FinTech in India is soaring exponentially owing to the promising initiatives taken by the government directed towards altering also the financial behavior of its citizenry. Initiatives that fuelled the changes include the formation of Application Programming Interfaces (APIs), formalisation of the Aadhaar-stack, Bharat Bill Payment System (BBPS), UPI-FAST payment link, introduction of regulatory sandboxes by the RBI & SEBI, secured payment and digital cash flow mechanisms, integration of RuPay-Network for Electronic Transfers (NETS), and, e-KYC (e-Know Your Customer), to name a few. Coupled with the advent of the Digital India campaign of the government of India, the awareness and acceptance in the minds of the citizens of the digital finance paradigm soared tremendously. A promising development that also contributed in mainstreaming the advent of FinTech in Asia was the partnership initiated by India with Singapore that led to the constitution of a Joint Working Group on FinTech for enhancing cooperation at the ASEAN level. As FinTech is an interdisciplinary domain, the commitment exhibited by the Government of India in developing an enabling ecosystem across technology and financial services’ architectures has allowed higher integration of FinTech among the citizens. Though there are still some challenges looming – essentially revolving around privacy and data (sharing) security.
For instance, addressing the privacy and data security concerns, the Supreme Court of India, u/s 57 of the Aadhaar Act – on September 26, 2018, passed a judgment termed using Aadhaar to establish the identity of an individual citizen, “unconstitutional.” However, the stipulated conditions then updated by the Reserve Bank of India (RBI) clarified that private companies would instead be allowed to access (upon individual consent – voluntary approval from the citizen) Aadhaar QR code or Aadhaar Virtual ID. This reinforced the acceptance of FinTech services – augmenting awareness. What also augmented the citizens’ FinTech ecosystem awareness levels was the constituting of Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Act, 2016 (affecting the usage of Aadhaar authentication by private entities under the auspices of a contract – motivating FinTech companies to introduce afresh KYC techniques). Further developments included promulgated amendments by way of an ordinance to the Prevention of Money Laundering Act, 2002 that permitted Aadhaar holding citizens to voluntarily reveal their Aadhaar to private companies with the intention of facilitating offline verification (FinTech companies verifying user-identity).
It is worth noting that, as EY global FinTech adoption increased 64% in 2019 with India and China leading the race at 87%, according to EY report – states livemint. Experts reason that as the traditional financial services firms started foraying in the FinTech space, the FinTech adoption rate elevated in India. In India, the historic event of demonetisation that was initiated in 2016 and the subsequent introduction of GST (goods and services tax) also contributed considerably in boosting the efforts of the government to reduce physical cash from the economy and augment shifting to digital money. These ambitious developments further accelerated the pace of FinTech penetration as banks, insurance companies, and wealth management firms started embracing digital technology ecosystems leading to innovative developments in money transfers and payment services spaces. Venturing into the future of FinTech, it’s anticipated that the advents of Artificial Intelligence and Blockchain will further strengthen the FinTech ecosystem, spurring its seamless adoption across interdependent sectors essentially in the wake of the ambitious smart city agenda of the government. Lastly, the formation of the Ombudsman Scheme for Digital Transactions (OSDT) for redressal of complaints regarding digital transactions by the RBI will also ultimately reinforce the trust of the citizens in the digital future of finance.