Fintech – 101

Ed. Note: This post by Mansi Meena is a part of the TLF Editorial Board Test 2018

Mobile devices these days, have become a common place and they affect how financial services are offered in addition to the consumption of these services. Niti Aayog Chief Executive Officer (CEO), Amitabh Kant said “Debit cards, credit cards and ATMs might lose relevance in the next four years”. FinTech is a model in the financial services industry which provides an end-to-end process through the Internet. The government is pushing for digital India by introducing reforms such as AADHAAR, e-KYC, low cost NPCI/UPI transaction system, etc. In fact, the budget of 2018 lays special focus on this whole program with an expenditure of Rs. 3,073 crore for the next financial year. But, the scope of cryptocurrency has not been legitimized in the budget either. Marketplace models such as, have reduced their information arbitrage, lowered costs and provide greater choice for consumers.

By 2022, 80% of the transactions will be made digitally and 70% of the retail chains are also expected to adopt the same mechanism of digital transactions. Since the Indian Government is bringing into the domain policies such as Goods and Services Tax (GST), improving the digital infrastructure, launching the payment systems such as AADHAAR, UPI, India Stack, etc., it is expected that the reduced transaction charges and the degree of ease of cash transfers associated with the electronic fund transfers as well as mobile banking will further drive the growth of digital payment systems. But, regardless of the initiatives propounded by the government or the private sector, until and unless the consumer does not trust the online payment channels, and the notion that they are more convenient than cash, the move to a cashless society will be slow.

The availability, adoption, and immediacy of payments has helped the value of transactions using digital wallets rise by 64% from December 2016 to December 2017. The Reserve Bank of India has been promoting the Unified Payments Interface (UPI), which constitutes of well-designed applications and also offers instant settlements. It has relatively, improved faster than the other forms of digital payments in terms of growth. While most UPI transactions are peer-to-peer, it allows the tech companies to build innovative products on top of it while it acts as a settlement railroad. In December 2016, Prime Minister Narendra Modi also launched the Bharat Interface for Money (BHIM) app. However, there is a long way to go as several pre-eminent factors that govern digital payments still remain seemingly not-so-accessible to the industry. The FinTech industry is hoping for some major changes to bring about a policy initiative that can transform India into a global FinTech hub. Through AADHAAR’s open data platform, private technology developers are building a range of personalised services on top of its data, like stacks. Global internet giant Google has launched Tez, another UPI app through which money can be sent or received directly into a bank account. After banks, e-commerce companies and cab aggregators, wallet companies are providing a global payment experience to the Indian consumers.

The FinTech industry has been helping to make digital payments a day-to-day reality in India, developing the most evolved digital payments system among countries including the UK, China, and Japan, according to a report by FIS, the US-based banking technology provider. Its expanse has driven the Indian economy to a path of a more promising transformation into being inclusive and data-driven while rapidly driving growth and adding funds to the exchequer through taxation. While progress has been made, there is still much ground to be covered and India must up the ante in addition to promoting these trends to realise its economic potential in greater measure. Lastly, the budget 2018-19 has been positive and is expected to be the best vehicle to achieve these goals.

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