Most conventional banks have adopted digital technologies to operate and deliver better services as new digital-only entities have emerged as challengers. Fintech players in the industry are collaborating and competing with core banks while, in addition, P2P (peer-to-peer) applications emerging in the credit and funding space.

Fintech: Embracing the Digital Age in the Time of Social Distancing

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The fintech revolution is mostly driven by technological developments that allow the deployment of application programming interfaces that help disparate and unconnected systems to talk seamlessly to each other. Overarching technological innovations such as interoperability, digital currencies, blockchain and artificial intelligence (AI) have driven breakthrough customer services and offerings.

AI and machine learning are enabling newer models of understanding and assessing customer and product data, thereby nurturing disruption in the products and services mix. Digital currencies open up avenues for otherwise difficult trade and make it easier for money transfers to happen, be it from governments to citizens or for economic exchanges anywhere in the world.

What has emerged is a rapidly morphing milieu where core banks, insurance and lending firms are being supported, complemented and even challenged by newer entities that either align and work as add-ons or independently offer alternate services. As any free marketeer would agree, all this is healthy innovation and creative destruction in full force. So why should anyone be concerned?

The truth is that the finance industry, and the very provision of financial services, sits at the heart of the searing problem of inequity and behooves to be regulated to prevent a plethora of financial crimes. The fast-developing fintech marketplace rests on underlying security and fraud protection systems that need to continuously evolve and strengthen. It is, therefore, paramount for this sector to be at the top of the agenda for both regulators and governments.

Central banks and regulators worldwide are racing to stay abreast with the latest innovations and market offerings to provide the underlying regulatory wiring for it all to work smoothly and sans fraud. It’s a tall order. There isn’t a single technology or application or system of monitoring that could fulfill this charter. Regulators would need to provide at the foundation an architecture that both supports and protects companies and customers. Systemic risks would have to be pre-detected and mitigated. Market dislocations spotted and dealt with.

Ultimately, fintech must improve the efficiency of financial services and further inclusion. Industry evolution ought to aid the lower-income segment, the under-banked as well as micro, small and medium enterprises while ensuring that preexisting risks of financial exclusion are not exacerbated. Reg-tech components, if deployed by financial entities in the form of point solutions, can remain isolated silos without an impact on a larger scale. What is required is a cohesive framework that mirrors the omnipresence of fintech developments.

Countries around the world, including India, are sponsoring initiatives like innovation hubs to stay on top of and engender tech-driven progress on desirable lines. That should ultimately lead to enriching financial lives across the world and perhaps even open the gates for poverty reduction strategies that were hitherto not imaginable. Such is the promise of the financial revolution that lies ahead if the regulatory waters are navigated well.

The views expressed in this article are the author’s own and do not necessarily reflect 51³Ô¹Ï’s editorial policy.

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Some find it irksome if not provocative to hear recently shaken corridors of power in the West ascribe India and China’s now visible and rising economic success to essentially being a ripple effect of the values of free trade that the West claims to have solely evangelised. Yes, these values powered the rise of the current capitalist powers for the last two centuries but to allude that the West has exclusive historic title to the promotion of ‘open trade and commerce’ is quite simply delusional and sounds at best like a bad loser congratulating himself for the opponent’s win.

The fact is that long before the West’s mercantilist supremacy came to the fore, the Silk Route existed as a proud manifestation of power and vibrancy of the Oriental economies. Centuries ago, China and India saw benefit in engendering long winded, well-defended and prosperous trade routes; all this when some of the West was a geographical curiosity and other parts shrouded in dark ages.

For much of this past decade when attention was sharply swung on the perceived ‘recent’ threat of the emerging Asian power blocs, simple facts were conveniently forgotten by commentators and rich-country leaders that sought to build a theory to explain this apparent rebalancing of the world. Facts such as, gunpowder –the beginnings of the firearms industry- was a Chinese invention, just as calculus and algebra, the first steps behind the algorithms that would two centuries on transform our information world, had their origins in India. These were the creations of dynamic societies that counted commerce and invention as a civilising force.

Politicians and lobbyists could do well to look outside their self-serving prisms and acquaint themselves better with history and its lessons. The enduring lesson is that countries and empires also have cycles, just like economies except they are longer and tend to run into centuries. And the length of time a civilisation dominated the world can at best be said to be inversely related to hubris it nurtured.

Consider the tempest of changes that have shaped these past few years with the Arab Spring, European crises and global economic re-balancing. Unlike most storms that are weathered by the common populace, these sweeping and oft dramatic changes have shaken leaders across the world. World leaders have remained muted in the backdrop or perhaps that’s why, categorical advances are being made on a tortuous change of guard between world power centres. 

This did not happen overnight, nor was it unexpected in many ways…A decade back there were signs of the USA faltering in its self-assumed role as a responsible world leader.

The debate was around ‘American Exceptionalism’, and whether it had legs in the face of faster, younger runners.  A society where many did not possess a passport, a society that was being merrily raised on conspicuous levels of consumption, a society that became insular after 9/11, had arguably set the tone for the new trajectory of world power over the next decade.

An acute manifestation of this trajectory involved baying for blood (in oil rich lands) and waging wars over fictional warnings of weapons of mass destruction in desert lands, while watching unperturbed the build-up at home of deadlier bombs we all now know as collateralized debt obligations.

Some in the US may be in denial but the subtle erosion of American hegemony, along with that of its European allies, in favour of China, and to a small extent India and other looming economic and population hubs is well on its way.

Chinese leaders, though while quietly preparing for their country’s rise to historical prominence, could not have imagined the rebalancing happening so fast (just consider the unsuspecting pace with which they were busily hoarding up US treasury bonds over the past decade!).  Nevertheless, while China in its own inscrutable way will eventually muscle through global headwinds and internal disquiet to resume its posture  as a world heavyweight (and throw it around a bit.. much to the ire of others), commentators might charitably consider re-assigning the term ‘emerging economy’ to those left in Beijing’s trail.

And who might they be? Small, ageing, over-insured, over-banked populations with bloating pension deficits and dimming growth will reluctantly compete for this unflattering nomenclature!

And India, that other giant in the picture whose masterly insouciance ensures that its polity is rarely shaken enough to aggressively seize the moment, continues to hover in this game of changing superpower batons. Complacent of its own historic place in the world, but many would say unambitious and callous, India, has risked passing by a great opportunity.

As golden moments go, this one was matchless. Yet while global commentators and investor pupils walk from China with yield and boundless opportunity, they halt at India’s borders, puzzled.

Why?

Because unruffled, in our land we take our time. We are a country that did not inherit democracy by a wave of trans- Atlantic migration or with the aid of bombs. Indians are born free and with opinions. It seems then that we have chosen this freedom to make a mess of a glorious mixture of opportune time and placement that world dynamics has placed on our glistening but as yet empty tables.

Why, again? We could have been unstoppable in commerce and creation… intellect and youth is on our side, the world could be in our hands – in a very Indian non-controlling way. Our politicians, policymakers and billionaires could have practised and preached growth, invited others to share in this bountiful market while setting the rules for fair play.

Perhaps, we eventually will. But for now, we sit amid the noise and din of our loud opinions, pilfering away at our own coffers and looking over our shoulders for a leader to lead our land. The elephant lumbers; the world continues to wait, as yet, that is.

The views expressed in this article are the author's own and do not necessarily reflect 51³Ô¹Ï’s editorial policy.

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In the two decades post 1991 when opening up became up a golden word, India has tasted the fruits of a global economy.  Its citizens, led by the middle class – which was hitherto neither here, nor there – seemed to have woken up to a dream of accomplishments and accompanying consumerist expectations. This was the era when mobile phones rapidly populated the aam aadmi’s home, every middle class family could plan a foreign holiday, children of the not-so-rich studied abroad, and IT professionals mushroomed in every neighbourhood waving their travel stamps as a symbol of newfound international identity.

Politicians, true to their nature have since tried to cash-in on this seeming prosperity wave that hit millions of Indians. While it is the Congress that led the initial reforms driven by an acute crisis, BJP, the other national contender also tried few years back to carry people along in a sentiment surge coined ‘India Shining’. The India that had not shone just yet, replied back with a stiff rebuttal that sent the netas packing to look for more appetising slogans. Amidst all the noise, ‘voice of the common man’ was stumbled upon as a plausibly handy plank to tout. And so jumped the political bandwagon on to this ship of the ‘common man’s interest’; one that all parties seem to claim, but none actually owns as suspected. 

Somewhere in all this clutter – of aspiring Indians, the left-out waiting to be counted, the super rich who were busy sewing up deals (of not business alone), the din of the politician claiming to clamour for the welfare of the have-nots –somewhere here, in the lexicon of the political circles and even the pink papers of India, the word reform became a synonym of liberalise. This linguistic trend that caught on slowly but surely, is in itself, a tragedy in the making.

The populace of India, the technocrats, the industrialists, the entrepreneurs – and above all even the media needs to remind itself that ‘Reform’ does not necessarily and by definition mean ‘Liberalise’.

Our foodgrain rots in tonnes, and our farmers commit suicides. The solution admittedly lies in agricultural and land reforms – even if partially and in an effective distribution mechanism that works. There is no magic key of ’investment limit to be raised’ that would solve problems of this nature and magnitude.

We don’t have a cold chain infrastructure in India – a basic need for effective food and medicine distribution – many a businessmen have apparently gone bankrupt even if they tried to set-up cold chains for reasons as mundane as no power, lack of roads.  What stops the government from having developed a plan to facilitate cold-chains much the same way that Software exports were encouraged? Why could the Reliances, and Tatas and Godrej’s not been well incentivised to undertake this crucial and potentially lucrative infrastructure build-up? Our cold chains do not necessarily need to come from cold countries! We could have pushed the right buttons on this one agenda years back, without dropping the Walmart bomb onto an already fractured political arena.

The merits of a Walmart is a separate debate, and not an easy one for either side – but the root problems for India are mismanagement and underutilisation of resources, minds and talent. Such afflictions in common language are called poor governance and regular doses of FDI announcements do not redeem this mother of all problems.

So, as we cheer forward to a globally connected India, let us not lose sense of what is right on one hand, what needs to be reformed on the other, and what needs to be liberalised. Opening up everything limitlessly, is no panacea and not something that even outspoken capitalist economies do. The USA that hankers India to open up, closes its own doors to counter trades when suitable and has for long artificially propped up its own farming, auto industry.

The very IMF, which preached to India for decades to open up its banking sector is now praising India for the strength in its Banking system and its relative immunity from the global financial crisis. We have one of the best central banks. Let us strengthen it further. Our roots are strong. There will always be clamour at our doors to open up as we are a big market that can offer growth to waning economies. India was called a golden bird, centuries back and has been often invaded for its wealth.  Open-up we must, but only with our best interests in mind. Reform, not just liberalise. India must choose a path most becoming for itself, and what is good for India, in the long run will also be good for the rest of the world which will gladly have us as a healthy, robust and growing economy than a completely unlocked chest with no treasures left.

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