Consumers across the globe are accustomed to a rich, connected, convenient and swift way of transacting. From the search, reviews, trial, and purchase to delivery; the customers expect the end-to-end life cycle should be swift and seamless. Digital financial services are no exception. FIs today explore ways and invest millions of dollars to innovate for a paradigm shift from real-time delivery to right-time delivery.
With Customer expectation on the rise, especially with the status-quo or experience offered by other industries has pushed the FIs to re-think their engagement strategy. CEOs of FIs grapple with thinking about how to be relevant amid rapid change and uncertain industry, especially with the native and legacy systems and processes.
To meet the superior customer expectations of Gen Y’s & Z’s, it is insufficient just to revamp IT infrastructure. The disruption necessary is far more complex. The revamping strategy needs more comprehensive boardroom thinking tackling a holistic view, covering facets such as innovation, product relevance, time to market, system, and processes, service distribution, and engagement.
This reconditioning of strategy requires thinking beyond internal structures such as building and aligning People, Processes, and Technology but also exploring ways to inject talents and thinking of entities, that believe in disrupting. According to SBI Growth Advisory - 67% of the CEOs are planning to drive significant customer experience initiatives going into 2022, which makes the collaboration with Fintechs more lucrative for FIs in designing intuitive ways of engagement, due to inherent DNAs of Fintechs to bring innovation on to the table.
FIs are hard-pressed for the Cost-to-income ratio, which reflects both growth and efficiency, is highly impacted. FIs are required to be innovative and required to take a dual approach to manage costs and efficiencies whilst continuously improving digital acceleration. Digital acceleration is of utmost critical for FIs to maintain customer stickiness and improve wallet share. Over the last few years, the banks have appreciated the role played by Fintechs in terms of digital acceleration, which has resulted in collaboration.
Equally, fintechs have spread their wings into an array of services within the FI's value chain creating innovative and lucrative services to motivate FIs to team up with fintech players with the goal to co-create products, and services distribution, and customer acquisitions for mutual benefit. The fintech landscape has widened into areas such as:
- Digital Payments, Remittance, Mobile Wallets, and Money Transfer
- Digital Lending & Alternative credit, BNPL, Credit Rating | Scoring
- Digital Savings, Wealth Management Micro Investments & Stock Management
- Cryptocurrency
- Lifestyle, eCommerce & Loyalty Program
- Digital KYC, User Journey workflows, Regulation assisted
With customers insisting on capabilities such as embedded finance, connected commerce, or alternative finance the space for Fintechs in the finance industry has grown exponentially. According to ResearchAndMarkets.com - Global Financial Services Market Outlook is expected to grow by $6T from 2021-to 2025; ($22.5T in 2021 to $28.5 T in 2025) at a compound annual growth rate (CAGR) of 6%. This growth and market expansion is attracting substantial investments into the fintech space.
Graph: Global Financial Services Market (USD Billion), Market forecast to grow at a CAGR of 6% (Reference: Research And Markets)
In proportionate to growth in Financial market growth, the digital financial space is on an upward trend in terms of volumes of transactions.
Graph: Transaction Value by Segment (USD Million) - (Reference: Statista)
Digital Wallets one of the initial use cases in the DFS has gained momentum with various micro-use cases deriving from various geographical regions also contributing towards a greater volume of fintech's contribution to DFS. we are about to see even more changes in the coming future.
According to Global Market Insights, the Mobile Wallet Market size exceeded USD 100 billion in 2020 and is expected to grow at over 20% CAGR between 2021 and 2027. The global mobile transaction volume crossed 100 billion in 2020, with transaction value accounting for about USD 6 trillion. (https://www.gminsights.com/industry-analysis/mobile-wallet-market )
Digital wallets have evolved from meager payment instruments to create their own ecosystem around them. Digital payment methods saw a massive surge in a span of four to five years creating their own unique business propositions and affiliated services. As the upward growth trend in Digital wallets continues to grow exponentially through the fuelling of new payment trends such as Embebbed finance, BNPL, and acceptance of crypto. As the FIs and Fintech are preparing for this next wave of payment revelation, they are creating a unique and personalized experience with technologies QR, NFC, and wearable devices alongside Ml, AI, LBS, and DLT. https://www.toptal.com/finance/market-research-analysts/fintech-landscape
Written By: Ajith Thadani, AVP-Global Sales and Business Development, Estel Technologies - Passionate Business Development Specialist with closer to 20 years experience in designing and implementing business growth strategies for Strategic Business Units (SBU's), Start-Ups, and Product verticals in BFSI, Fintechs, IoT & Telco domains
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