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6 Trends that Defined the BFSI Industry This Decade

Pre-crisis, the most innovative product that came out of the banking sector was internet banking. Post-2008, innovations, and new products have been coming through at regular intervals.

Updated:December 18, 2019, 11:55 PM IST
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6 Trends that Defined the BFSI Industry This Decade
Pre-crisis, the most innovative product that came out of the banking sector was internet banking. Post-2008, innovations, and new products have been coming through at regular intervals.

The BFSI (Banking, Financial Services and Insurance) sector has been through a paradigm shift in the last decade. One can clearly make a distinction with respect to this sector based on the periods before and after the financial crisis of 2008.

Pre-crisis, the most innovative product that came out of the banking sector was internet banking. Post-2008, innovations, and new products have been coming through at regular intervals. Let’s look at a few trends that have emerged in the BFSI space in the last decade:

  1. Digitisation:

Technology has changed the way the BFSI sector operates. From merely being an enabler, tech has redefined business models and broken entry barriers.  Gone are the days of standing outside banks to update passbooks, get bank statements and request for chequebooks. Digitisation has made consumer experience seamless. Today, one can do everything from opening up a bank account to paying vendors to booking fixed deposits online. One can buy insurance online, pay their premiums and top-up their products as well. Businesses get access to people on multiple touchpoints thanks to digitisation. It makes it easier for businesses to sell their products and services to customers. To give you context, in FY2019, Bajaj Allianz Life Insurance sold ULIPs (Unit Linked Insurance Plans) worth Rs. 157 crore, up from Rs. 60 crore in FY2018, a growth of 163%.

  1. Consolidation of Banks:

One of the major movements in the banking space happened in 2019 when the RBI merged 10 nationalised banks into four strong ones. Indian Bank was merged with Allahabad Bank; PNB, OBC and United Bank were merged; Union Bank of India, Andhra Bank and Corporation Bank were merged, and Canara Bank and Syndicate Bank were merged. This was done to increase scale for banks.

  1. Rise of Fintech Companies:

The term ‘fintech’ has become part of our regular usage now. Fintech companies made use of the available tech and took it to another level. Everything from buying stocks to buying insurance to credit needs is now available to the consumer in their mobile phones. However, one aspect that fintech can’t replace anytime soon is the ‘financial advisor’. While fintech and digitisation are great in the sense that they do away with routine work, one still needs a financial advisor to explain the details of financial products and services. The fintech market in India is set to touch $31 billion in 2020, according to NITI Aayog CEO Amitabh Kant.

  1. Regulation and Rise of New Finance:

Pre-2008, regulation favoured banks and was largely unfavourable to payment banks, NBFCs, small finance banks and the likes. Today, consumers across socio-economic strata have options that fit their needs. Apart from opening up this space, the RBI (Reserve Bank of India) has also brought in tightened capital adequacy measures along with global standards to ensure that the new entities do not face major challenges.

When NBFCs and new banks enter the market, businesses get access to a whole new set of customers. If businesses move quickly, they reap the rewards. IN 2019, BAIL’s institutional teams signed up diverse banks including Bandhan Bank, ESAF Small Finance Bank, Jana Small Finance Bank, Ujjivan Small Finance Bank, and India Post Payments Bank amongst others that increased their growth rate by 87% (individual rated new business) in the year

  1. Consumer Credit Preferences:

Indians used to stay away from institutional credit for a long time. They preferred borrowing money from friends and family. However, this decade has seen a tremendous change in consumer preferences for credit. Rise in credit cards, personal and auto loans, has grown in double digits this decade. Add the debut of payment and small finance banks coupled with fintech and there was a significant difference in the way consumers approached credit. For instance, users spent Rs. 6 lakh crore on credit cards in 2018-19, up 30% from the previous year.

  1. Rise of Insurance Products:

Insurance in India was always synonymous with life insurance. While the seeds of new insurance products had been sown since the late 1990s-early 2000s, this decade saw insurance spread its branches. Everything from auto insurance to medical insurance to mobile phone insurance is available today. Gross premiums written in India reached $94.48 billion in FY18, with $71.1 billion from life insurance and $23.38 billion from non-life insurance. Bajaj Allianz Life Insurance has Rs. 56,620 crore as assets under management as of March 31, 2019.

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