Fintech, a portmanteau of financial technology, refers to technology that enables and supports financial and other banking services, by automating their use and delivery. Fintech goes beyond payments technology to cover sub-segments like lending, wealth management, credit reporting etc. Financial institutions are being transformed in terms of their roles and responsibilities, products and services as well as distribution channels, shaped by changing consumer expectations (need for digital finance and inclusion, smartphone adoption) and regulatory landscapes.
The transition of the mobile network in India into a legitimate software services platform has led to an explosion of fintech enterprise and innovation in India. The six benefits of the Indian growth story include access, inclusion, connectivity, ease of living, opportunity and accountability.This has made it an attractive destination for companies and start-ups, with India’s scale having the potential to enable fintech products to go global by reducing costs and risks.The ecosystem has flourished given the considerable efforts of financial institutions, start-ups, the government, regulators and venture capitalists to create a dynamic and collaborative environment. Specifically, the government has adopted a reformist stance towards digital transformation of the economy, based on current and future innovations in areas like artificial intelligence, block chain technologies and data analytics, data intelligence and distributed ledger technology.
This aggressive promotion of a cashless economy and a strengthened infrastructure for startups is reflected in initiatives like Start-Up India, income tax exemptions for start-ups during the first 3 years, selective tax rebates, RuPay, introduction of UPI or Unified Payment Interface or launching the Application Programming Interface Exchange or APIX). According to PM Modi, fintech can fight global financial crimes, combat money laundering and improve the living conditions of human beings “through direct contact with the most marginalised”. The Indian government is also expediting the shift to a presence, paper and cash-less service delivery system, popularly known as India Stack.
Despite funding and unprecedented growth at 135%, fintech startups grapple with multiple structural and operational limitations. The Ministry of Finance reported that financial innovations get stalled because “Indian regulators are disproportionately focused on averting scams. This generates a regulatory bias of blocking innovation in order to be safe, and an industry bias of avoiding untested ideas since they expose firms to the risk of frauds.”
A KPMG-NASSCHOM study titled Fintech in India – Powering a digital economy, released in September 2018, highlights the transition to a cashless economy, establishment of regulatory sandboxes and access to internet services can help better understand the viability of opportunities available and mitigate inherent risks. Fintech companies need to adopt creative and cost-effective ways to channel domain expertise and achieve due-diligence/regulatory compliance, in embracing existing IT solutions to create robust innovations. While fintech startups are on the rise and are fast becoming key enablers for the businesses of traditional financial institutions, India is yet to see the emergence of a home grown player that will sustainably transform the existing ecosystem with new business models that achieve a competitive edge in unison with global standards.
India Outbound
November 15,2018
source https://indiaoutbound.org/boosting-indias-fintech-ecosystem/
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