Smart Revolution: An opportunity for the BFSI Sector to Grow Amid Covid-19 Pandemic

The Covid-19 pandemic has affected almost every other industry and the BFSI industry is not an exception. There are several factors that the BFSI industry can adopt to overcome the crisis. The banking industry must increase its alertness, the financial firms must remain proactive to face the economic disruptions while the insurance sector must think about the long-term strategies, prioritizing their customers and ensuring the continuity of essential services.

The banking, financial services, and insurance (BFSI) industry provides a range of financial products and services that include universal banks, commercial banks, insurance companies, mutual funds, and other financial entities.

Needless to say, the Covid-19 pandemic is an irreversible event that has brought uncertainty to every point of society. The impact of the Covid-19 pandemic on the BFSI industry will be severe and the situation has worsened due to staff-shortages and financial pressure on firms to deal with the Covid-19 outbreak. To navigate with this uncertainty, the BFSI sector must keep an eye on the liquidity, credit-risks, and the well-being of the employees and must consider the impacts of the pandemic on the businesses. The pandemic can be dealt with well by adopting apt technologies and innovations that could help the companies to prepare for new risks. Along with that, the current priority of the BFSI market players must be to meet the demands of the customers and look after the well-being of the employees.

Impact of Covid-19 on the banking sector

The Covid-19 pandemic is probably the most serious challenge that the financial institutions might have ever faced and the consequences are still unpredictable. The banking industry has hardly any choice but to increase its alertness and revise the forecasts according to the circumstances that might evolve in the future. The banking sector needs to recognize the requirements of the customers and the financial risks and its implications.

On the other hand, the pandemic is the right time for the banks to provide support to the customers as it would not only help the economy but also the reputation of the bank in a long run. To face the crisis some of the steps that banks might adopt are-

• Rethink about the post-Covid-19 strategy
• Focus on the business continuity planning to survive the crisis
• Prioritize your customers while making business decisions
• Find alternatives to reduce your costs
• Rethink about all the challenges that you might face while dealing with the customers and their loans

Along with all the points mentioned above, firms should prepare for all the downgrading that the industry might face.

The most common agreement made by the majority of economists is that many countries will see a continuous slowdown and eventually downward revisions in the GDP growth. Most of the countries have come up with relief programs to sustain economies and banks are at the core of carrying out such measures.

Impact of Covid-19 on the finance industry

The Covid-19 pandemic has cost both humans and the money; the world has never seen a time worse than this. There is no doubt that there have been essential impacts on global supply chains that were dependent on goods from China. The working capital management ought to be challenging as-

• The businesses that are not getting enough demand may experience overstocking that could continue till the demand is back on track or the production is reduced.
• The customers might delay the payments to safeguard the cash while on the other hand, the shippers might be in great need of payments.
• The non-affected counterparties might have a competitive advantage and may provide early payment discounts to the customers.

The financial sectors that are most likely to get affected by the Covid-19 pandemic are-

• Export & Import- The exporters who are mainly exposed to the international market might face a problem.
• The manufacturers that are dependent on parts of affected countries- Automotive companies that are dependent on countries such as China
• Tour and Travel- Businesses that are dependent on tourism such as hotels and travel agencies
• Airline industry- The airline industry will face a problem as people will prefer to travel with their vehicles for domestic travel
• Others- This includes retailers, luxury goods traders, and shopping malls

The government, as well as the banks, have been doing their best to address the economic collapse but the answer to which policy should continue to preserve financial stability remains unanswered. Therefore, businesses must be proactive to withstand the financial disruptions that the firms might face and act wisely to face the predicted risks.

Impact of Covid-19 on insurance industry

Though the insurance industry is well prepared for the majority of the losses, the financial impacts will definitely take time to play-out. The financial impacts of COVID-19 upon the insurance industry are specific-

• The fall in equity markets and the interest rates might put pressure on the reinsurer’s balance sheets.
• There will be time-lag for insurance if the customer wants to claim the money.

Currently, the immediate concern for insurers is the protection of employees and the health and safety of distribution partners. The major components of the insurance industry that would get affected on the profitable side by the pandemic are-

• Claims- Since the health agencies are estimating many numbers of deaths, therefore life and disability claims are expected to increase.
• Investment Income- Due to the inconsistency in the financial markets, it is likely that the interest rates will remain low and therefore, the investment income will see a simultaneous growth.
• Premium income- Life and annuity insurances will see a bang on the premium income that would last for a short period.

To overcome the current crisis, the firms should consider several factors such as customers' opinions, impacts on capital, and revenue along with the regulations and directives provided by the government. The priority of the firms should only be to serve customers at the time while ensuring them to fulfill the promises made to them along with employee welfare. Moreover, the firms need to recognize the current situation and rework on the long-term strategies, ensuring the customers the continuity of critical services.

All three sectors have been taking effective measures to deal with the crisis. Although we cannot exactly predict the state of the global BFSI sector, we can see a shift toward diversification and more cash flows into financial institutions. In conclusion, the need of the hour is to invest in businesses with careful and continuity planning with intended risks during these difficult times.

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