Financial service providers must engage openly with fintechs, says Finmin

Financial services providers must not hesitate to collaborate with fintech innovators, said a top Finance Ministry official on Monday.

The next wave of innovation will happen when the established financial services providers work openly and engage with the fintech industry, especially innovators, so as to marry scale with innovation, said K Rajaraman, Additional Secretary, Department of Economic Affairs, at FICCI-IBA-organised PICUP Fintech Conference.

Digitial platforms

Now that there is an explosion in the use of digitial platforms, fintechs have to focus on how to provide resilient front ends for financial service providers, he said, adding that cyber security has gained importance in the recent years.

The recent Distributed Denial of Service (DDoS) attacks on the New Zealand stock exchange is a pointer, he noted. Put simply, in DDoS attacks, cyber-criminals overload and crash an organisation’s online services by bombarding their internet facing systems with vast amounts of spurious traffic.

Cyber attack challenges have to be handled by a variety of stakeholders and innovators have a critical role, added Rajaraman.

Rajaraman also urged the fintech industry to work intensively with the insurance industry to see how micro insurance and micro pension products rolled out by the government and others can be used with fintechs as the riding platform.

“Insurtech presents an opportunity of enabling penetration in insurance segment, which is abysmally low at this time. The penetration is only 2.76 per cent in life insurance and 0.93 per cent in non life. This is against 2.6 per cent in global average. Coupled with the penetration problem, you can also address risk issues by harnessing Artificial Intelligence,” he said.

Payments affected

Rajaraman noted that the Covid-19 has affected payments. But if one sees the high-frequency indicators, payments have come back to good amount of normalcy, and as much as 85 to 90 per cent of the January 2020 level has been reached, he added.

He also said there is an opportunity waiting for the country to harness fintech or marry fintech with government flagship schemes such as Atal Pension Yojana, Shram yogi mandhan Yojana and so on.

Rajaraman also pointed out that an InsurTech partnered with NPCI in May 2020 to provide Covid coverage to 700 million Rupay Card users. “These are example of cross-sectoral collaborations identified by fintech and packaged by fintech innovators. There are a number of last-mile KYC issues that need to be sorted by the regulators – eKyC, Vkyc, ckyc. We are intensively interacting with the RBI, Dept of Revenue to sort out these issues,” he added.