FICCI Report Explores Promises and Challenges of FinTech in India

The Federation of Indian Chambers of Commerce and Industry (FICCI) published a new report in January called “Leveraging the FinTech Opportunities in India” to highlight a number of topics, including digital payments, digital banking, blockchain, and online lending, to name a few.

According to FICCI Secretary General Dr. A. Didar Singh;

“It is usually felt that FinTech is all about digitising money. Our contributors to this edition show that there is more to it and that FinTech is about monetising data. By reducing information asymmetry in the marketplace, FinTech is not only improving the ability to match investors, lenders and borrowers; but providing a more level playing field that allows retail investors to have greater participation in the market. Innovative financial services such as robo-advisory have the potential to extend financial advice beyond high net worth individuals and more sophisticated investors, to a wider cross-section of the investors. And the frictionless operation of FinTech innovations such as block-chain and digital currencies are generating new value streams not just in financial services but across the economy.”

The FICCI report includes 19 articles about various aspects of fintech.

In “Leveraging FinTech: Digital Payments Gaining Ground in India”, Bhaskar Son and Soumyajit Niyogi describe how fintech innovations are creating opportunities while at the same time exacerbating inequality.

Dr. A.S. Ramasastri writes in “FinTechs in India: Drives of Digital Banking?” about what the increased investments in fintech from $1.8 billion in 2010 to $19 billion in 2015 mean for the sector in the country.

Kumar Abhishek explains in “The FinTech Revolution – Transforming Financial Services” that fintech innovations have transformative influence over the rural areas and those working in the unorganized sector, namely through decreasing costs of financial services.

In “The New Sector on the Block”, Mukesh Bubna says,

“The came, they saw and they have already conquered the marketplace much faster than one would have thought. P2P lending has found itself in the middle of action following the demonetization exercise of the government.”

Varun Dua and Devendra Rane in “Blockchain and FinTech: A Debate and a Promise” explains that the technology is misunderstood, but believes that India could contribute to its advancement because as a “late entrant into the global economy”, the country is able to “skip trends and jump to latest technologies”.

Rajat Gandhi writes in “In 2017, Can FinTech Make Everything About Money Easy?” that the P2P lending model is “the most exciting” within the fintech sector because it expands lending opportunities to the informal sector, “democratizing lending”.

In “Path To The Ultimate FinTech Offering”, Jitendra Gupta and Anurag Pandey describes that Prime Minister Narendra Modi’s demonetization announcement in November 2016 sparked “an arms race” within the industry to serve up services and products that digitalizing consumers will quickly demand.  In particular, startups and companies will aim to provide payment services and make use of rich data.

Gaurav Hinduja notes in “The Evolving FinTech Landscape in India” that fintech is not going to replace traditional banking services, but is a spinoff of these services as the space continues to evolve.  He also observes that the country’s financial inclusion penetration is low, citing as many as 145 million households not having access to banking services.  As such, fintech lenders should pay attention to underserved segments of the population, but come up with unique ways to address these customers’ needs.

In “Taking on the Indian Financial Goliath – The Story of the FinTech David”, Harshvardhan Lunia warns that the effectiveness of mobile internet penetration is questionable when literacy rates could be higher.  However, he optimistically notes that;

“With online transactions in banks on the rise, banks continually need to improve on their technological architecture to cater to a population that takes time to adopt new practices but is quick on the uptake once the learning curve is met.”

Akshay Mehrotra highlights in “Emerging New Trends/Technologies in the Online Lending Space” the disruption that fintech took part in the e-commerce and e-classified space.

In “Aadhaar Enabled Digital Process Transformation in Indian BFSI Sector”, Sanket Nayak writes that for all of the fintech advances focused on services and products, there needs to be a specific focus on identity.  That is, a person’s fingerprints, iris, single-passcode, and digital signatures — to name a few — that would prove a person’s identity remotely before allowing access to such fintech advances.

Karthik Rangappa writes in “India Stack – Moment in the Sun for Indian Capital Markets” that less than 2 percent of the Indian population participate in the capital markets due to a tedious onboarding process that includes mountains of paperwork and a long in-person verification process that deters people from opening accounts.

According to Ankit Ratan in “Cryptography: The Vault for Today’s Banks”;

“As the world moves to digital there is a corresponding need of this ‘impenetrable’ safety and security in the digital world. Cryptography is the answer. … The Indian eco-system though has largely neglected this area. The Indian government also has not been proactive, unlike its western counterparts, in creating standards. Indian banking’s rapid digitization should be parallelly supported with advancement in security practices. Building skill and knowledge base in cryptography might be a good starting point.”

Amit Sachdev further describes of the banks-startups dynamic in “FinTechs & Banks: Together Creating Value for Customer” that;

“Partnerships between banks and FinTechs offers a win-win solution for all – customers, banks and FinTech players through rapid and breakthrough innovations at scale. … An ideal partnership model between banks and FinTechs would involve co-innovating the business model by leveraging the strengths of both partners. While this business model design would offer some clear answers, there would be quite a few hypotheses to be tested. The tech platforms of FinTech partner can be used for rapid prototyping and multiple pilots across segments and geographies to validate these hypotheses.”

Deepak Sharma writes in “The Emergence of FinTech in India” that the country has made strides over the past five years, especially in five areas: ecosystem, fintech companies and startups, banks and financial institutions, consumers, and regulators.  He also notes that the country is a model for “mobile first”, which will continue to be highlighted after PM Modi’s push toward a cashless economy.

In “The Future of Personal Finance is Instant, Cashless, Paperless-and Presence-Less” by Adhil Shetty, he explains that fintech can play a role in “taking more Indians towards economic prosperity” if customers and banks can both adapt to financial digitalization.  He also believes in the power of “reach” that fintech offers, as;

“Cellphone and internet connectivity may reach where the brick and mortar financial institutions will not.”

Bipin Preet Singh writes in “Leveraging FinTech Opportunities in India” that;

“The transaction value for the Indian FinTech sector is estimated to be 33 billion dollars and forecast to reach 73 billion dollars by 2020, growing at a CAGR [compound annual growth rate] of 22 per cent – over three times the GDP growth rate. The wave continues due to a strong talent pipeline of cost-effective tech workforce.”

In “FinTech-Making India a New Techno Banking Empire” by Manavjeet Singh, he highlights that Indian fintech players will see success if they stress affordability, reliability, and ubiquity of their services.  Furthermore, they have to cultivate trust between the rural and urban areas.

Finally, Ajay Scrinivasan wraps up the report in “Change is the New Normal” by noting that the amount of disruptions that occurred in 2016 should foreshadow the continuing disruptions that will occur this year.

FICCI is the self-described “voice of India’s business and industry” that is the country’s “oldest and largest apex business organization”.  It was founded in 1927 and works with both the private and public sector.

For the full report, see below.

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