The financial sector showed resilience by innovations in 2021. There are two dimensions to the pandemic and the developments that happened. One, when the pandemic struck, no one was prepared, and therefore, there was a rapid change we made the way we functioned and remote working. Banks were not prepared as they deal with sensitive data, access to this was limited, and 2021 was entirely driven by uncertainties.
Element of uncertainty is holding back many things for a lot of industries. However, as far as the financial sector is concerned, barring a few NBFCs, there hasn’t been any significant issue with financial institutions. Of course, their health has improved due to clean-up and other mechanisms, but in general, the financial sector’s health has not deteriorated.
The low-interest-rate regime has helped the industry to a large extent. The government’s spending should help economic recovery.
Most of the things in payments and banking we would not have imagined in 2019 has become a reality today. Rapid digitization wouldn’t have been possible without the pandemic, and it has accelerated the pace to how it happens.
Dramatic changes have happened on the payments side, and it’s omnipresent across the board. Most adopters find it sustainable and are stuck with the idea of digital payments and habitual to it.
The second dramatic change is the virtual interactions, which has changed how business interactions are happening compared to earlier times.
Both of these dramatic changes are here to stay and co-exist.
In 2022, my sincere hope is the pandemic should die down. The other thing that may happen is more and more services will get digitized and AI-based. For example, we look at creditworthiness when we do lending. E.g. Retail lending, here lenders are eager to know the person’s creditworthiness, ability, and will to repay. Credit officers or loan officers used to do this in the past. Now banks have got the most extensive financial database. If they make a good analysis of this database, they can decide customers creditworthiness. This would enable digital lending, especially in personal loans category.
It is a segment where a decent rate can be charged, and low delinquencies can be seen and provide reasonable returns for banks.