Unit-1

Financial services
Introduction
• Financial services refer to
services provided by the finance
industry.

• The finance industry

encompasses a broad range of
organizations that deal with the
management of money.
• Among these organizations are banks, credit card
companies, insurance companies, consumer finance
companies, stock brokerages, investment funds and
enterprises, some government sponsored.

• The functions of financial services are

• Facilitating transactions (exchange of goods and services) in the
economy.
• Mobilizing savings (for which the outlets would otherwise be much
more limited).
• Allocating capital funds (notably to finance productive investment).
• Monitoring managers (so that the funds allocated will be spent as
envisaged).
• Transforming risk (reducing it through aggregation and enabling it
to be carried by those more willing to bear it).
Who offers Financial Services?
• Financial institutions: Specialized service as a product like
Banking, Insurance, Asset Management (Mutual Fund),
Registrar, Depository, etc,.

• Financial Intermediaries: Bridge the gap between the seller

and buyer or demand and supply. Stock Brokers and Forex
dealers are the few to mention.

• Financial Markets: They offer services like Listing, delisting,

online trading, clearing, settlement, risk management in
Equity, Debt, Derivatives and Forex Markets.
Types of Financial Services
• Banking Services

• Insurance Services

• Investment Management Services

• Capital Market Services

• Non Banking Financial Services

• Corporate Services

• Merchant Banking Services

• Global Financial Services

Financial services features
Certainly, let's simplify the features of financial services into five key points:

1. Banking and Digital Payments: Financial services include traditional banking like savings and checking
accounts, along with digital payment options like mobile wallets and apps to make electronic transactions.

2. Investing and Wealth Management: You can invest your money in things like stocks, bonds, and
property. Wealth management services help people manage their investments for the future.

3. Insurance for Protection: Financial services provide insurance to protect against unexpected events,
such as health issues or accidents. It offers financial security when things go wrong.

4. Borrowing and Lending: You can get loans or credit cards to access funds for things like buying a home,
starting a business, or managing expenses. Financial services offer these lending options.

5. Planning, Security, and Support: Financial services help you plan your financial future, keep your money
safe, and provide customer support when you have questions or need help with your finances.
Effect of Technological Trends
• Agile and adaptive banking
• Hyper personalization in the banking industry
• Artificial intelligence in the entire banking industry
• Open banking and embedded finance
• Payments 4.X as a trend in banking
• Hyper-automated banking with Robotic Process Automation
(RPA)
• Low-code or no-code platforms
• Buy Now Pay Later (BNPL) 2.0
• Regulatory Technology (RegTech)
• Metaverse in finance
Technological Trends
• New technological developments are redefining our
approach to finance.

• The role of banking is changing with the emergence of new

technologies.

• This, in turn, is also affecting how companies or finance

departments function daily.

• The concepts of AI transformation, blockchain, NFT, AR, and

VR are becoming integral to conversations about the
sector’s future.
 Agile and adaptive banking
• 1. Being Agile in Finance: Being agile in finance means that financial companies need to be
competitive and able to create and launch new products quickly and efficiently. This is like
being really good at adapting and moving fast in the financial world.

• 2. Adapting for Survival: Traditional financial firms like banks and insurance companies have
to be flexible and nimble, meaning they can change and react quickly to stay in business.

• 3. Big Changes Coming: A research study suggests that by 2030, around 80% of traditional
financial institutions might not exist anymore. That's a huge change in the industry.

• 4. Going Agile to Improve: The study also found that many banks and FinTech companies
want to improve their financial services by using agile methods. This means they are trying
to become more flexible and quick in how they do things to make their services better.
 Hyper personalization in the banking industry
• People want personalized digital experiences, even in banking. When banks
recognize your past interactions and predict what you might need in the future, it
keeps you happy and loyal. This personal touch not only makes customers happy
but also helps banks make more money. By teaming up with FinTech companies,
banks can offer these personalized services to users.
• Today, people, banks, and FinTech companies are using special
tools called APIs to share information. The goal is to offer
personalized experiences to customers, no matter where they
are in their digital journey. This trend is likely to continue, and
we'll see banking services integrated into various aspects of our
daily lives.
Artificial intelligence in the entire banking industry
• Another of the key banking technology trends we can expect to
see in recent times is the increased use of artificial intelligence in
banking.

• For example, AI-powered chatbots will become even more

common, providing customers with 24/7 support and
personalized recommendations.

• Besides, artificial intelligence is increasingly applicable to banking,

primarily due to its ability to process large amounts of data and
make quick decisions.
• The technology can also help banks improve fraud detection
and reduce financial crime risk.

• For example, with machine learning, banking systems and apps

can analyze real-time transaction data and automatically
trigger alerts or block suspicious transactions if suspicious
activity is detected.

• Another example of an AI application is credit risk analysis.

Thanks to AI-based systems, banks can quickly and accurately
assess customers’ creditworthiness and determine the level of
risk involved in their loans or extending credit.

• AI can also help optimize business processes in banking.

• By automating processes, banks can save time and
resources by reducing costs and increasing the efficiency of
their operations.

• Artificial intelligence is, thus, undoubtedly a banking

technology trend. It can bring many benefits to both banks
and customers. With AI, banks and other financial
institutions can make more accurate decisions and provide
better customer service.
Open banking and embedded finance
• Next on the list is open banking and embedded finance. In short,
the open banking phenomenon has existed for some time.

• However, only recently have financial institutions recognized its

potential. Overall, the concept boosts digital experiences, grants
faster onboarding, and broadens access to alternative asset
marketplaces.

• Open banking delivers a myriad of opportunities to the finance

industry because it grants unprecedented access to banking
customers.
Payments 4.X as a trend in banking
• Over the past few years, the increasing level of widespread
digitization has also caused user experiences and expectations to
dictate the direction of cashless transactions.

• The answer to customer experience and expectations, and as we

know, not only Data is king, but the Customer is the king too, is
Payments 4.X.

• This is currently one of the most critical trends in banking, which

may contribute to changing the way financial transactions are
carried out shortly.
• The concept involves an improved version of traditional
payment methods, such as debit cards and bank transfers,
using new technologies such as blockchain, artificial
intelligence, and automation.
• With Payments 4.X, bank customers have access to more
personalized financial services that are faster, more efficient,
and more secure than legacy solutions.
• In addition, with Payments 4.X, banks have the opportunity
to increase their competitiveness in the market and adapt to
the changing spending needs of their customers, helping to
keep costs, improve the quality of service and increase
customer loyalty.
Hyper-automated banking with Robotic Process
Automation (RPA)
• RPA and hyper-automation in banking are expected to
reach $4.9 billion by 2029.

• The market will experience a Compound Annual Growth

Rate of 27% between 2022 and 2029.

• In other words, every year the RPA and hyper-automated

banking market will grow by one-fourth of its value.

• What is the reason behind such rapid growth and why are
these technologies coined as financial services trends?
• Similarly to AI, ML, and open banking, the financial services
industry has been using hyper-automation for a long time.

• In short, hyper-automation is now being called upon to

increase the speed of financial and banking transactions.

• Likewise, the instrument can help reduce operational expenses

while reducing the impact of human errors.

• RPA with hyper-automation takes a great deal of time from

staff, thus shifting their responsibilities to core financial tasks.

• The institutions can tap into Big data analytics, thus generating
new revenue streams and making more informed decisions
after getting insights from AI, ML, and RPA.
Low-code or no-code platforms
• The fiercely competitive industry environment in the e-
banking sector requires openness and access to modern
methods to build digital solutions.

• The answer to the need for faster delivery of products and

services in the FinTech sector and beyond are platforms using
a low code or no code approach.

• The software development process using such platforms is

much simpler, as they contain ready-made components to
build a product, process, or service with minimal programming
knowledge.
• According to Gartner forecasts, by 2025, as many as 70% of new
enterprise applications will use low-code solutions.

• This compares with a share of less than 25% in 2020. The trend
is mature enough to support such processes as customer
onboarding and offer a wide range of add-on products.

• FinTechs, among others, are basing their competitive advantage

on such solutions.

• This open-source, low-code platform enables Java developers to

build scalable, extensible, and secure enterprise and SaaS
applications more efficiently.

• Without a doubt, low-code platforms will become emerging in

banking technologies for several reasons.
Buy Now Pay Later (BNPL) 2.0
• While the credit system has existed for decades, the ability
to purchase something by splitting the purchase into
interest-free installments is still new.

• In traditional terms, BNPL was most often used for high-

value items.

• Currently, the phenomenon is spreading to other categories

of goods and entering new industries, including finance.

• This second version of BNPL allows customers to make

online purchases with virtual and physical credit cards.
Buy Now Pay Later (BNPL) market size in USD Billion
• Simply put, the system will work as an ordinary credit card
service with the key difference being that you can deconstruct
almost any purchase into installment-free payments.
• Tech giants like Apple have recognized this trend and already
are reaping the benefits.
• Taking this into account, BNPL 2.0 is expected to be a great
customer engagement opportunity.
• It will create a more seamless purchasing experience and
decrease the card abandonment rate.
• Namely, regulatory bodies are trying to make it bulletproof in
regards to data security and potential financial crimes.
Regulatory Technology (RegTech)
• The RegTech market is growing similarly to global cloud
finance and RPA. The segment is expected to reach a value
of $30 billion by 2027.

• What is the key driver behind RegTech? The rising number of

fraudulent activities in the financial sector. Some even
call RegTech a new FinTech.

• It is crucial to explore several key elements so as to determine

whether the concept meets its preceding reputation.

• In short, RegTech is a way of improving compliance by applying

modern technologies.
In recent years, the application of RegTech has increased by 500%.
In short, the approach offers these benefits:
• With growing regulation, compliance personnel cannot keep up with it.
RegTech helps automate the compliance process by processing vast data
volumes at a rapid pace.
• The traditional methods of compliance relied on manual input, which is
prone to human error. In turn, RegTech is based on automation tools and
algorithms minimizing the chance of error.
• RegTech brings higher transparency in connecting people to processes. In
this way, insights can be shared much faster and more candidly.
• RegTech improves risk management. Businesses can use their existing data
to evaluate risks, as well as alert personnel and authorities of suspicious
activities.
• RegTech helps financial institutions keep up with the
increasing pressure of regulation, which makes automation
serve the purpose of better compliance through error
minimization, efficient data processing, and effective risk
management.

• Most notably, it helps avoid massive fines linked to

noncompliance, some of which can be as high as $4.3
billion.
Metaverse in finance
• Perhaps, we could say that the metaverse concept will
forever be associated with Mark Zuckerberg’s promo.

• In a nutshell, the metaverse can be coined as the fifth stage

of the banking evolution.

• The key argument is that it brings the customer experience

in virtual banking to a whole other level.

• Metaverse brings AR and VR into the financial sectors, thus

improving personalized banking as a service.
• It is expected that by 2030, about 50% of banks all over the globe
will use AR and VR as a channel for customer transactions and
employee engagement.

• To illustrate, Bank of America recently launched a VR-based

training program to help their employees prepare for real-life
customer interactions.

• In turn, BNP Paribas launched an app allowing customers to

conduct different banking transactions via VR. These experiments
are not so widespread, yet they show some promise.

• The new generation of tech-savvy consumers will use VR and AR

to a greater extent.