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11 innovations are an ideal solution to this challenge. For
STIRRING UP The Indian banking system is a melting pot of paradoxes. On
the one hand, we have emerging technologies, like AI/ML
and Blockchain, changing the face of the game dramatically.
A REVOLUTION: A On the other, we have 20% of India’s population
unbanked[1] and yet to experience the benefits of the saved
CLOSE LOOK AT rupee. Government intervention can only do so much to
elevate the quality of banking in a country of 1 billion. The
INDIA'S FINTECH rise of India’s dynamic FinTech sector can be the much-
needed breakthrough, connecting the dots and bridging the
BOOM & WAY gap between banks and the Indian public.
FORWARD Wealth distribution is a problem unique to India. This is
unlike the developed West, where it is likely uniform,
regardless of where you look. Wealth distribution is just one
of the many ways in which the Indian banking system differs
from the rest of the world. There are other issues as well –
lack of digitization and modernization, legacy issues, financial
th
Feb 12 , 2019 inclusion, and so on.
FinTech: Reshaping India through innovations
The FinTech sector is a key facilitator of innovative, yet
profitable solutions to solve the complex problems in India’s
banking system.
Challenge 1: Increasing India’s banked population
and boosting protability
Plenty is being done by the authorities to resolve India’s
alleged banking crisis. But, the impetus for digitalization will
be moot if it doesn’t reach the unbanked on time. Through
smart solutions and innovative approaches, FinTech can lend
themselves as a partner to the banking ecosystem. By
Jaya Vaidhyanathan working as extensions of banks, they can be influential in
CEO, BCT Digital solving the problems of profitability and outreach.
Challenge 2: Unlocking insights from the customer
journey Banks spend a lot of time processing customer
accounts and transactions, but not in the interim, exploring
the customer lifecycle. FinTech can leverage the power of
big data and analytics to analyze customer activities, discover
The rise of India’s dynamic
hidden intelligence and devise profitable solutions that
FinTech sector can be the enhance competitiveness.
much-needed breakthrough, Challenge 3: Tackling systemic problems, like NPAs
connecting the dots and India’s banking sector has yet to master the balancing act
bridging the gap between between regulations and profitability. The sheer transactional
volume is a major obstacle to employees achieving anything
banks and the Indian public. beyond the routine tasks and competencies. FinTech
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knowledge, which is further enhanced by English-language
proficiency. However, typically, FinTech in South East Asia is
example, Early Warning Systems leverage advanced
technologies to identify, flag and resolve the problem of cheaper than in India, so cost-competitiveness is
NPAs, preventing unwarranted escalations, while alleviating downgraded.
the transactional burden on bank employees. 5. The mindset to explore and experiment: Initiatives like
Challenge 4: Fostering a culture of innovation the innovation sandbox are widely accepted in South East
By collaborating with FinTech companies, the ecosystem of Asian countries. Saying ‘yes’ to experimentation has led to a
PSUs, private banks, NBFCs and community banks can lot of success stories.
usher in systemic changes within the institution of banking.
They can resolve their fundamental challenges, and invest in 6. Scale matters: The larger outreach, the better the
intuitive solutions to enrich customer experience and profitability – this wisdom holds true for FinTech as well.
improve competitiveness. South-East Asia has a larger customer base than India, and a
India vs South East Asia: The big picture banking set-up favourable to cross-border trade. The
growth of trade between countries that have similar
India’s FinTech sector is rapidly evolving, but it trails behind demographics has only contributed to profitability.
some of its counterparts in South East Asia. South East Asia
is a mixed bowl of banking technology readiness. While Indian FinTech: Has it arrived?
countries, like Singapore, are advanced and boast of What lessons can India learn from the South East Asian
exceptional success, others are still playing catch-up. FinTech success story?
Nevertheless, the rise of FinTech in South East Asia has been The shift from physical to digital banking, in many of the
a commendable story. Just five years back, Singapore had a South-East Asian countries, has been executed very well.
monopoly in FinTech. Today, hubs like Manila, Hanoi and There is a lot for India to learn from these success stories.
Bangkok are growing impressively.
Characteristically, overseas transactions between countries
The two markets – India and South East Asia – have many in South East Asia are easier than between India and its
similarities, in terms of population, customer demographics, closest neighbours. Mobile banking is on the rise, even
socio-economics, and customer expectations. Yet, up close, among the rural population. Peer-to-peer electronic lending
some of the fundamental elements of the South East Asian has also picked up. As the banking sector evolves and goes
FinTech industry are in stark contrast with India’s: ‘phigital’, there is a need to be foresighted and agile enough
to capture the market heads-on.
1. Flexible and loosely-governed regulatory controls:
Routine activities, like opening a bank account, are easier While the flexible regulatory scenario in South East Asia is
and less formal in South East Asia. This has positives as wel conducive to innovation, some checks and balances are
as negatives, vulnerability to fraud being one of the necessary – which is something that India gets right. Simple
negatives. Regulations and governance need to be balanced exercises, like the credit card validation PIN, go a long way
in most of the countries here – Singapore is an exception in preventing fraud. India’s massive population and
transactional volumes mean that the cost of failure is high.
.2. Complex local flavours: Customizations required for So, it is natural that any innovation will be tested intensely,
South-East Asian markets are more complicated, which scrutinized and RBI-approved. This is an absolute must.
leaves no room for a templatized approach. Hence, internal
players dominate the market. The Indian technology ecosystem does not lend itself
naturally to innovation. This is unlike the Silicon Valley, and
3. Legacy issues are prevalent: South East Asia’s FinTech whose products stem from co-innovation between the
landscape is older than India’s, and legacy core banking corporates and the academia. What the Indian FinTech
issues and challenges are common roadblocks to industry needs is for all its stakeholders – from the academia
modernization. to regulators to innovators to venture capitalists– to come
4. Indian FinTechs have a more global reach: Global together and innovate. Only then can we truly arrive.
implementation expertise brings in extensive sectoral
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