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Parallel banking system promising future for banking and finance in India
The convergence of various financial technologies such as data analytics, Artificial Intelligence (AI), Machine Learning (ML), and Blockchain have transformed the banking and financial services sector as we know it, giving rise to the dynamic and agile fintech sector.
This is a user generated content for MyStory, a YourStory initiative to enable its community to contribute and have their voices heard. The views and writings here reflect that of the author and not of YourStory.
Along with North America and Europe, the Asia-Pacific region to has seen an exponential rise in the number of fintech start-ups, with venture capital-backed investments in the Indian fintech sector reaching USD 1.6 billion in value over the past three years.
On the global front, investment in AI applications during the 2016-17 period reached USD 5.1 billion, rising from 2015’s USD 4 billion. Fintech firms that provide technology-driven solutions in the financial space also referred to as fintechs, have evolved from being a disruptive threat to potential collaborators for financial institutions that are now helping them make the most of the technology boom in the sector.
India’s banking and finance sector: Going the fintech way
AI, Machine Learning, Blockchain, and data analytics are technologies with a wide range of potential use cases in the fintech industry. Over the past couple of years, the Indian fintech landscape has seen these technologies evolve considerably and at a rapid pace, thus bringing it closer to other emerging fintech markets in the West.
But until very recently, India’s banking and finance industry was highly resistant to change and adoption of technology, with high barriers of entry to new players, be it in the B2B or B2C segments. However, the massive technological revolution has yanked the sector out of its state of complacency and facilitated a massive shift in how both incumbent players, as well as consumers, perceive innovation in the banking and finance space.
New-age fintech start-ups are keen on augmenting the offerings of existing players through tech-led plug-and-play solutions which can significantly enhance the user experience, both internally and externally. Similarly, traditional institutions have come to be more accepting of new technologies and innovation, exploring collaborations with start-ups, and developing business models that benefit both.
More and more traditional financial institutions are investing in emerging technologies as a way to boost the efficiency of their operations, increase productivity, and enhance the overall customer experience. Artificial Intelligence has been acknowledged as one of the most exciting and lucrative segments within the fintech space in India.
AI and ML with data analytics presents an opportunity for banks and financial institutions to offer far more advanced and personalised customer experiences by leveraging automation to deliver faster turnaround times on customer queries and requests.
More than 36% of large financial institutions in the country have already begun investing in automation and AI, while nearly 70% report that they are planning to in the near future. Large financial institutions and corporate banks are extensively leveraging AI and ML to automate and streamline workflows, while chatbots are emerging as highly effective points of contact between the customer and the service provider which use conversational analytics to ensure efficient customer service and fulfilment of customer demands.
That banks and the traditional financial sectors will need to embrace the disruption created by fintech firms is a fact which has been acknowledged by both the industry and the government. With financial inclusion as a top priority for the Indian government, policy makers and financial regulators are now creating a conducive ecosystem for the growth of the fintech sector, which will ultimately play a critical role in facilitating large-scale financial inclusion of the country’s unbanked and unserved populace
