Table Of Contents
- Growing adoption of RegTech augmenting the growth rate of the domain
- Rising investments in API ecosystems strengthening the position of the sector
- Decentralized Finance (DeFi): A unique approach to settling financial transactions
- Customer-centric banking services through robotic process automation
- Transitioning toward InsurTech opening numerous growth opportunities for the landscape
- Maximizing the Investment Opportunities in the BFSI Domain in Q3 2024
Onkar Sumant
Koyel Ghosh
BFSI Domain: Top 5 Trends That Have Helped the Sector Scale New Heights in Q3 2024
The growing focus on digitalization and financial inclusion has significantly transformed the BFSI domain. Over the years, various countries have rolled out initiatives for bringing marginalized and vulnerable sections of society into formal economy and banking channels. Moreover, several governments, with the help of imminent economists and policymakers, in developed and developing countries have launched schemes that promote microfinance, digital lending, personalized financial solutions, etc.
To effectively implement such welfare schemes and initiatives, public and private banks and financial institutions have modified their operations and unveiled new services and products that cater to the evolving needs of the sector. Apart from these factors, certain advancements and developments in the third quarter of 2024 have taken the landscape to new heights. Allied Market Research has analyzed these trends in detail and compiled a study that throws light on their impact on the BFSI domain.
Growing adoption of RegTech augmenting the growth rate of the domain
RegTech refers to the use of information technology to enhance regulatory and compliance processes. In the past few years, with the advent of advanced technologies such as AI, machine learning, and data analytics, the scope of the RegTech industry has widened considerably. These innovations help banks and financial institutions track the changes in governmental regulations and norms in real-time and suggest measures for adherence. Machine learning algorithms are mainly used to validate the authenticity of the regulatory data and report if any inaccuracies or discrepancies are detected. Moreover, AI-based tools are now being employed by many organizations to introduce robotic process automation in daily business operations. These solutions are deployed for the purpose of anomaly detection and flagging suspicious transactions. The rising integration of these emerging technologies is anticipated to help the RegTech industry surge ahead at a fascinating CAGR of 22.6% from 2023 to 2032 period.
Rising investments in API ecosystems strengthening the position of the sector
The idea of open banking has gained a lot of popularity in recent times. It involves the sharing of financial data between banks, non-banking institutions, and third-party service providers using application programming interfaces (APIs). To establish their foothold in the open banking industry, several organizations have collaborated with information technology giants like Google LLC, IBM Corporation, Oracle Corporation, Cloud Software Group, Inc., etc., to develop seamless APIs. The primary reason behind the increasing preference for these solutions is the rising popularity of mobile banking. To bring vulnerable sections in the formal economy, governments across the globe are launching schemes to help people open bank accounts through their smartphones. Hence, many financial institutions are investing heavily in APIs to provide a wide range of services to their customers and expand operations globally.
Decentralized Finance (DeFi): A unique approach to settling financial transactions
The decentralized finance industry is projected to gather a revenue of $497.9 billion by 2032, growing at a stunning CAGR of 43.4% from 2023 to 2032. The increasing investments by banks and financial institutions in blockchain technology have played a major role in popularizing the concept of DeFi in Q3 2024. The innovative methodology of financial transaction settlement makes use of blockchain to improve transparency and automation in activities like lending, trading, borrowing, and payments. Additionally, DeFi is being used to offer a new range of services to customers including, synthetic assets provisioning, decentralized exchange rate banking, etc. The increasing penetration of internet services and the launch of 5G technology in various developed and developing countries have also enhanced the adoption of decentralized finance. The new approach has enabled governments to seamlessly provide different monetary services to the unbanked sections of the population.
Customer-centric banking services through robotic process automation
Many banks and financial institutions, especially insurance companies, are employing robotic process automation (RPA) techniques to improve their productivity and efficiency. RPA essentially involves the use of software applications and bots to perform daily tasks without human intervention. A study has shown that since 2018, many of the top insurance firms have adopted automation technologies to perform repetitive work and free up labor for productive jobs. The integration of RPA has enabled firms to reduce the paperwork and documentation related to insurance policies, thus helping them process claims faster. Furthermore, the human errors associated with regulatory compliance are also reduced with the use of software bots. This, in turn, has aided companies in bringing down the overall costs associated with business operations. Ultimately, the insurer has more funds, time, and workforce available to cater to the demands of its customers comprehensively.
Transitioning toward InsurTech opening numerous growth opportunities for the landscape
Like most other sectors of the global economy, the emergence of state-of-the-art digital technologies has revolutionized the sphere of insurance and reinsurance also. The use of innovative technologies such as blockchain, AI, ML, and data analytics for the creation, administration, and distribution of different indemnity products and services is called InsurTech. The demand for insurance policies has increased massively since the COVID-19 pandemic, and companies have launched modernized solutions to address these growing demands holistically. The rapid digitization of business models has significantly contributed to the growth of the landscape. Furthermore, governments across the globe have enacted regulations to help these companies adopt high-end technologies seamlessly. Several multinational companies such as DXC Technology Company, Trov Insurance Solutions, LLC, Shift Technology, Damco Group, and Wipro Limited., have launched ingenious products to aid businesses in establishing their dominance in the sector. All these factors have collectively strengthened the position of the InsurTech industry.
Maximizing the Investment Opportunities in the BFSI Domain in Q3 2024
The in-depth analysis offered by AMR’s study has enabled companies to understand the evolving nature of the sector and make the right investment decisions accordingly. The research highlights that the growing adoption of RegTech and InsurTech by leading financial institutions has substantially expanded their customer base globally. Additionally, the advent of APIs and a decentralized finance approach has created favorable conditions for the growth of the domain in Q3 2024. Finally, the growing deployment of RPA in insurance operations has positively impacted the landscape in the third quarter of 2024.
Stay in touch with our analysts for a comprehensive analysis of the BFSI sector!
