BFSI Industry in 2024: Overview, Challenges and Recent Trends
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In this particular blog, we will explain what the BFSI industry is all about, catch up with its recent developments, focus on its major challenges, and study the trends that will define the industry in the coming times.
Undoubtedly, this industry enhances and boosts economic development by providing basic financial services, which include facilitating the flow of finance, giving out loans, risk management, and protection of properties.
BFSI Industry Analysis
The BFSI industry includes institutions that provide certain key financial services, including banks, insurance companies, and other bodies involved in the capital market. It contains:
- Banking: It includes retail and commercial banking, payment and fund transfer systems, management of assets, trust companies, etc.
- Financial Services: Such services include activities like investment banking, wealth management, as well as financial and business consulting.
- Insurance: Covers life insurance, health insurance, property insurance, and casualty insurance.
Market Overview
In the previous decade, digital media and globalisation have transformed the BFSI sectors. According to the estimates from August 2022, the BFSI Security Market stands at USD 55.9 billion and is estimated to expand at a rate of 11.5% reaching USD 165.9 billion by the year 2030.
Global Outlook
As per McKinsey’s Global Banking Annual Review, the sector seems to be on the path of growth owing to the increasing penetration of artificial intelligence and other advanced technologies. However, the industry is under stress owing to factors like increasing competition, lack of operational efficiencies, and over-regulation.
BFSI Industry Challenges
Even though the BFSI industry is gaining momentum, it has its challenges. Some of the key challenges in the BFSI industry comprise the following:
Cybersecurity Risks
Increased volumes of digital transactions have been accompanied by an increase in cyber threats. They have to invest in measures that will enhance their security of sensitive information and breach prevention.
Regulatory Compliance
The need to keep up with continual changes in both international and local policies will not cease shortly. Compliance with certain protocols, like GDPR, demands a lot of effort.
Technological Debt
Technological advancement of organizations is inhibited by outdated systems. It is costly and takes with it a lot of time but there is a need to upgrade or replace them to remain competitive.
Customer Expectations
The customers of today expect a frictionless optimized, integrated, and multi-channel journey. Achieving this level of customer expectations would require a high level of investment in customer experience management.
Competition from FinTechs
New market/industry entrants such as FinTech start-ups and BigTech companies are effectively differentiating themselves owing to the competitive pricing model.
BFSI Industry Trends
The following are some of the major developing BFSI industry trends that are shaping the industry in the year 2024:
Artificial Intelligence in BFSI
BFSI operations are undergoing a revolution due to AI and machine learning. AI machine learning applications range from fraud prevention to credit scoring. Many financial services have incorporated chatbots, robo-advisors, and predictive analytics as the norm.
Artificial Intelligence in the BFSI Industry was valued at USD 20 billion in 2022 & is forecasted to grow at a rate of 20% from the year 2023 to 2032 as more investments increase towards the deployment of AI solutions & services to the BFSI industries.
Digital-only Banks
Without the traditional fixed cost structure, digital-only banks are quickly becoming popular because they provide more expedited and better services.
The Global Digital Transformation in BFSI Market size is anticipated to be worth $215 billion by 2030, extending at a CAGR of 15.8% between 2021 and 2030.
Blockchain Technology
Blockchain is augmenting the clarity and safety of cross-border payments, trade finance, and smart contracts. For 2033, the Global Blockchain Technology In BFSI Market size is forecasted to reach US$ 218.3 billion, up from US$ 5.5 Billion, registering a CAGR of 44.5% between 2024 and 2033.
It is also reported that Bank infrastructure costs due to blockchain technology will be 30% lower. A report by Accenture sees annual savings of over USD 12 billion a year due to the implementation of blockchain technology for investment banks.
Improved Cybersecurity
The BFIS organizations are focusing on biometric technologies, multi-factor authentication, and systems for the prevention and detection of real-time fraud. Cybersecurity Ventures believes that cybercrime around cryptocurrency will reach $30 billion yearly by the year 2025. As per the Cybersecurity Ventures, ransomed data will cost around $265 billion annually to its victims and other sectors by the year 2031.
Role of ProHance in Helping Companies Adopt BFSI Industry Trends
To incorporate these changes, sound technology and operational systems need to be employed in respective companies. ProHance is a top-level operations management and workforce analytics tool that assists organizations in the BFSI industry to automate workflows and improve the productivity of employees.
Key Benefits of ProHance in BFSI
- Process Optimization: ProHance eliminates repetitive and manual work through workflow automation, decreasing the possibility of errors.
- Real-Time Analytics: Offers timely feedback about an employee’s work output and how efficiently business processes are handled.
- Compliance Management: Aids analysis in compliance processes by making it possible to observe and supervise compliance policies and procedures.
- Cost Efficiency: Enhances cost efficiency by making optimal use of resources and cutting back on operational expenses.
With the help of ProHance, financial firms will not only be able to remain relevant but will be able to maintain operational excellence.
Also Read: Empowering BFSI with Workflow for Compliance and Efficiency
Conclusion
In the year 2024, the world of BFSI finds itself in the middle of many opportunities and challenges. Thanks to advancements in the areas of AI, Blockchain, and digitalization, the industry is primed for exponential growth. But in order to succeed, financial institutions will have to overcome issues like cybersecurity threats, regulatory burdens, and competition from FinTechs.
Platforms like ProHance can help organizations to reach optimum levels of efficiency enabling them to adopt changing paradigms and afford excellent experiences to their clients. More than ever, being able to change and be creative as the BFSI space changes will be a winning strategy.
Frequently Asked Question
Q1. What is the BFSI industry?
The BFSI industry includes the three major segments of banking, financial services, and insurance, mainly being involved in monetary operations and risk coverage.
Q2. Which BFSI industry trends seem to dominate today and in the future, if any?
Some of the prominent trends in the industry are based on the usage of artificial intelligence, the rise of digital-only banks, the application of blockchain, and the improvement in cybersecurity.
Q3. How could AI be useful in the BFSI sector?
AI is changing the landscape of the BFSI sector by making it easier to manage fraud, make credit decisions, and deliver customized solutions to customers.
