Over the past few years, the world has experienced a surge in digitalisation. In India too, several sectors have been aggressively prancing towards digitalisation to appeal to younger audiences. While this phenomenon was witnessed first in sectors like food/grocery deliveries, cab services, online shopping etc, digitalisation in the financial services sector has also started to gain pace with innovative offerings such as UPI and BNPL (buy now pay later).

So to get deeper insights into this growing trend and its impact on India’s financial sector, we sat down with U.S.-based digital transformation and product development services firm Orion Innovation’s Anoop Gala.

The Covid Factor

Talking about how the recent expansion into the digital realm was accelerated by the pandemic Gala said “If we take the clock back three years, what Covid did is first and foremost, for many institutions, it brought a digital-first agenda. And what I mean by digital first is digital, not just from mobile phones and a user experience perspective, right? Digital in its pure sense, so that the business could become resilient to a Covid-like phenomenon.

Now you have been ordering Uber and Ola, and you have been ordering from Swiggy and Zomato, but on the corporate side, and on the commercial side, the products were not enabled for the same experience. So anytime anywhere digital banking was not a possibility.

But with Covid, everyone had to shift their user experience, not just on the consumer banking side, but also on the commercial banking side.

To illustrate how changes in financial products and services occurred, Gala talked about the wealth management companies and how they had to pivot to delivering advice, delivering portfolio strategies, delivering information and all that in a digital-first medium.

He then focused on the other changes that happened with the acceleration of digitalisation due to Covid. “People started looking at data as an asset. As they say, data is the new oil. The journey for data monetisation and data analytics actually accelerated because of COVID.”

Cloud-native engineering also became a fundamental, foundational infrastructure need as a part of the whole Covid acceleration to digital. Institutions have started moving to the cloud.”

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The New Players Beating The Leagcy Player?

Most of the innovative products mentioned earlier in the article saw newer players coming up and capturing the market, while traditional banks and NBFCs lagged behind in the adoption of these new technologies. So we asked Gala, why were the newer players able to do so and if its a trend that will continue.

“Whenever a pivot is made two things happen and in this particular case some of the newer players were able to pivot faster because they had less baggage. They were more agile by nature, agile not because they were small, agile because their technology stack was fairly modern. Now larger banks, which are the traditional incumbents, it was difficult for them to pivot overnight, right? Because they are dealing with, you know, 100 million plus customers.

So yes, traditional incumbents were more challenged than new-age players. Hence, you can see that a lot of new fintech companies came up.

The second thing that happened. Use cases of products like Order Ahead, and BNPL were not traditional use cases. And suddenly overnight they gained a lot of traction. Typically in any cycle, it takes about 18 months to 24 months for a full-service adoption, okay? That’s your empirical benchmark. In this case, everything got shrink-wrapped into three months. So the smaller companies, what I mean by smaller is the more agile companies, were able to pivot much more quickly and quickly translate that use case and service it into the market. For the traditional incumbents, it took longer.”

Now, can the traditional players can catch up? Gala who has over two decades of experience in the industry thinks that the traditional players have the advantage of user trust working for them and if they are able to leverage that and keep innovating at the same time, things could change, as scale is a challenge for the newer fintech players.

Regulations

With this rapid innovation, many experts believe that the risk of financial wrongdoing and fraud can also increase. Regulations in these new avenues are still catching up. Addressing the subject Gala explained, “Regulation is always going to be one step behind, but from our perspective, what we are seeing is our regulatory framework, our regulatory authorities in India and in general in that market, have also been extremely agile in responding, to making adjustments and shifts in their regulatory framework to accommodate these new products and services as they are getting rolled out.

Yes, there will be some lag, and there is some lag, but I think the regulatory framework is good enough to continue to monitor, track, and make the relevant adjustments. I think it is also the responsibility of suppliers, and partners like us who are working in that ecosystem to make sure that there is a balance, that you are maintaining, there is an urge to create a new product and service, but it has to be done within the ambit of the regulatory framework.”

The Arrival of AI

Talking about the adoption of AI among consumers Gala told Benzinga India “See, adoption in general is an evolution. You see more adoption in tier 1 tier 2 cities as opposed to tier 3 tier 4 cities. But the biggest problem or the challenge in tier 3 and tier 4 earlier was access, right?

I think that a lot of work has happened in accelerating that connectivity, availability of internet, of broadband, and I think that shift is happening. As that happens at multiple tier 2 tier 3 tier 4 cities. You would see suddenly the adoption increase multifold.

For institutions at the fundamental level, AI is going to help them with data. Now as connectivity and adoption get better across these cities, data is starting to become available people would look to monetise the data and understand the nuances and start creating their responses ahead of time.

Okay, so instead of everyone being in a reactive mode, AI can become a big enabler for helping to create the response mechanisms at different levels, be it infrastructure, be it application, be it customer experience, AI can actually become a big enabler in building those response mechanisms.”

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