Banking in India – Disruption and Transition through the Lens of Data Analytics
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The Indian banking sector has seen a paradigm shift in recent years, thanks to digitalization, data analytics, and innovative technologies. With an estimated 1.3 billion population and a rapidly growing economy, the potential for growth in India's banking industry is immense. This week we explore the disruption and transition in the Indian banking sector, focusing on the impact of data analytics and how it is shaping the industry.
Disruption in the Indian Banking Sector:
Digitalization
The Indian government has been actively promoting digitalization in the financial sector. According to 波士顿谘询公司 and PhonePe Pulse Release Report on Digital Payments, Digital Payments in India Projected To Reach $10 Trillion by 2026. With the launch of the Unified Payments Interface (UPI) in 2016, India's digital transactions have skyrocketed. During last five years, various easy and convenient modes of digital payments, including Bharat Interface for Money-Unified Payments Interface (BHIM-UPI), Immediate Payment Service (IMPS), and National Electronic Toll Collection (NETC) have registered substantial growth and have transformed digital payment ecosystem by increasing person-to-person (P2P) as well as person-to-merchant (P2M) payments. BHIM UPI has emerged as the preferred payment mode of the citizens and has recorded 803.6 crore digital payment transactions with the value of ? 12.98 lakh crore in January 2023.
Financial Inclusion
The Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, launched in 2014, aimed to bring financial inclusion to the underprivileged and unbanked population. More than 46.25 crore beneficiaries banked under PMJDY since inception, amounting to Rs. 1,73,954 crore, with PMJDY Accounts growing 3-fold from 14.72 crore in Mar’15 to 46.25 crore as on 10-08-2022.
Fintech Boom
The fintech industry in India has witnessed massive growth in recent years, driven by a young and tech-savvy population, widespread internet access, and supportive government policies. According to a report by PwC, India currently has the third- financial inclusion in the country. OCEN could enable largest
FinTech market globally and is poised to expand the various parts of the lending value chain and act as a at a compound annual growth rate (CAGR) of 31% up to common language of communication between the various 2025, which is higher than the global growth rate. These fintech companies have disrupted traditional banking by offering innovative products and services such as digital lending, wealth management, and insurance.
Transition in the Banking Industry:
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Data-Driven Decision Making
With the advent of data analytics, banks in India have started leveraging data to make informed decisions. Data analytics helps banks in credit risk assessment, fraud detection, and customer segmentation, among other areas. According to Nasscom, Indian Big data analytics sector is expected to witness almost eight-fold growth to reach $16 billion by 2025 from the current level of $2 billion, with the banking and financial services industry (BFSI) being one of the major contributors.
Adoption of Advanced Analytics
Indian banks have started using advanced analytics tools such as machine learning (ML) and artificial intelligence (AI) to improve their services. One of India's leading private sector banks, uses AI and ML in areas such as credit underwriting, risk management, and customer engagement. The bank also reported a considerable reduction in loan defaults after the implementation of AI-driven predictive models.
Regulatory Sandbox
The Reserve Bank of India (RBI) has introduced a regulatory sandbox for fintech companies to test their innovative products and services in a controlled environment. This initiative has helped create a conducive ecosystem for the growth of fintech startups in India.
Open Banking
Open banking, enabled by the RBI's Account Aggregator Framework, has led to a more customer-centric approach in the Indian banking sector. This framework allows customers to share their financial data securely with third-party service providers, enabling them to access a range of innovative financial products and services. Open banking has the potential to increase the revenue of Indian banks considerably.
Key Takeaways
The Indian banking sector has undergone a significant transformation in recent years, driven by digitalization, data analytics, and fintech innovation. As banks continue to leverage data and advanced analytics tools, they can offer personalized products and services to customers, streamline operations, and manage risks more effectively. However, the industry must also address challenges such as cybersecurity threats and regulatory compliance to ensure sustainable growth. As the Indian banking sector continues to evolve, it is poised to play a crucial role in driving the country's economic growth and financial inclusion, and Data Analytics can play a crucial part in helping the banking industry tap its full potential.
Glorious Insight has been helping the banking industry re-imagine their businesses in this new of Fintech. If you’d like to know more about how we can partner with you in your digital transformation journey, please feel free to contact us. Thank you!