Financial Software Services

The finance industry embraced technology with open arms ahead of time, only to earn an early mover advantage. The result is promising changes in the finance landscape.

Today, products like chatbots, automation, data analytics, cybersecurity, and more are questioning India’s future in financial services.

Technology battled the challenge of financial inclusion that the pandemic brought forth with Artificial Intelligence or AI piloting the initiatives such as gathering data.

It is now time to make sense of the data hence gathered. So let’s explore the possibilities of how AI could shape the future of financial services in India.

Stakeholders Spearheading AI-Driven Solutions in Fintech

AI has a significant footprint on nearly all sectors but with varying degrees. For instance, investment banks have been the major player in AI adoption. Leveraging NLP and ML, they have shaped how AI can be adopted.

This is followed by the retail banks, which have grown accustomed to using predictive analysis to support customer retention initiatives. It includes the process of mining present and past data and statistics to predict future behavioural patterns.

Banks construct strategies to retain customers by delighting them based on the likely customer behaviour. The industry players probably lagging are insurers, maybe because of the limited set of products.

Also read: The Future of Blockchain and Cryptocurrency in India

Other AI-based technologies that banks use are anti-money laundering, anti-fraud, compliance, credit-underwriting, and smart contracts technology.

Some AI Implementation Efforts Companies Bank On

The adopters of AI have reaped some fantastic benefits by deploying it into their business strategy. In a nutshell, AI backs up innovative efforts to launch new products and services or even find and enter a new market of opportunities.

Presently, the extensive benefits of AI in the finance sector feature lower operational costs, data-driven decisions, predictive analytics, and ramping up employees’ working capacity.

There’s more: AI enables better product curation, improved risk management, elevated marketing services and high customer satisfaction.

This is our affirmation that AI would help companies break beyond the boundaries that legacy players planted.

For instance, insurers are expected to experience the highest AI adoption rate. This is because they have the most room for adoption as they lag and have a limited product range. As a result, the next five years can be a significant game-changer in the face of insurance products.

How can companies invest in AI?

AI cannot bring disruptions if not invested strategically.

Therefore, organisations need to evaluate the success AI can help procure for them. It is a critical aspect to consider for business strategy.

Also read: Stages in Loan Origination Explained

But, how can a company evaluate the success of the application?

There are three reliable metrics that the existing users of AI believe in. Pinning the most reliable metric to track the views here might get contradictory, but here we are, with the top three metrics:

1. Customer satisfaction – Some companies believe the success of AI ultimately boils down to the customer or stakeholder’s satisfaction. Any improvements in the level of satisfaction show AI’s potential in action. Some great examples of measuring AI success lie in NLP and ML, including tools like automated chats and requests for quotes (RFQs).
2. Shrinking operational cost – AI can, through cutting manual processes, among other ways, help reduce operational costs. Higher costs that AI deployed tools help save, propels better performance, and eventually succeed.
3. ROI – AI can construct a better road to travel and reach the expected Return on Investment (ROI). AI initiatives towards increased ROI are extraordinary measures of its success and its capacity to scale.

The possible roadmap to AI’s evolution

AI can help companies scale and innovate, but how can we possibly reach the destination is still a matter of concern?

Earlier, the business strategy was simple: Look through labour costs and find the rates that best fit manual, repetitive and process-driven tasks.

But now, companies look for digitised solutions, and in case they can afford them, they choose to hire robots. Ultimately, the fundamentals of an organisation’s operational process are up for some serious change.

This is how the traditional or legacy structures of work are shattered.

Another possible obstacle in the journey of financial industry evolution is job opportunity. Job opportunities are likely affected by AI’s wide-scale adoption, and existing efficiencies might be up for a review.

Also read: 5 Ways In Which AI Is Revolutionising The Lending Business In India

If you think this is all, we urge you to think again. The entire shift in customer experience and job possibilities would also have a major impact on real estate.

People whose job replacement is not on the books will be able to achieve more and get more things done with the same amount of workload.

Beyond this, the layout of the journey is much more than job replacement. It is also so much more about rightly utilising AI and supporting tools. The risks of AI are potentially high given the size of the organisation and its understanding of AI capability.

Any roadblocks on the journey of expansion?

Yes, the cost is the major roadblock organisations can experience while trying to venture into AI. Insufficient infrastructure and poor data quality are the significant areas of worry.

Companies with larger income pools have an advantage over others. For instance, they can enjoy the potential of AI sooner than their smaller counterparts which may entail growing beyond a threshold that others can reach.

Also read: How Will Machine Learning Transform Credit Underwriting Software?

Organisations are aiming to spike up their investments in technologies like AI that have the potential of revisiting how legacy firms work. However, it is not about redefining how the finance industry works but rather letting the foundations stay intact and trying to build better pillars to business success.

If you love the requisites of the fintech industry as much as we do, follow up with the blog section of Finezza. We keep posting the latest updates from the world of finance so that you’re always a notch ahead.

If you’re learning about a new industry, then you need to familiarise yourself with the jargon of that industry. The jargon is not meant to confuse you; it is meant to help you communicate concepts as clearly and quickly as possible.

With the marriage of finance with ever-evolving technology, common terminologies have also transformed. Two often used terms in the industry that any finance enthusiast or professional needs to know are “Finserv” and “FinTech.” These terms are sometimes used interchangeably, but there are important distinctions between them.

How is FinTech different from Finserv?

While these sound similar, certain points identify the need for two separate terms. To explore the difference, let’s first understand the two terms individually.

What is Finserv?

Finserv is an abbreviation for “financial services”. Essentially, any company that offers financial services is known as a Finserv company. This may include banks, non-banking financial corporations (NBFCs), insurance companies, brokerages, and so on.

Finserv is a very old term and has been used for decades to refer to financial service providers. For example, a prominent financial company in India is Bajaj Finserv.

Finserv is commonly used in the industry to describe any company that provides financial services. Banks that have been around for more than 50 years in India are also described as Finserv companies.

What is FinTech? 

FinTech is an abbreviation for “financial technology”. This refers to companies that leverage technology in order to provide financial services. FinTech is a relatively new term that has been around for a couple of decades. FinTech is usually used to refer to tech start-ups that are operating in the financial space. 

You may say that even Finserv companies use technology in some form or the other. For example, every company uses computers these days, so are Finserv companies also FinTech companies? 

The simple answer is “no”. FinTech companies are different from Finserv companies because FinTech companies use technology in order to disrupt the existing financial space. The use of the latest technology means that FinTech start-ups can provide a financial service in a more efficient or cost-effective way than was possible before. For instance, in Asia alone, more than 2.38 billion people used a FinTech service in 2021.

There are several examples of FinTech start-ups in India as well, like PayTM, Cred, and MobiKwik, to name a few. In 2021, the overall market size of the Indian FinTech industry was $31 billion, and it is estimated to reach $150 billion by 2025.

The Primary Differences 

There are several differences between a FinTech and Finserv company. Some of the most notable ones are below.

Disruptive – Finserv companies have been operating for a long time. They have similar business models that are time-proven. For example, every bank operates in a standardised way, and there are only a few aspects to differentiate one bank from another.

However, FinTech start-ups are defined as new and disruptive. These companies are much more experimental, and they aim to do business differently by leveraging the latest technology.

For example, the payments space has seen a lot of activity by new FinTech start-ups. These start-ups allow you to digitally make payments simply by using your smartphone without the need to carry cash or use a debit card or credit card. This is just one of the ways in which FinTech start-ups are revolutionising finance.

Scalable – The goal of a FinTech company is to provide their services to underserved communities and areas.

Since these companies use the internet and smartphones, they can reach the customers that traditional Finserv cannot. With the ubiquity of smartphones in today’s era, FinTech companies can provide their services to a large swath of the population.

Further, since the cost of acquiring a new customer is relatively low, FinTech start-ups can scale their operations very quickly and may even record high growth numbers in a relatively short period of time.

Digital – The operations of a FinTech company are digital. Customers can interact with these companies entirely online, and there is no need for a physical presence.

For example, traditional Finserv companies may require you to visit their branch office or head office to do business with them. However, a FinTech start-up has capabilities that allow you to do all your business with them through an app or a website. There is no need to stand in line at an office when dealing with a FinTech company.

Further, FinTech start-ups are leading the way to financial inclusion thanks to digital access.

Lower Cost – Due to the reduction in the cost of digital infrastructure, FinTech start-ups can offer their services at highly competitive rates as compared to Finserv companies. Several FinTech companies even offer a large portion of their services for free. For example, a person does not need to pay anything in order to use PayTM.

The Future of Finance

It is clear that FinTech is the future of finance. However, this does not mean that Finserv companies will go out of business. Instead, almost every Finserv company is actively working towards adopting technology to offer better and more cost-effective services to their customers.

For example, banks like ICICI have launched their own mobile app through which customers can deal with almost any banking operation. Customers can use this app to transfer money, request a debit or credit card, check their transactions, apply for loans, and so on.

FinTech start-ups are facing tough competition from Finserv companies while encroaching on their space. As the popularity of FinTech services grows, more and more Finserv companies are digitally transforming themselves in order to stay relevant in the future.

Open banking and automation allow companies to reach more customers than ever before. As of today, there are over 1.7 billion individuals in the world without access to banking services. But with the advent of new technology, it seems the picture is changing, and changing for good.

Several global technology powerhouses are also entering the financial space to take advantage of the financial technology revolution. Even Apple and Microsoft are testing the waters. The day may not be far when almost every financial service will be available to everyone at the click of a button on their smartphones.

Wrap Up 

Sooner than later, every financial company will become a FinTech company. The road ahead is bright for companies that are open to leveraging new technology to provide better services. The line between Finserv and FinTech may dissolve soon enough as even traditional companies adopt FinTech capabilities.

If you’re banking online, you should be careful of fraud. Read our primer on avoiding fraud to keep yourself safe while operating in the digital space.

Also, do contact Finezza if you’re looking for comprehensive credit assessment solutions. We hope you’ve found our article helpful and informative.