The Banking, Financial Services, and Insurance (BFSI) sector stands at a pivotal crossroads. UPI (Unified Payments Interface), net banking and mobile payments are revolutionising how banking is done – UPI transaction volumes surged 35% year-on-year, reaching 106.36 billion transactions worth ₹143.34 trillion in 1H 2025.
India’s insurance industry is one of the fastest-growing sectors, driven by rising incomes, financial awareness, and supportive regulations. It ranks as the fifth largest life insurance market among emerging economies, growing 32-34% annually. India’s financial services are undergoing a rapid transformation, driven by FinTech start-ups. These companies are increasingly adopting AI and new technologies to replace traditional banking practices and deliver more personalised products. The transformation is not just about going digital; it is about making finance more inclusive and accessible and lending, payments and enabling tech were the top invested sectors.
Key challenges facing the Indian BFSI sector
With legacy systems constraining agility and new-age fintechs raising consumer expectations, BFSI institutions are under unprecedented pressure to transform digitally while upholding stringent and ever-evolving regulatory standards. They grapple with several core challenges:
- Legacy Systems & Competition: Outdated, siloed systems prevent rapid innovation, while nimble fintechs and neobanks are setting new benchmarks for agility and customer experience.
- Regulatory Scrutiny: Ever-evolving mandates from the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, and National Payments Corporation of India necessitate rigorous compliance and auditability.
- Customer Expectations: The modern Indian customer demands hyper-personalised services and seamless engagement across all digital channels—these are now baseline, not optional.
How technology helps overcome these obstacles for the BFSI sector
Forward-looking organisations see technology as an enabler to serve their customers seamlessly. The BFSI sector relies on tech solutions and enablers:
- Operational Resilience: Through enterprise-grade network, cloud, and security infrastructure to enhance risk posture and reliability.
- Enhanced Experiences: AI-driven insights power integrated customer and employee journeys to deliver superior engagement.
- Compliance and Security: Whether mandated by industry regulators or driven by market needs, BFSI tech needs to be secure and compliant.
- Cost Efficiency: Bundled solutions to reduce procurement complexity and total cost of ownership, making digital transformation both accessible and affordable.
- Inclusive Transformation: Ready-to-deploy modules to empower smaller banks, NBFCs, and Small Finance Banks to innovate at scale.
Need for a holistic tech platform for the Indian BFSI sector
The challenges faced by BFSI institutions can be individually addressed by point technical products – however, there are many drawbacks to this siloed approach. The need of the hour is a holistic, curated, future-ready digital platform for the sector, that is equal parts secure, compliant, and customer-centric. Such a platform should offer:
- Seamless Integration: Curated application bundling helps ensure a governed, interoperable experience across functions.
- Compliance Readiness: Technology that features zero-trust security, BFSI-grade hosting, data localisation, end-to-end encryption, cloud-native controls, and automated business continuity planning.
- Omni-Channel Engagement: Built-in digital channels enable compliant, customer-first engagement at every digital touchpoint.
- Smooth Orchestration: Enterprises must consider partnering with a managed services provider/enabler who orchestrates the entire ecosystem under a single, SLA-governed framework. A tri-partite model is key as it clearly delineates roles for each partner (infrastructure and security), the Independent Software Vendor (application), and the BFSI institution (operations). Whether adopting fast-track KYC modules or full-stack lending solutions, BFSI institutions must have the flexibility to choose what fits their unique journey.
Delivering a connected experience
A modular platform that integrates various solutions is key to improve customer and employee experience.
The needs of BFSI organisations span across secure connectivity, cloud, and compliance-driven solutions that enable them to innovate confidently.
To simplify BFSI transformation, the need of the hour is a curated ecosystem of BFSI focused independent software vendors (ISVs) which brings together specialised fintech and regulatory tech solutions – ranging from full-stack KYC modules to lending management platforms – under a governed, SLA-driven framework. By enabling interoperability and compliance readiness, this approach empowers BFSI institutions to accelerate innovation while maintaining operational resilience.
As Indian BFSI institutions strive to balance innovation, compliance, and customer experience, they need a robust customised digital fabric—powered by a recognised ISV ecosystem - to emerge as winners. By integrating network, cloud, security, and engagement into a single in-a-box solution, the BFSI Digital Fabric reduces complexity and empowers the sector to achieve its digital ambitions, securely and compliantly.
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