Developments Shaping FinTech Awareness in India

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.

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India as a Cashless Society: Issues & Advantages

The stupendous growth of contactless payment systems, the widespread advent of mobile technology, and the development of Open Banking boosting speedy development of digital payment infrastructure, cash is gradually getting replaced. The payment economy of India is experiencing tectonic shifts in its structure and organisation of late. Platforms developed for sending and receiving payments have been a recipient of promising technological and policy supports from the industry and the government – and, henceforth, from the citizens, as well. The announcement and implementation of the historic demonetisation in November 2016, and the thrust with which the subsequent Digital India campaign was executed, the planned strategy of the government that commenced with a consideration of the Black Money SIT (Special Investigative Tribunal) report recommendations, the launching of the Jan-Dhan Yojana, tracking of the illegal (money hoarding) foreign accounts, got strengthened with the announcement of the income declaration scheme and the strategic initiative in the form of demonetisation drive.

The digital frameworks put in place by the government include the launch of a UPI-based BHIM app for smartphone users, launch of Aadhaar merchant pay, and direct benefit transfer (DBT). There are, however, apparent challenges facing the economy of India in going 100% cashless – these include: lack of electricity 24/7, digital illiteracy, still an untapped smartphone market, economic slowdown, and a lack of required technological infrastructure. The boons of going cashless are multiple: reduction in crime rates, reduced cost of producing and managing cash in government and administration – increase in efficiency, the data available from going cashless can be analysed to improve their public policies and spreading of germs via physical currency notes will also decrease.

It should also be noted that the cost of maintaining the infrastructure to support cash transactions will not be affordable in the future – thereby, accelerating a transition to digital payment methods will be the only alternative. By the time we reach this phase of development, the government also needs to sensitise people of India to adopt cashless means of transactions by comprehending their psychological and behavioural limitations, if any, preventing them to still stick to cash. People generally give preference to the convenience and incentivised offers available upon switching to cashless modes of payments – however, they need to be sensitised about the wider scope of a cashless society: countervailing black money, simplified tax collection system, only white money existing in the economy, almost no corruption, etc.

Likewise, people need to be made feeling safe when sharing their financial and personal information online. It’s a must to note that the informal workforce of India accounts for about 90% of the employed. This informal sector has a system of providing earnings to workers in cash. These workers generally exhibit tendencies of low savings and suboptimal banking habits. This needs to change if India wants to make its digital cashless economy strong.

RBI Permits E-Mandates – What’s in it for FinTech India?

The Reserve Bank of India (RBI) has permitted, w.e.f. September 2019, electronic mandate (e-mandate) for transactions up to Rs. 2000. With this, the FinTech industry players are optimistic that the processing of electronic mandate on cards for recurring transactions (merchant payments) will also be extended to allied payments methods, viz. UPI. They also anticipate that the cap on such transactions will subsequently cross the current Rs. 2,000 limit. Following the receipt of requests from financial industry stakeholders to permit processing of e-mandate on cards for recurring transactions with Additional Factor of Authentication (AFA) during e-mandate registration, first transaction, and simple &/or automatic subsequent successive transactions, the RBI considered allowing e-mandate.

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FinTech Connect 2019 – What’s the Spotlight?

FinTech Connect is the annual 2-day event of eminence organised in London (scheduled on 3-4 December, 2019) in the presence of FinTech industry stalwarts, noted bankers, capital investors, and insurers. With over 175 exhibitors and partners having participated in the 2018 event (likes of Mastercard, BBVA, etc.), 250+ expert speakers graced the audiences with insightful talks pertaining to blockchain, futuristic RegTech and InsurTech, cashless, and boosting digital transformation; having 5000+ attendees, and 6 strategic conference sessions.

A Startup Launch Pad also graced the opportunities at the 2018 event. Notable presentations in the 2018 event (5-6 December, 2018) were made by the following: Moneybox (assisting young investors invest optimally); CitiBank (future of Distributed Ledger Technology); a panel discussion on GDPR and PSD2 (chaired by Letitia Seglah, Independent Consultant—Digital Transformation in Banking & Finance). The key topics for the 2018 event were Digital Transformation, IT Infrastructure, PayTech, RegTech Compliance, InsurTech, and Startup Growth.

The FinTech Connect 2019 event is set to assemble 6000+ of the FinTech community (attendees) for sharing insights on the optimal practices, exhibit new products and solutions that offer a promising path to devise the future of financial services. There will be 200 exhibitors, 300 speakers, representation of 80+ countries, 60+ tech demos (via the Startup Launch Pad powered by Phrontier), and 5 conferences (DX Connect, RegTech & Security Connect, PayTech Connect, Blockchain Connect, and the FinTech Founders Forum). The lead partners for the 2019 event are Bottomline, Paycasso, Phrontier, and Siemens.

The sponsors for the 2019 event are Armada Labs, Bitstamp, Chart IQ, Consensys, EMQ, EValue, Invest Northern Ireland, Navigant, NS8, Openfin, Riskified, Signicat, Cymru Wales, and Wirecard. The registered exhibitors for 2019 are Allpay Cards, Armada Labs, Avrium, Bitstamp, Boku, Bottomline, Bright Inventions, Chart IQ, CKEditor 5, Convensys, Danal, De risk360, EValue, Fintus and Work Flows, GeigerBTC, Imburse, Kompany, Linx, Melissa, Navigant, NS8, Openfin, Oropay, Phrontier, Predictify, Real Time Consultants, Reblase, Riskified, Siemes, Signicat, Transact Payments, Cymru Wales, and Wirecard.

The 2019 event is backed by a renowned Advisory Board. The Blockchain Advisory Board consists of Søren F. Mortensen, Global Director – Financial Markets, IBM; Richard Phipps, Solution Design & Delivery Director, Swiss Re; Tao Tao, Business Development Director – EMEA, Ali Pay; Dora Matheidesz, Senior Innovation Manager for Blockchain, HSBC; Anthony Macey, Head of Blockchain and DLT, Barclays; Michael Coletta, Head of Blockchain Technology and Business Development, London Stock Exchange Group; Oli Harris, Head of Crypto-Assets Strategy and Quorum, JPMorgan Chase & Co., to name a few.

The DX Advisory board has Wincie Wong, Head of Innovation for Supply Chain Services, RBS; Ajwad Hashim, Vice President – Innovation and Emerging Technology, Barclays; Sotiris Manderis, Managing Director, Corporate and Institutional Digital, HSBC; Anna Maj, FinTech Lead, PwC; Bijna Dasani, Head of Architecture and Innovation, LLOYDS Banking Group, to name a few.

The PayTech Advisory Board includes Murali Akella, Head of Banks Business Development, TransferWise; Rich Wagner, CEO, CashPlus; Mitch Pulley, Payments Industry and Services Manager, Atom Bank; David McHenry MD, Head of Global Treasury and Payments Advisory – EMEA, Silicon Valley Bank, to name a few.

The RegTech and Security Advisory Board consist of Johan Kestens, CIO, ING; Mukund Umalkar, Head of Innovation Lab, Commonwealth Bank; Christophe Gouelo, Head of RegTech Consulting – CIB Change Management, BNP Paribas; Adriana Ennab, Director, Public Policy, Credit Suisse, to name a few.

To put things in perspective, some of the challenges that face the FinTech industry are risk management, cybersecurity, regulatory (RegTech) compliances, decoding customer intelligence, updating IT operating model, and robotics/AI adoption, to name a few. How this crucial event creates the foundation to meet the challenges facing the global financial services and financial technology industry approaching 2020 will be interesting to explore.

Artificial Intelligence & FinTech-led FI in India

Financial firms have already embraced the mainframe computer and relational databases. Artificial Intelligence (AI) assists FinTech companies in seeking solutions (by increasing efficiency) to human problems. AI provides outcomes by applying methods sought from Human Intelligence at a level that is exceeding the human scale.

The paradigm shifts happening of late in the FinTech companies have led them experiencing the opportunities present by promising technologies such as Machine Learning (ML), AI, Neural Networks, Big Data Analytics, and evolutionary algorithms presenting avenues to be able to process, diverse and deep datasets with advanced computing. AI & ML can process the large volume of customer information; facilitating the data and information comparison so as to develop customised services and products as demanded by customers (elevating customer satisfaction).

The possible use cases of Artificial Intelligence for FinTech and Financial Services are: i. accurate (data-driven) decision making. ii. automated customer support (increasing the reach to remote areas to serve the underserved). iii. fraud detections and claims management. iv. insurances management (automated underwriting process). v. automated virtual financial assistants (ROBO-Advisors). vi. predictive analysis in financial services. vii. wealth management for masses.

Innovative companies are using the new technological platforms to minimise poverty, whilst not mainstreaming profit earning from banks (this is to say that the open banking process is certainly shaping financial inclusion). Also, the advent of digital services (e.g., communication automation) is set to be central in the financial inclusion of all socioeconomic sects. In India, financial inclusion efforts have been initiated by the Reserve Bank of India (RBI). It is noteworthy that the banking sector of India has for the first time received from the RBI, in 2015, varied licenses to form 11 Payments Banks and 10 Small Finance Bank Licenses.

Considering the dual trends mentioned above, introducing “automation to rural banking” might get necessary for banks. As artificial intelligence aims to enrich financial inclusion, developing an appropriate regulatory framework might also become necessary for compliances—automation can streamline these obligations. Notably, in September 2018, the Robert Bosch Centre for Data Science and Artificial Intelligence at Indian Institute of Technology (IIT) Madras announced in collaboration with Dvara Group the development of AI solutions meant to devise customised financial products for the Dvara Group’s 800,000 customers in remote locations.

It is also a welcome move that the promising FinTech startups (having AI and technological innovations as the core enabling frameworks—to assess credit scores of potential subscribers and their digital acceptance) are reaching to serve the underserved (and underbanked) by considering them eligible to access the innovative financial products and services. In the coming times, AI-powered financial services will be the primary medium of interaction for the users, thereby further penetrating financial products and lending to eligible masses hailing even from the remote areas of India, so as to realise the dream of total financial inclusion.

LendIt FinTech 2019 – Addressing the Trends

The LendIt FinTech 2019–the world’s first marketplace lending conference inaugurated first in the New York City in June 2013–took place in San Francisco, California (USA) on 8-9 April 2019. The premise of the inaugural LendIt FinTech conference held in June 2013 was based on plummeting consumer satisfaction from the big banks. This further resulted in banks’ earnings primarily emanating from fees and cost cutting as against from market share growth. With this precursor, the LendIt FinTech conference has successfully transformed into being the largest lending and FinTech conference in the 3 regions they operate: USA, China, and Europe.

In the April 2019 conference, the first day (April 8) session following the opening remarks by LendIt FinTech was titled, “A Roadmap for Finding Your Next Billion with Machine Learning,” delivered by Douglas Merrill (ZestFinance) and Roger Hochschild (Discover Financial Services). The following session titled, “$700B Untapped Investment Segment,” was delivered by Sallie Krawcheck (Ellevest). A presentation titled, “Beyond the Hype: How Blockchain Changes Everything,” by Mike Cagney (Figure) also took place.

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AWS FinTech Day 2019; Why AWS for FinTech?

The advent of financial technology (FinTech) brought about considerable efficiency, transparency, and accountability in the functioning of the banking and finance industry. Banks began welcoming and cooperating with their FinTech disruptors to manage technology trends such as Cloud, Mobile, and Blockchain to survive in a market powered by disruptive technologies. Amazon Web Services (AWS) adoption for FinTech has also led to these banking and finance companies accelerate lowering their costs immediately.

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FINJS & FinTech World Forum 2019: Exploring Experts’ Focus

The FINJS (JavaScript for Finance) and FinTech World Forum are the leading conferences shaping the growth trajectory of the global financial technology (FinTech) industry by assimilating the finest (forthcoming) technological and business solutions. FinTech professionals from all over the world assemble to acquaint with the innovative technologies shaping new industry trends. FINJS is a capital markets network that showcases innovations driven by web technologies. FINJS events are invite-only and include CTOs, e-Commerce managers, development managers, product managers and other thought-leaders from banks, buy-side, and industry-leading technology platforms. Thought leaders from the entire finance industry and core experts from the larger technology community exhibit how they leverage JavaScript—the interpreted programming language with applicability via web technologies also to FinTech—to offer finance solutions. The latest FinTech advances and demos (1:1 live demos) are exhibited at the FINJS event with experts hailing from the largest Fortune 500 companies sharing futuristic insights and valuable experiences. Being held four times a year, the acclaimed FINJS event was held on May 21, 2019 in London, whereas the preceding one was held on March 19, 2019 in New York.

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FinTech for Business (MSME) Inclusion in India

Micro, Small and Medium Enterprises (MSMEs) have long voiced their discontent concerning access to credit (traditional banking systems), and also about encountering rampant operational inefficiencies. According to a recent report titled, “Credit disrupted: Digital MSME lending in India,” by the Omidyar Network and Boston Consulting Group (BCG), MSMEs still find it cumbersome to access formal credit as nearly 40% of lending is taking place via informal sources; with total MSME credit demand estimated in the report being Rs. 45 lakh crore, Rs. 25 lakh crore are to be offered via formal (credit) channels (borrowing via proprietor name—Rs. 10 lakh crore—or via entity name—Rs. 15 lakh crore), Rs. 20 lakh crore are to be financed via informal (credit) channels (as reported by The Hindu Business Line).

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Mitigating the Cost of Cash

In the midst of the entire digital money versus cash money saga rests the core trigger of the seemingly apparent decline of the physical money. As experts, researchers, and analysts have time and again opined, this (so far) unavoidable trigger is “the cost of cash.” Therefore, it’s obvious that containing cash costs is a must for financial institutions to position themselves competitively in the market. Along with this, it is also necessary to promote cash efficiency and decrease the costs of cash operations.

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