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The digital-first future

How innovative technologies, digital transformations, global customers, and changing expectations are rapidly changing the BFSI industry.


The digital-first future

How innovative technologies, digital transformations, global customers, and changing expectations are rapidly changing the BFSI industry.

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Fredrik Forss
| Linkedin
| International Marketing & PR Manager

The past years have seen the banking, financial services, and insurance (BFSI) industry make impressive strides in its digital transformations. By focusing on improving and expanding their digital services, with the customer experience at the forefront, BFSI companies are aiming for better customer engagement and retention.

This is being driven by technologies that enable fast scalability and maximum flexibility – such as the cloud and APIs – and that deliver a high amount of self-service, where artificial intelligence-driven solutions are leading the way.

But for all the progress being made, the industry still faces constant challenges. Especially when it comes to delivering an excellent customer experience that helps build trust.

Matshona Dhliwayo

“Earning trust is more difficult than earning money.”

As noted in’s Global BFSI Industry Trends Report 2022, “Consumer trust is non-negotiable in this industry. The ability to deliver excellent customer experiences through mobile devices is crucial for survival; this means delivering seamless and effortless interactions and transactions regardless of the method or channel the customer has used to communicate each time they connect with a business.

The need for such ‘seamless and effortless interactions’ has grown immensely during the past two years as the coronavirus pandemic’s lockdowns and social distancing have limited physical interactions – and as people increasingly adopt a digital lifestyle and ‘work from home’ becomes more widespread. Any organization not investing in a digital solution will quickly alienate their customers – whether individuals or other businesses.

This was discussed in our article on the impact of Covid-19 on the insurance and banking sectors:

“…it’s essential to keep in mind today’s rapidly changing customer preferences and how the coronavirus crisis is accelerating the trend toward using financial apps and online banking.”

And further elaborated on by Laura J Hay, Global Head of Insurance at KPMG International. “There is a risk of losing customers to more digitally-enabled competitors moving forward, particularly in personal lines where many customers’ patience with non-digitized processes these days is low.”

The bottom line

Becoming a digital-driven organization has clear benefits. Customer acquisition can be cheaper and easier, you can quickly react to technological and market trends, and operations can be streamlined via software integration (for example, a sale via a POS system is made, it then automatically updates your inventory management system as your account system records the sale, then your customer management system updates your customer’s sale history). No manual intervention is necessary.

Most importantly, it helps BFSI organizations optimize the customer experience and directly engage with customers who expect to connect with businesses online 24/7. An essential requirement when fostering trust and building a positive customer experience.

A changing of the guard

Digital experiences are particularly expected by younger, digitally-native, generations who are now entering the workforce and making their own financial decisions.

Millennials, according to the World Data Lab, are expected to have ‘an aggregate annual income of over USD 4 trillion by 2030’. Gen-Z is right behind and by 2031 is expected to surpass millennials’ earning power.

Then add in the expected USD 68 trillion that millennials and Gen-Z will inherit from their Baby Boomer (and early Gen-X) parents. They have the potential to be the most wealthy generation in history.

These new consumers will expect nothing less than a seamless digital experience for their BFSI needs.

This, of course, isn’t to say that Gen-X and Baby Boomers are all living in the dark ages. Currently, Gen Xers have the ‘highest post-tax incomes and spend the most’. They also grew up during a time when technology began to embrace the online world. They’re tech-savvy, just not fully immersed like their children or younger brothers and sisters, and when online, their ‘activities are more driven by purpose and intent than casual browsing.’

It’s clear that digital is here to stay and will, over time, become the predominant means for customers to interact with BFSI organizations. For example, a 2021 FICO Consumer Digital Banking Survey found that ‘almost half (41 percent) of North American consumers are more likely to use digital means to open a financial account than a year ago, while almost a third (32 percent) are less likely to visit a branch to open a new account.’

The digital floodgates have opened, and they won’t close again.

Everything is personal

This, alongside organization’s embracing digitalization and customer-centric strategies, is resulting in one of the biggest trends within the BFSI industry – in fact, in all industries with digital solutions. Hyper-personalization.

As noted in the Deloitte report, The future of retail banking: The hyper-personalisation imperative, “Hyper-personalisation can be defined as using real-time data to generate insights by using behavioural science and data science to deliver services, products and pricing that are context-specific and relevant to customers’ manifest and latent needs (i.e. those needs which, due to a lack of information or availability of a product or service, cannot be satisfied). These insights are garnered using Artificial Intelligence to analyse data.

Beyond standard personalization (such as using someone’s name on an email), hyper-personalization closely analyzes the entire customer journey – from social media to purchase history, Internet of Things data, and much more – and enables organizations to have a two-way conversation with their customers while enabling them to create their own experiences with your business.

Being able to do so is quickly becoming a competitive advantage. Beyond price and quality, as noted in a recent Accenture report, five factors are now driving consumers’ purchasing decisions: “health and safety; service and personal care; ease and convenience; product origin; and trust and reputation.

By helping to make conversations more meaningful, hyper-personalization is set to be an essential tool in helping businesses meet customer needs. People now want other things from a business, not just a simple product or service. The relationship is far more personal and as we enter an age of hyper-connectivity, customer data will be a key predictor of potential growth and profitability.

The connected customer

Arthur C. Clarke

“Any sufficiently advanced technology is indistinguishable from magic.”

This need to create experiences and meet ‘everything must be digital’ expectations is resulting in BFSI companies racing to meet the market’s desire for online and interconnected services. To create their own magic.

Innovative technologies, platforms, business models, and strategies are being explored. This can include the integration of technologies, especially through the cloud, and cover multiple, often interconnected technologies, including enterprise mobility management, digital commerce, cybersecurity, Internet of Things, ERP, CRM, enterprise content management, blockchain, AI, data analytics, and digital visualization.

As we discussed in our article on Telematics and the insurance industry, “Modern technology is helping the insurance industry evolve from product-driven to customer-centric – from ‘reactive’ to ‘proactive’.”

A case in point is the use of telematics devices. From the same article:

“For car’s alone, telematics devices can collect extremely detailed information:

GPS data, fuel economy, battery health, how your customer drives the car (too fast, braking too hard). Engine diagnostics, where they drive and how far, traffic conditions, who’s driving the car, and much more.

Such real-world data helps you customize policies and dictate premiums. While your customers gain information (based on their actual driving habits) to select policies that match their needs.

The better they drive, the more they’re rewarded, and the less payout. Decisions that are all based on hard data, collected in real-time.

It’s clear that such connected technology is rapidly changing the BFSI industry. And one of the most explored today is artificial intelligence within chatbots, self-service tools, CRM, data analytics, and fraud detection solutions (to name a few).

As noted by a Global Market Insights report, in 2019, the use of AI in the BFSI market was estimated at USD 5 billion and expected to increase at over 40% Compound Annual Growth Rate between 2020 and 2026. In the report, AI was seen as a way for banks to “increase their operational efficiency and provide better customer experience”.

It is also an effective means of keeping costs down as noted in Business Insider’s AI in Banking report. “The three main channels where banks can use artificial intelligence to save on costs are front office (conversational banking), middle office (fraud detection and risk management) and back office (underwriting).”

By using AI to cut costs and analyze customer behavior so their needs can be met, AI will be ever more used to provide a highly personalized, frictionless experience.

However, the more technology that is introduced and the more it is integrated (amongst themselves and within legacy systems), the greater the challenges around security, data protection, and regulatory compliance.

Ensuring systems work as intended at every customer touchpoint is extremely important. Validating payments and authentications, for one example, must be 100% accurate.

For a comprehensive overview of the technological issues facing the BFSI industry, take a look at the PwC report, Financial Services Technology 2020 and Beyond: Embracing disruption.

At your service

Digitalization and innovative technologies are also enabling BFSI organizations to introduce new services and business models. Neobanks are online-only and have no physical branches. Open banking enables third-party financial service providers to access a bank’s customer’s data. Embedded finance is the “use of financial tools or services — such as lending or payment processing — by a non-financial provider. For example, an electrical shop could offer point-of-service insurance for goods sold in-store.”

Then you also have cloud and API-enabled Banking-as-a-Service. Insurance-as-a-service. Even financial service-as-a-service.

We are quickly entering a digital future where individualized and custom-made services can be quickly created to service the needs of anyone, anywhere.

Small world, big challenges

For merchants and BFSI organizations, digital innovations are letting them significantly increase their reach with minimal effort. Within hours a local business can trade globally.

This is also seeing a rise in competition when it comes to firms offering digital payments solutions that can reach anyone. Most recently, Google partnered with Western Union and Wise to launch its own International Money Transfer solution, so that, as mentioned by Reuters: “Google Pay users in the United States can now transfer money to app customers in India and Singapore, with plans to expand to the 80 countries available via Wise, and 200 via Western Union by the end of the year.

Additionally, that “The new remittances functionality escalates competition among technology companies and traditional finance firms over consumers’ money and data, with providers looking to become a one-stop shop for their users’ financial needs.

Cross-border solutions, however, come with their own challenges. Some can include meeting international laws, regulations, and standards, such as the impending ISO 20022. Others must ensure that data between international banks is formatted correctly on a user’s app. Another, that transfer payments are quick and secure, whether from a one-person-run online store or a complex omnichannel solution.

Online, cloud-driven digital products and services, have made it easy to communicate and conduct business from any location at any time, and BFSI organizations that are embracing digital solutions will have a greater reach and better ability to quickly innovate.

McKinsey notes that for insurers, “As ecosystems continue to develop globally, cloud-native insurers will be best positioned to act as ecosystem orchestrators—acting as a connecting hub among customers, distributors, insurtech, healthcare providers, carriers, and reinsurers, among others.”

Additionally, as Deloitte’s 2019 payment trends report discussed, technology will bring substantial change.

The greater prevalence of exponential technologies—distributed ledger technology (DLT) and cryptocurrencies, Internet of Things (IoT) as point of sale (POS), wallets, tokenization, and more—will expand consumers’ and merchants’ options for how to pay and receive payment. Further, as the value of traditional competitive differentiators decreases (e.g., transaction processing speed, convenience, and access), streams of traditional product revenue will likely become commoditized, resulting in decreased payment processing fees. Future revenue, therefore, will need to come from other means; likely differentiated services or experiences.

Everything is evolving so rapidly – on a global, connected level – and competition is becoming so diverse, that it’s clear why solutions must focus on keeping people happy and building trust. Everything may change tomorrow, but you want your customers to stay with you. No matter where they are.

Putting people first in a digital future

Get your customer experience right by validating and securing payments and authentication processes. Crowdtesting helps you gain and retain your BFSI customers.

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A woman uses Testbirds services in the BFSI industry

The future, it has been said, is unwritten. The BFSI industry is amid a digital revolution and the traditional ways of doing things are quickly being re-evaluated, and in many cases, discarded.

Whether you want to use social media-based ‘financial influencers’ to reach your customers or develop a sensor that monitors how they drive, build a drone that delivers real-time data about what’s happening at a factory you insure, or develop an AI and machine learning POS system, or a 5G-enabled IoT device that provides real-time services… everything is possible.

The challenge is ensuring it builds trust.

When every transaction, every claim, and every conversation might see a customer leave and use a competitor, ensuring your digital solutions are secure, relevant, and provide a truly personalized and meaningful customer journey is non-negotiable. No trust. No customers.

This truly is a digital-first reality.

Very soon, one chance is all many companies will ever have. It’s essential your planning, strategies, and testing, get it right.

The first time.


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