Page 40 - Banking Finance March 2023

ARTICLE

systems of monitoring and control over the retail outlets/ companies, on the other hand, require minimal paperwork.
franchises, including cash management, which could be used They also use AI for risk assessment on indicators such as
to advantage. These outlets are already dealing with the income and spending patterns. This is greatly useful for local
local population and are familiar with them. The businesses for micro-financing services and capital
shopkeepers and other retail agents of the large corporates investment. Fintech companies also use various tools to
may be more comfortable dealing with the company that educate their audiences. Financial literacy is the way to go
they are already used to and familiar with, rather than with forward. Awareness about qualifying for loans and fulfilling
the bank. credit requirements helps users as well as fintech.

Role of Government Compliances such as identity verification are fewer for
fintech companies. Moreover, the RBI has allowed eAadhaar
Government bodies have been quite active in the financial
verification and video KYC to promote digitisation and
inclusion programs, and several schemes such as Pradhan
reduce customer acquisition costs. All this works in favour
Mantri Jan Dhan Yojana, Atal Pension Yojana, Stand Up India
of fintech companies and they can innovate and roll out new
Scheme, Pradhan Mantri Mudra Yojana, Pradhan Mantri
features and products faster, while also adhering to
Suraksha Bima Yojana, and Sukanya Samriddhi Yojana were
government regulations.
launched for the financially challenged sections of the
society.
Internet usage has drastically increased in the country. In
areas where physical banks cannot be set up, fintech
However, government bodies need to address the current
companies have a massive advantage. They can provide
challenge of providing better infrastructure to enhance
access to basic products and services and help unbanked
acceptance infrastructure across the country, encourage
users save and grow their money. Fintech companies can
innovation in digital payments methods, increasing the
help uneducated and semi-educated users with easy
spectrum of social schemes, and better regulatory
onboarding. They can also provide customer-friendly services
frameworks. Improving awareness on digital means of
with the integration of AI and ML with Big data.
payments and ensuring customer grievances are addressed
seamlessly in time-bound manner, will help build confidence
among those sections of society who are excluded, and Role of Regulator in FI
reluctant in accepting digital modes of payments The challenge for the regulator in a fast-developing
economy like ours is to keep pace with the market
Role of Fintech innovations and strive to strike a balance between ensuring
safety without stifling innovation which is never an easy
India has an 87% fintech adoption rate. This is higher than
task. Responsible financial innovation requires balancing
the world's average adoption rate of 64%. There is no
innovative products with necessary safeguards for ensuring
denying that fintech is working towards next-generation
financial system stability and customer protection.
financial solutions. They will also without a doubt contribute
Therefore, while appreciating and recognising the benefits
to financial inclusion.
emanating from digital credit, we need to take cognizance
of the attendant risks such as data privacy, disruptive
Fintech companies innovate to enable secure digital
business models, aggressive recovery methods, and
payments. With AI, they have been successful in creating
exorbitant interest rates. We must remember that financial
instant digital payments that allow transfers, verification,
inclusion is not just a goal but also a means to an end as an
cashless buying and selling, and more. They are all about
enabler for sustainable economic growth, reduction of
convenience and flexibility. They are also easy to use. From
inequality and eliminating poverty
booking LPG cylinders online to paying utility bills has all
become clicks.
Source:
Traditional banks typically require a lot of paperwork. Fintech RBI Speeches and RBI Papers

36 | 2023 | MARCH | BANKING FINANCE