be used as a key security feature of the FinTech applications for processes like smart contracts and digital payments.
FinTech startups have certainly disrupted the BFSI market dynamics for the incumbents. By forming a strategic alliance with the startups, the incumbents can offer their users the ideal speed, security, and efficiency. We can expect to hear more M&A deals getting signed as we move further into the 2020s.
Banks, financial services providers, and insurance companies are required to upgrade their way of doing things. Digitalization is inevitable. Embracing the digital technology is the key to achieve accelerated growth.
2. Enterprise agility
Customers will continue to demand faster services and reduced costs. Enterprise agility is essential to meet these growing demands. Speed will remain the most critical factor that will ensuring scalability and competitive edge for an enterprise.
By implementing Agile practices within the organization, a BFSI enterprise can respond to its customers’ needs in a flexible manner while increasing the speed of execution. The ownership-mindset fostered by Agile results in greater productivityand adaptability.
The pace of innovation in the present dynamics essentiates flexibility within a BFSI enterprise. In order to stay competitive, it is necessary for the enterprises to adopt innovative solutions. And, to be able to adopt, enterprise would require an Agile and responsive infrastructure.
3. Automation and AI
Automation and AI technologies are maturing in the BFSI domain. Although, earlier the domain did not gain success in its automation efforts, the future can be different. McKinsey expects that early growing pains will ultimately give way to a transformation of banking, with outsized gains for the institutions that master the new capabilities. As per McKinsey, after the emergence of a second wave of automation and AI in the sector, 10 to 25% of the work across banking functions will be performed by machines. This will free employees from iterative tasks and allow them to attend to those tasks that bring higher value to the enterprise.
McKinsey suggests that the sector should cease this opportunity by taking a strategic approach. The enterprises in the BFSI segment should redesign their legacy processes considering the automated or AI-led tasks.
Robotic Process Automation (RPA) tools will be widely used to automate financial and valuations processes such as accounts payable/receivable, reconciliations, data preparation, and consolidation. Automation will accelerate time-consuming tasks such as insurance claims processing, policy administrations, credit card processing, and billings.
4. Cybersecurity and financial frauds
Digitalization of BFSI industry has only one disadvantage – cyber threats.
A PwC report blames the following forces for the sub-optimal cybersecurity status, which will remain the top concern for all the enterprises embracing digital transformation:
- Use of third-party vendors
- Rapidly evolving, sophisticated, and complex technologies
- Cross-border data exchanges
- Increased use of mobile technologies by customers and the rapid growth of IoT
- Heightened cross-border information security threats
69% of financial services CEOs reported in a PwC survey that they are either somewhat or extremely concerned about cyber-threats, while 65% of the companies said that they have adopted cloud-based security measures in their organization.
Cyber-risks would require a proactive approach from the part of BFSI enterprises. They need to first assess, evaluate, and understand the present security status of their organization and identify their cyber-risk appetite. They should develop a cybersecurity roadmap that will enable them to gauge at the vulnerable areas and seal those gaps early. A strategy also helps them to facilitate quick response in case of a breach. Human capital will play the most crucial role here. This is why, organizations should hire and train cyber-security teams that can effectively mitigate the threat actors and vulnerabilities in advance.
David Brear, the co-founder and CEO at 11:FS noted, “Technological innovations will be the heart and blood of the banking industry for many years to come and if big banks do not make the most of it, the new players from FinTech and large technology companies surely will.”
There is no escape from digitalization now – either embrace it wholly or evaporate. The future of BFSI sector will be dominated by AI-driven conversations with chatbots instead of human representatives; automated data entry processes instead of a dull worker copy-pasting data on a spreadsheet; hyper-personalized, data-led, omni-channel services instead of a large sea of options; secure transactions at a tap instead of bank visits; and a lot more. All in all, innovative software solutions will be driving the BFSI domain in the coming years.
The transition to digital would not be an easy one, but Cigniti is here to ensure a seamless transformation. Our BFSI testing expertise have empowered several of our clients to deliver flawless services to their customers. Our holistic testing solutions for banking, financial services, and insurance include maximum test coverage, modernization of legacy processes, customized domain-competency groups, differentiated technology frameworks, and industry best practices. Connect with us to know more about our proficiency in banking application testing, financial application testing, and insurance application testing.