Context: Regulation and technology must both evolve simultaneously.
Way forward for Fintech Sector in India:
Complement as well as compete with Banks: It is capable of providing payment and credit services to the geographically dispersed masses with small-ticket needs far more effectively than banks.
Indian banking underserves the poor and the rural; while the Jan Dhan scheme has forced banks to open accounts for the rural poor, these remain underutilized.
Rethink Myopic Restriction: such as scrapping of Merchant Discount Rate (MDR) which is a vital source of revenue for payment service operators and disincentivize new entrants.
Guarding Against Vulnerabilities: Building capacity of the banks’ technological infrastructure to provide safeguards of ever-rising sophistication.
Educating and training customers to guard against practices that harm them. (guarding against cybercriminals)
Safe access to critical data: Making available the data that fintech utilizes to assess credit requirements and viability.
Regulation needs to makes sure that such data access does not harm the data subjects (citizens).
For e.g. Ant Group utilizes 3000 data points to take credit decisions, while Indian firms are far behind.
Fintech has the potential to transform other financial services: insurance, investment, remittances.