Rabi Sankar, Deputy Governor, Reserve Bank of India, noted in the latest speech that the fintech landscape offers the promise of technological innovation in finance and the hope of substantial efficiency gains, better customer experience, and greater social welfare. However, he cautioned about threats of online frauds, compromise of customer credentials, and data privacy. The rapid technological transformation of the financial sector has led to some peculiar challenges. One can witness a degree of friction in compliance, not characteristic of a typically well-regulated financial system. Regulatory initiatives, especially those intended for customer convenience or safety, often face opposition. Resistance to change is couched under the excuse of customer convenience. India would only be able to reach a thriving and mature payments system if, over time, all stakeholders attach due importance to long-term improvements over short-term gains and internalize mature practices like informed consent and transparency of data usage.
He stated that the JAM trinity has achieved levels of financial inclusion unimaginable for a country the size of India. Small businesses and vendors have started adapting to digital payments. Yet digital penetration is limited largely to urban and metro areas. Promising options have been identified through the sandbox mechanism and efforts are on to mainstream those technologies. While digital payments have become instantaneous within the country, the environment for cross-border payments has pretty much stagnated for decades. The factors cited are usually the following – the need for exchange rates, time-zone differences, varying regulatory and legal requirements across different jurisdictions, etc. Fintech can surely solve these frictions – platform-based solutions can make real-time price discovery possible even for retail-sized transactions, according to the Deputy Governor.
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