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BFSI Sector Innovations 2024

  1. Open Banking

Open banking facilitates secure data sharing between financial institutions and third-party providers using standardized APIs. This innovation reduces costs associated with maintaining legacy systems and enables the creation of personalized financial products.

Example: Tailor-made credit scoring - Traditional credit scoring methods often exclude people who use debit cards or have limited credit history. Open banking allows lenders to access transaction history in savings and checking accounts, providing a more comprehensive view of a customer's financial health

Benefits:

  • Improved customer experience through personalized services.
  • Increased competition leading to better financial products.

Challenges:

  • Ensuring data security and privacy.

 

  1. Embedded Finance

Embedded finance integrates financial services into various sectors, providing a seamless user experience. Streamlines financial operations, reducing overhead and improving customer satisfaction. Examples include embedded payments within e-commerce platforms.

Example: Embedded payments - Companies like Uber and Starbucks use embedded payments, allowing customers to pay directly through their apps without needing to pull out cash or credit cards

Benefits:

  • Enhanced user convenience.
  • Expanded market reach for financial services.

Challenges:

  • Regulatory compliance and data security.

 

 

  1. Insurtech

Insurtech automates claims processing and risk assessment, leading to lower operational costs. Leverages technologies like AI, machine learning and blockchain to transform the insurance industry. These technologies streamline operations and offer innovative products.

Example: Telematics in car insurance - Companies like Zego use telematics to offer flexible policies tailored to gig economy workers, self-employed individuals, and entrepreneurs. This pay-as-you-go structure adjusts pricing based on real-time data

Benefits:

  • Efficient claims processing and risk assessment.
  • Personalized insurance products.

Challenges:

  • Data privacy concerns and integration with legacy systems.

 

  1. Sustainable Finance

Sustainable finance incorporates ESG (Environmental, Social, and Governance) factors into decision-making. Financial institutions are investing in renewable energy and sustainability projects. Reduces energy consumption and waste resulting in long-term cost savings.

Example: Green bonds - Financial institutions issue green bonds to fund projects that have positive environmental benefits, such as renewable energy projects or sustainable infrastructure.

Benefits:

  • Positive environmental impact.
  • Enhanced corporate reputation.

Challenges:

  • Measuring and reporting ESG performance.

 

  1. AI-Driven Financial Services

AI is being utilized for advanced data analytics, fraud detection, and customer service automation in the financial sector reducing losses and improving efficiency

Example: Robo-advisors - Platforms like Betterment and Wealth front use AI algorithms to provide personalized investment advice and manage portfolios with minimal human intervention.

Benefits:

  • Improved decision-making and operational efficiency.
  • Enhanced security through real-time threat detection.

Challenges:

  • Ensuring ethical AI use and addressing bias in AI models.

The BFSI sector is experiencing transformative changes driven by technological innovations. Open banking, AI-driven services, and sustainable finance are revolutionizing the financial industry, These innovations promise enhanced efficiency, security, and sustainability, paving the way for a brighter future in both sectors.


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Krishnan is founder of Katalytx Analytics. They collaborate with IT organizations as Technology Partners advising and supporting their expansion and growth journey, specializing in services that drive growth, enhance efficiency and unlock new opportunities.

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