FinTech has the potential to reshape the financial services and financial inclusion landscape in India in fundamental ways, noted the RBI governor Shaktikanta Das in a speech today. It can reduce costs and improve access and quality of financial services. FinTech stands for financial technology and describes technologically enabled financial innovations. From ‘start-ups’ to ‘big-techs’ to established financial institutions, all the key players are harnessing this technological edge along the financial services’ value chain to provide agile, efficient and differentiated experiences to the end-user.
A recent global survey ranks India second in terms of FinTech adoption, with an adoption rate of 52%. It is reported that there are as many as 1218 FinTech firms operating in India which have created a large number of jobs. They are also generating a healthy appetite for investment. The Reserve Bank has over the years encouraged greater use of electronic payments so as to achieve a “less-cash” society. The objective has been to provide a payment system that combines the attributes of safety, security, enhanced convenience and accessibility, leveraging technological solutions that enable faster processing. Affordability, interoperability, and customer awareness and protection have also been other focus areas.
Banks have been the traditional gateway to payment services. However, with the fast pace of technological changes, this domain is no longer the monopoly of banks. Non-bank entities are cooperating as well as competing with banks, either as technology service providers to banks or by directly providing retail electronic payment services. The regulatory framework has also encouraged this enhanced participation of non-bank entities in the payments domain.
The NEFT system handled 195 crore transactions valued at around Rs.172 lakh crore in 2017-18 growing by 4.9 times in terms of volume and 5.9 times in terms in terms of value over the previous five years. Similarly, the number of transactions carried out through credit and debit cards in 2017-18 was 141 crore and 334 crore, respectively. Prepaid payment instruments (PPIs) recorded a volume of about 346 crore transactions, valued at Rs.1.4 lakh crore. Thus, the total card payments, in volume terms, stood at 52% of the total retail payments during the year 2017-18.