FinTech India: Uncertainty, Challenges, & More

The FinTech industry of India has been showing the sign of a promising future ahead as the government has also keenly embraced a digital future. However, the FinTech industry still has its own share of hurdles that require effective solutions. The apparent hurdles include the uncertain regulatory environment that impacts the business conduct of FinTech companies. For instance, September 26, 2018, Aadhaar ruling of Supreme Court (SC) preventing private companies from using the biometric data of Aadhaar affected the operating strategies of banking and financial services firms. With access to the Aadhaar data, firms could gain remote access to rural markets and urban poor segments affordably.

Following the SC Aadhaar ruling, technology firms are offered a feasibly safer alternative by the Unique Identification Authority of India (UIDAI – administrative authority of Aadhaar that also administers the (offline) citizen registry. Now, any entity that wishes to access Aadhaar numbers online will have to download either the new QR codes or XML (Extensible Markup Language) format from the UIDAI portal to access a 16-digit Virtual Aadhaar Card ID (VID) having a secured layer. Although, even within this framework, there’s the need of first downloading the XML file and gaining the OTP (one-time-password), all within an internet environment that’s already affected by the menace of (especially in the areas having remotely residing citizens) limited net connectivity and speed glitches.

An equal concern is remote “customer onboarding” – which was instant and seamless with the erstwhile Aadhaar-based process. In this scenario, there are also the looming issues of errors or of filling up insufficient information in the forms by subscribers &/or company agents (traveling extensively to acquire or register new customers in far-flung areas). This can soar the otherwise avoidable cost considerably.

The air of uncertainty doesn’t stop here. The issue of e-KYC is also confusing – which is compressed in-between RBI and the apex court’s Aadhaar judgment. While the RBI announced its mandate for the payment companies to finish the KYC (know-your-customer) formalities within the prescribed timeframe, the apex court judgment directed towards stopping e-KYC fuelled the fog of uncertainty as it announced its Aadhaar judgment. This left only the costly offline KYC alternative for the FinTech firms to resort to for fulfilling the RBI mandate. While on one hand companies were in the process of readying their human resources for efficiently performing their e-KYC duties (having already invested their monies), the Aadhaar judgment completely changed the course of FinTech firms’ strategies.

Apart from these, there are issues such as regional disparities in states which aren’t in the mainstream. Gender disparities also exist – giving birth to patriarchy that prevents the usage of smartphones by women in some societies, owing to cultural immaturity; thereby, marginalising them from accessing even a regular bank account, let alone using modern FinTech services. Marginalisation of farmers is also a cause of concern as they aren’t able to access customised financial safeguards. Strengthening the leverage on incumbent distribution channels is also direly needed, apart from developing credibility (trust) of FinTech companies in the minds of its customers, ensuring data security and privacy. There is also the influx in the industry of established tech giants, namely Google, WhatsApp and a couple of big firms from China having a hefty capital base that can be deployed – making it tough for domestic tech startups to sustain.