The Latest Tech Innovations in the BFSI Sector
By: Monish Salot
2020 has been a watershed year in almost every aspect. No conventional playbook seems to have answers for the challenges we’re facing. There appears to be no cure for the raging pandemic. The collateral damage to both the lives and livelihood of millions of people seems to see no end. Thrown into a gamut of problems the industry has evolved overnight, some forced others foresighted while many have collapsed. One such pivotal industry is the Banking, financial services and insurance (BFSI) Industry. With social distancing and controlled public movement, the BFSI sector has been at the forefront of innovation in 2020.
Let us look at the innovations adopted by the BFSI sector in 2020.
VKYC – Video KYC is in line with the RBI notification of recognizing Video-Based Customer Identification Process (VCIP) as a method of customer identification. VKYC is a cost-effective customer identification process where the documents are electronically signed. This also reduces the chances of fraud and at the same time fastens the process multiple times.
VKYC can substantially reduce onboarding costs, especially for firms handling a large volume of identity verification operations. Even Aadhaar-based eKYC, touted as a cheaper alternative to conventional KYC approaches, costs Rs. 20, in addition to external costs. AI-based vKYC solutions can bring this cost further down.
It allows people the comfort of accessing the benefits of financial services at the same time ensuring safety of their health. Various major and small finance banks including the likes of SBI, Axis etc have recently adopted the VKYC process. SBI’s VKYC approach leverages AI-based OCR (optical character recognition), enabling document records to be scanned in straight from the video call, saving the customer time and the bank onboarding costs.
VKYC has the potential to be the innovation of the year, considering it’s completely paperless and contactless, just what’s needed for these times.
Cloud Adoption – BFSI sector has been reluctant to adapt to the cloud for its concern with sensitive data and security compliances. However, the cloud has tremendous utility in streamlining and cutting business costs while at the same time helping bankers to work remotely from home.
Cloud services in the BFSI space are expected to become a $32 billion industry by 2023, bolstered by the cost savings and efficiencies they enable for banking and finance institutions. Banks and financial institutions have been key drivers behind industry-wide CAGR in the cloud space, and are the single largest segment that cloud providers cater to.
Eight years ago, at a time when cloud services were significantly less mature than they are now, a Rackspace study identified that an overwhelming majority, 88 percent of clients across industries, found that cloud services helped to save costs.
BFSI organizations can best utilise the cloud for backend and horizontal functions. Cloud technologies also offer companies the benefit of serving in geographies and offering varied products without having to have a physical presence. With RBI’s directives of data localization and government policies towards digitalization, cloud has been one of the top BFSI adoption priorities of 2020.
Workflow automation – Automation follows a consistent trend of incremental innovation. BFSI firms are eliminating repetitive tasks and complex business processes. Automation is helping BFSI firms reduce processing times, ensure customer support and enable a better of coverage in intensive manual activities like auditing. Automation plays a particularly important role in today’s world: social distancing has created a shortage of available finance sector workers. Process automation acts as a force multiplier, enabling smaller, remote teams to get the job done. Nearly 90 percent of all process automation clients reported increased efficiency after deployment, while nearly 60 percent reported a decrease in manual errors.
Democratization of business management apps creation– Gone are the days when making applications was the work of tech geeks. The advancement in technology and the ease of tools that help one make software have improved. Localized tailor-made applications developed in-house, for niche problem areas, are a priority innovation. This becomes imperative considering the nature of the pandemic is not universally the same.
Blockchain – Over the past decade, blockchain has become a foundational technology facilitating cutting edge innovation across industries in India. While there is still a lot of ambiguity related to the adoption of blockchain at the government level, various banks have adopted blockchain linked loan systems in the country.
Insurance firms are turning to blockchain and smart contracts to bring in more efficiency, transparency, and security. Despite being a veteran in this category, blockchain still holds immense potential in transforming BFSI industry. This is seen in the fact that nearly 70 percent of all banking institutions already work with blockchain in some shape or form.
BFSI industry being on the tech frontline is at the cusp of systematic changes. Though driven by the pandemic, we expect these to have a lasting impact. Innovations like VKYC in BFSI will fundamentally alter our interaction of financial services. Amidst these uncertain times, the only certainty lies in change, which, when it provides more effective solutions, will ultimately be for the good.
(The author is Co-founder and Chief Product & Technology Officer and the views expressed in the article are his own)