BFSI sector will move towards digital-centric financial ecosystem: Practus’ Kalyanaraman

The technological change like advancement in AI is probably leading to AGI or Artificial General Intelligence.“AGI is a hypothetical type of AI that would have the ability to perform many intellectual tasks,” says Sriram Kalyanaraman, the Partner, BFSI & Advisor at Practus in an exclusive interview with Bizz Buzz. He also throws light on current trends or emerging issues within the BFSI sector that Practus is actively addressing through its consulting services, and how it facilitates institutions in implementing automated credit decision making by combining inputs from credit bureau, account aggravators, behaviour data and AI to determine the repayment pattern and credit quality of customers

In your opinion, what are the most significant challenges or trends currently being faced, and how do you believe you are equipped to address them?

The technological change like advancement in AI is probably leading to AGI or Artificial General Intelligence. AGI is a hypothetical type of AI that would have the ability to perform many intellectual tasks. The challenge is integrating these and using them meaningfully in credit decisions, collections, and behaviuor pattern analysis of the customer. This would also mean a high level of unlearning and relearning which means a large part of the team will undergo a churn.

Looking ahead, what are your predictions for the future of the BFSI sector?

As India’s GDP is expected to move towards 7.3 per cent in FY24, the BFSI sector will move towards a more digital-centric financial ecosystem. There will be complete automation of KYC and credit processes, even for large value loans and home loans, as the government itself is gearing up its digital infrastructure in a big way. Digital lending is set to grow as the Indian digital lending market is expected to be $720 mn by 2030 aided by Generative AI in fine-tuning lending and credit decisions. Cutting edge personalised customer service leading to empathy banking in its real term, personalised insurance products, and quotes based on customer behavior. Increased investments in cybersecurity and a renewed focus on ESG initiatives will be the order of the day. As regulation increases, regtech, or implementing and monitoring regulation through technology, will gain momentum. The BFSI sector may see a big transformation with AI and sustainable finance.

Given Practus' expertise in business transformation and performance improvement, how do you tailor your services specifically for clients in the BFSI sector?

Once we do an initial assessment with the client's team, we define the project's path and do a market and competitor (national /international) mapping. One of the assessments we do is the client's maturity in the digital journey and suggest the most cost-effective digital and process alternatives. All the solutions need not necessarily be digital initiatives as we firmly believe, in many cases, simple process changes and realignment will yield good results. Practus not only works on suggestions for improvement of processes and tech adoption, but also helps the client execute and put in place the suggestion thereby implementing what we had advised to give the maximum results. We also ensure that the risks are assessed and that our solutions are sustainable in the long run for the next level of growth.

With a focus on return on investment (RoI) and outcome-based strategies, how do you measure success in your engagements with financial institutions?

We set the success matrices with the customer after our study and when we start the core project. Once we do this using our proprietary tools, we measure the outcome and strategies and agree with the customer. In fact, a major part of our commercials are loaded towards achieving the outcomes and goals set, so that there is enough incentivisation for both the client and Practus teams to achieve the agreed outcomes.

The success of a project is measured by multiple parameters – some examples are: Financial success by RoIs in the form of EBITDA and cash flow improvements, pre and post / KPIs for processes, Risk parameters, efficiency, technical adoption at grassroots level pre and post and also a pre and post benchmarking with industry.

What are the current trends or emerging issues you see within the BFSI sector that Practus is actively addressing through its consulting services?

Generative AI and blockchain is an emerging trend. It is estimated that 78 per cent of C suite leaders said that they are leveraging Generative AI and blockchain and its being tested by many banks for their supply chain financing. Open banking where banks partner with fintech companies has evolved. As per one estimate, BFSI generates 2.5 quintillion of data per day and 48.60 billion of real-time transactions per day (BFSI Outlook AirtelReport 2024), and hence cloud storage has become a necessity. All the technological dependence has increased cyber risks and organisations have moved to SD-WAN (Software-defined Wide Area Network). The CERTIN, the Indian Government's cyber security advisory firm, is also working with banks & financial institutions to maintain a robust digital system. Rural banking and financing have evolved in a big way thanks to Pradhana Mantri Jan DhanYojana and Pradhan Mantri Awas Yojana (PMJDY and PMAY). Small finance banks and neo-banks have come into play. Practus works practically in all these areas with clients to help them evolve digitally and adapt and embed the digital journey across the spectrum. Regtech (regulatory technology) has become a large business and Practus with our partners also advises and helps customers to monitor and implement all the regulatory directions.

In your experience, what role does innovation play in the success of financial services organisations today?

Innovation in a financial institution directly aids business growth by enabling quick decision-making, fine-tuning credit policies and customizing it, and also aiding the process improvements and targeted collections. This would automatically streamline processes, reduce costs, and improve efficiency, leading to high profitability. Also, innovation coupled with technology deployment enables one to create great customer satisfaction thereby enabling customer delight. As mentioned earlier, Practus enables and facilitates this innovation in the customer segment and handholds them and helps implement the innovative ideas that are approved by the management. For example, the P2P lending where large number of lenders lend to individual borrowers through a platform is the result of this innovation. Also, we can facilitate institutions in implementing automated credit decision making by combining inputs from credit bureau, account aggravators, behaviour data and AI to determine the repayment pattern and credit quality of customers.