Digital Transformation in BFSI Market Share, Size [2031]

Report Description

Digital Transformation in BFSI Market Outlook 2031

The global digital transformation in BFSI market size was USD 68.2 Billion in 2022 and is likely to reach USD 310.6 Billion by 2031, expanding at a CAGR of 16.6% during 2023–2031. The market growth is attributed to the increasing use of AI, IT services, mobile devices, and online platforms.

Rapid increase in the adoption of digital technology by several banks, as it enhances customer experience and improves operational efficiency, which is expected to drive the market during the forecast period. Digital transformation helps BFSI to increase its productivity and provide transparency between the company and clients. Digital transformation surges customer retention rate and enhances the service of BFSI. It further helps in saving time, streamline workflow, and reduce operational costs in the BFSI sector.

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The report finds that the COVID-19 pandemic boosted the market due to the increasing customer demand for digital services. The BFSI industry heavily adopted blockchain technology during this period to provide secure and safe transaction channels for customers. The increasing adoption of digital services, mobile apps, and online platforms and the high adoption of advanced technologies, such as AI, fueled the digital transformation in the BFSI sector.

Digital Transformation in BFSI Market Dynamics

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Major Drivers

Growing need for digital services in banks to improve the customer experience is projected to boost the market. Banks are adopting digital technology to enhance customer experience and improve operational efficiency. In-built and user-friendly mobile banking apps are boosting the digital transformation in the BFSI sector. Digital transformation helps in facilitating various services, loyalty, and trust, and attracting new customers in the BFSI sector. It provides competitor analysis, which helps in improving the services of the BFSI sector.

• In July 2023, SBI launched an upgraded version of the YONO app, which enables customers to view their investments, cards, insurance, and banking transactions. It provides access to various UPI features, such as request money, scan and pay, pay by contacts, rewards, and others. It also helps with loan applications, EMI, and cashless withdrawals.

Increasing demand for IT solutions is anticipated to fuel the market. IT solutions are gaining popularity due to the rising cybersecurity threats and the need to adopt emerging technology. Solutions such as payment processing, customer relationship management (CRM), risk management, and cybersecurity propel the market. IT solution features, such asaccessing the location of ATM networks, accessing customer service channels, and requesting loans,contribute to the growth of the market.

Existing Restraints

Rising security threats and cyber attacks are expected to hamper the market. Cybersecurity risks affect customer loyalty and trust. Cyber attackers use clone websites of BFSI for scams, which leads to the loss of sensitive information, including consumer personal data and financial data. However, issues with legacy systems and infrastructure hinder the market. These systems are designed to fulfill specific functions;thus, the system lacks in flexibility to rapidly respond to changing markets.

Emerging Opportunities

Increasing adoption of advanced technologies, such as machine learning (ML) and artificial intelligence (AI),is expected to create lucrative opportunities in the market. Advanced technology provides customers with efficient and fast services. AI-based chatbots and virtual assistance are improving customer experience, which boosts the digital transformation. Several companies are adopting ML, as it helps to predict threats, which fuels the market.

• In September 2023, Temenos launched its first Generative AI Solution for the banking sector, which automatically classifies banking transactions of customers. Transaction classification helps banks provide personalized insights and recommendations and enhances customer loyalty by providing more products and offers. It even offers engaging and intuitive digital banking experiences.

Scope of the Digital Transformation in BFSI Report

The market report includes an assessment of the market trends, market segments, and regional markets. Overview and dynamics have also been included in the report.

Digital Transformation in BFSI Market Segment Insights

Component Analysis

Based on component, the digital transformation in BFSI market is bifurcated into service and solution. The solution segment is expected to expand at a significant growth rate during the projection period due to real-time and fast monetary transactions, reducing processing times, and enhancing liquidity management provided by digital solutions. These solutions help to comply with ensuring data protection, privacy, and regulatory requirements. Digital transformation solutions collect data from various sources and provide a complete view of customer profiles and monetary actions.

• In March 2023, PwC collaborates with FintechOS to launch a digital banking solution on Microsoft Cloud for financial services. It helps to improve customer experience and innovate rapidly at less cost. It enables financial institutions to boost digital transformation cost-effectively.

The service segment is anticipated to hold a key share of the market in the coming years due to increasing need for various services, such as system integration, consulting, and support and maintenance. Services help institutions integrate digital solutions into their existing infrastructure and maintain & upgrade their digital systems. Digital service delivers personalized offerings, quick retention of customers, accurate assessment, and reliable risk calculation However, the growing threat of cyber-attacks and data breaches boost the market.

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Deployment Mode Analysis

In terms of deployment mode, the global digital transformation in BFSImarket is segregated into cloud and on-premise.

The cloud segment is projected to register a considerable CAGR during the forecast period. Cloud infrastructure includes the deployment and maintenance of servers, networking equipment, storage devices, and other software & hardware resources in the data centers. Cloud infrastructure allows remote monitoring through the internet and is easy to deploy and manage without any hardware. The cloud software uses a metered, pay-per-use model, which is more cost-effective than on-premises, depending on specific needs.

• In Oct 2023, Kyndryl announced the availability of services for financial services organizations seeking to use Google Cloud. It helps in safely storing and protecting confidential and sensitive data. It is designed to enable a unified, scalable, and security-rich data platform to boost the regulatory and compliance activities of customers.

The on-premise segment is anticipated to account for a major market share in the coming years, as it provides absolute control over the hardware, software, and infrastructural platforms.On-premise software is installed on the computers of the organization. It allows organizations to change settings according to specific needs, thereby reducing cyber threats.

Enterprise Size Analysis

On the basis of enterprise size, the digital transformation in BFSI market is segmented into small and medium-size denterprises and large-sized enterprises.

The large-sized enterprise segment is expected to register a robust growth rate during the forecast period, due to the rising demand for competitor analysis, assets protection, reputation management, and IP protection among the large enterprises. The segment growth is further attributed to the increased digitization in the BFSI sector, which allows computerization of routine processes, reduction in the need for visiting physical branches, and streamlines back-office processes, leading to cost savings for large enterprises.

Technology Analysis

Based on technology, the globaldigital transformation in BFSI market is segmented into artificial intelligence, big data and business analytics, blockchain, cloud computing, cybersecurity, and others.

The big data and business analytics segment is expected to register a robust growth rate during the forecast period, as it provides insights into existing and potential customers across various portfolios. It provides insights into customer transactional trends, which increase customer satisfaction, reduce customer churn, and target potential customers for new loans. Big data is vast data sets that are heterogeneous and produced timely in financial services, which are ATM transactions, account opening, payment clearance, and others.

End-user Analysis

On the basis of end-user, the digital transformation in BFSImarket is segmented into banks, insurance companies, and others.

The insurance companies segment is projected to register a considerable CAGR during the forecast period, as insurance companies heavily use blockchain technology for fraud prevention, create transparency, and store records of claims, transactions, and policies. These companies also offer online portals where customers assess their policies, make claims, and pay premiums.

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The banks segment is projected to hold a large market share in the coming years, as the digital transformation provides a better understanding of customer preferences and personalized offerings. It facilitates customers to send and receive digital payments with a click. Digital transformation helps banks to deliver their services to remote areas, which results in quick customer retention.

Regional Analysis

In terms of region, the global digital transformation in BFSI market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East, and Africa.

North America is expected to dominate the market during the projection period due to the increasing digitization of traditional businesses. The regional market growth is further attributed to the rapid adoption of mobile devices, cloud technology, and IoT solutions inthe BFSI sector. Companies are able to provide digital solutions to end-users with the help of digital transformation.

The market in Asia Pacific is anticipated to expand at a rapid pace in the coming years, due to the rising investment by various companies in digital solutions and services.  Countries such as India, Japan, Australia, and Singapore are focusing on adopting digital technologies in smart bank projects.

• In August 2023, City Union Bank launched the firstVoice Biometric Authentication Banking App, which reduces customer efforts, improves customer experience, and prevents fraud. It enhances security and provides a convenient technique to authenticate users.

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