Fintech firms can check digital frauds, says RBI Deputy Governor T Rabi Sankar
Upscaling of supporting infrastructure like RTGS and NEFT to be available round-the-clock not only improves choices for customers and businesses alike, they enhance the availability to non-banks and reduce settlement risk of satellite payments systems, RBI Deputy Governor T Rabi Sankar said
Technology-driven fintech firms can play multiple roles in areas such as digital fraud prevention, financial inclusion and cross-border payments, said RBI Deputy Governor T Rabi Sankar.
The technological innovation in finance, he said, also raises hopes of substantial efficiency gains, better customer experience and greater social welfare.
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While talking about the potential of the fintech firms, Sankar also underlined the need for effectively dealing with "threats of online frauds, compromise of customer credentials and data privacy and safety for the spring of hope not to turn into the winter of despair."
He was speaking at Global FinTech Fest 2021 (GFF 2021), hosted by the Fintech Convergence Council (FCC), Payments Council of India (PCI), National Payments Corporation of India (NPCI) along with IAMAI.
As the digital payments landscape is maturing, Sankar said RBI's regulatory attention is shifting to the next level of reforms.
Upscaling of supporting infrastructure like RTGS and NEFT to be available round-the-clock not only improves choices for customers and businesses alike, they enhance the availability to non-banks and reduce settlement risk of satellite payments systems, he added.
He 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 ? 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, the deputy governor said.
"Another area where fintech holds promise is to prevent digital frauds, which have become apparent as the pace of digital penetration has outstripped development of awareness," he said. Citing data, he said incidents of digital frauds have risen during the pandemic.
He said data from American consumer credit reporting agency TransUnion has found that fraudsters are ramping up their efforts in the financial services industry.
When comparing the last four months of 2020 (September 1 ? December 31) and the first four months of 2021 (January 1 ? May 1), the company found that the share of suspected digital fraud attempts originating from India against financial services businesses had increased by 89 per cent. Globally, financial services fraud attempts increased 149 per cent.
"Clearly, both regulators and other stakeholders have to play their respective roles effectively to ensure that innovation in the fintech space continues to support India's economic growth," he added.
The deputy governor further said digital penetration is limited largely to urban and metro areas.
"We need technological solutions to increase penetration to the vast sections of the population which is unbanked and lacks a smartphone," he said.
He also said that "promising options" have been identified through the RBI's sandbox mechanism and efforts are on to mainstream those technologies.
In his speech, Sankar also said the benefits of technology in improving efficiency and reach of the financial system, as well as the concomitant benefits for economic growth and financial inclusion call for a systematic non-disruptive adoption and encouragement of such technology in the financial system.
Because FinTech can improve the efficiency of intermediation by driving down costs, sachetising of products and services, improving customer service and expanding the reach of financial services, it poses a challenge to the incumbents and forces them to adapt or change the way financial intermediation takes place.
The ideal approach is for FinTech companies to be considered as enablers and partners by banks or other financial institutions, he said, and added that competition for banks comes not from FinTech firms but from other banks which leverage FinTech better.
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