The Fintech Disruption: Innovation, Regulation, and Transformation

Technology is transforming the finance sector in previous unimaginable ways. Digital wallets and contactless payments are improving transaction efficiency, while blockchain and big data solutions are rewriting the rules of banking. The rise of financial technology (fintech) also poses questions relating to privacy, cyber-security, inclusion, and fair competition. In a series of panels, policy and technology experts, high-ranking government officials, and industry leaders discussed fintech’s potential and challenges.

Discussion Highlights

• Fintech in India: Participants noted that India is undergoing a fintech revolution, with the government actively prioritizing increasing smartphone and internet penetration and the transition to a cashless economy. A participant noted that while the current value of digital payments in India is an estimated $50 billion, this is likely to increase to around $500 billion by 2022, driven by technologies and innovations such as the Unified Payments Interface and Aadhaar Pay, along with increasingly lower transaction costs.
• Challenges Facing Fintech: Participants highlighted four major challenges that the fintech industry faces, and which can be impediments to its continued growth:
  • First, financial literacy levels in India are very low. This makes it difficult to incentivize a greater uptake of digital payments, especially in rural areas. Low levels of financial literacy also contribute to increasing instances of fraud, which reduces confidence in digital payments.
  • Second, very little public data exists at the level of individual consumers or villages, making it difficult to judge the true reach and impact of fintech.
  • Third, there is a very apparent lack of adequate and effective consumer redressal mechanisms, which prevents consumers from having complete faith in these financial instruments.
  • Fourth, some participants pointed out that consumers find it difficult to differentiate between the variety of fintech products in the market. Participants emphasized the need for greater consolidation and interoperability among the various payment and lending systems to encourage an uptake in digital payments.
• Innovation and Regulation: Stakeholders from the fintech industry noted that they have three primary requirements from regulators:
  • First, there must be absolute clarity in the relevant policies and the role and power of the various regulators.
  • Second, regulators must recognize the fact that fintech companies are technology companies first and foremost, and therefore questions of technology, and not finance, lie at the heart of both the issues faced by the industry and the services it builds.
  • Third, regulations must be applied consistently to reduce policy uncertainty. All players in the industry should be treated uniformly and without bias.
• Fintech’s Regulatory Regime:  Similarly, stakeholders from the regulatory side outlined what they believe is required from the fintech companies:
  • First, it was argued that the regulators have been very receptive to new ideas and innovations but the industry itself needs to approach the regulators more often and make clear what solutions would they like to see emerge from regulations and policies.
  • Second, regulators are looking to the industry to provide last mile financial connectivity to consumers.
  • Third, given the nature of their business, regulators expect fintech companies to mature relatively quickly and ensure that they start adopting stronger consumer protection standards.

This event summary was prepared by Shashank Reddy, a research assistant at Carnegie India.

Agenda

12.15 to 1:00 p.m.

Registration and Working Lunch

1:00 to 1:10 p.m.

Opening Remarks

• Ananth Padmanabhan, Carnegie India

1:10 to 2:15 p.m.

Rewriting the Rules of Finance: Technology and Transformation

• Amitabh Kant, NITI Aayog
• Subir Gokarn, International Monetary Fund
• A.P. Hota, National Payments Corporation of India
• Chair: Shivnath Thukral, Carnegie India

2:15 to 3:30 p.m.

Enhancing Efficiencies and Promoting Inclusion

• Shashi Arora, Airtel Payments Bank
• Pramod Saxena, Oxigen Services
• Amit Sachdev, CoinTribe
• Sanjay Bahl, Indian Computer Emergency Response Team (ICERT)
• Sumita Kale, Indicus Centre for Financial Inclusion
• Chair: Probir Roy, PayMate

3:30 to 4:00 p.m.

Innovating Amidst Regulation

• Sameer Nigam, PhonePe

4:00 to 5:10 p.m.

Reimagining Financial Services: Blockchain and Big Data

• Harjeet Toor, Ratnakar Bank
• Satyen Kothari, Cube
• Rohan Mishra, MasterCard
• Shinam Arora, Primechain Technologies
• Chair: Bala Parthasarathy, MoneyTap

5:10 to 5:15 p.m.

Vote of Thanks and Action Agenda for Future Research

• Saksham Khosla, Carnegie India