Table of Contents

Introduction to Fintech.......................................................................................................3
Introduction to the Fintech landscape........................................................................................3
FinTech Ecosystem & Players......................................................................................................4
FinTech Technologies..................................................................................................................6
Factors Driving Growth of Fintech...............................................................................................7
Challenges in Fintech..................................................................................................................9
The Future of Fintech................................................................................................................10
New Technologies Powering Fintech.................................................................................12
Cloud Computing - Introduction, Technologies & Applications..................................................12
API Economy & Use Cases.........................................................................................................14
Big Data , Data Analytics and Use-cases...................................................................................21
Introduction to Robotic Process Automation & Use-cases.........................................................30
Introduction to AI and Machine Learning - its Use-cases...........................................................34
Introduction to Blockchain & Application in Cryptocurrencies, Smart Contracts........................37
Fintech in Banking & Lending...........................................................................................43
Introduction to Banking Landscape...........................................................................................43
Digital Banking - Retail & Corporate..........................................................................................45
Financial Inclusion powered by IndiaStack................................................................................51
Open Banking / Neo Banking & Account Aggregation...............................................................51
Introduction to LendingTech - Different Business Model & Key Trends......................................55
Digital Payments..............................................................................................................57
Evolution of Digital payments in India.......................................................................................57
Payments Ecosystem & Players.................................................................................................59
Introduction to Global Payment Ecosystem & Cross Border digital payments............................60
WealthTech......................................................................................................................64
WealthTech landscape - ecosystem & key growth drivers.........................................................64
Key Players...............................................................................................................................66
Key Takeaways..........................................................................................................................67
InsurTech..........................................................................................................................67
Insurtech landscape - ecosystem & key growth drivers.............................................................67
Challenges and Limitations.......................................................................................................69
New Evolving Business Models.................................................................................................69
Key Takeaways..........................................................................................................................69

1
RegTech...........................................................................................................................70
What is RegTech?......................................................................................................................70
The Need for RegTech:..............................................................................................................70
Where Does it Work Best?........................................................................................................70
Key Benefits of RegTech:...........................................................................................................71
Challenges and the Way Forward:.............................................................................................71
Key Players & Take aways.........................................................................................................72

2
Introduction to Fintech

Introduction to the Fintech landscape

FinTech, a combination of the words “finance” and “technology,” is a term that refers to any
technology that seeks to enhance and automate the delivery of financial services in newer
and faster ways than was traditionally available.

Commencing as a term referring to the back end technology used by large financial
institutions, it has expanded to include technological innovation in the financial sector,
including innovations in financial literacy and education, retail banking, investments, etc.

FinTech can take the form of software, a service, or a business that provides technologically
advanced ways to make financial processes more efficient by disrupting traditional methods.

FinTech describes a variety of financial activities, such as money transfers, depositing a check
with your smartphone, bypassing a bank branch to apply for credit, raising money for a
business startup, or managing your investments, generally without the assistance of a
person.

Sector initiated to flourish in the 1990s when the Internet and e-commerce business models
soared and in the following decade banking in most parts was already completely digitalized.
The Global Financial Crisis in 2008, in which many people lost their trust in traditional
banking systems, security and transparency has become more important than ever. This
shifting mindset and the technology of cloud computing made it possible to invent new
customized solutions and standard procedures such as providing access to banking profile,
payment and transfer of money with automatically converted currencies

India - one of the largest Fintech markets in the word

As per the MEDICI India FinTech Report, India has seen explosive growth in the number of
new ventures launched in the FinTech space. Between 2010 and 2015, India saw 1216 new
FinTech startup founded. The period between 2015 to June 2020 has seen phenomenal
growth in new startups across Payments, Lending, Wealth and others. India’s evolution as a
progressive FinTech nation is due to following factors:

 Solving for identity in the form of Aadhaar for formalization

3
  Getting everyone a bank account or equivalents (PMJDY) to store money.
 Building scalable platform(s) to move money (IMPS, UPI, BBPS, etc.) &
 Allowing banks and FinTech companies and wealth/insurance/ lending players also to
access platforms like UPI, GSTIN & Digi locker to innovate.

The demonetization drive in 2016 in India, can safely be called another landmark moment
which redefined the FinTech ecosystem as it was understood until then and put many
FinTech startups in India on the map. The ban on INR 500 and INR 1,000 currency notes,
which wiped out 86.4% of cash from the economy overnight, forced the public to switch to
digital payments and online transactions

FinTech Ecosystem & Players

The Indian fintech ecosystem is perhaps the most unique in the world, with hyperscale
payment infrastructure, thriving lending innovations, digitally savvy banks, and market-
driven open-banking frameworks. This has helped the country achieve a scale of unheard
levels — 71 billion digital payment transactions, Rs 11.8 trillion lent to retail and SME
customers, and 55 million active neobank (online bank) accounts.

The Indian fintech ecosystem has broken the barriers of language, location, and illiteracy.
Fintech firms have helped onboard new-to-credit as well as sub-prime customers. Jan Dhan
and neobanking are helping ensure that every citizen has access to banking. A case in point
is the high penetration of UPI.

Earlier, Indian fintech would imitate developments abroad, but now the reverse has begun.
With a focus on speed, cost, and scalability, homegrown innovations like UPI, the India stack,
and lending frameworks have become global benchmarks.

Indian financial institutions have shown maturity by collaborating deeply with the fintech
industry and offering their services through an open-banking architecture. Leading banks are
building separate business lines to partner with fintech firms and embedded finance players
to roll out products and services. In parallel, these banks are creating competing products.

Some of the key points from the 2023 budget, which has provided further support for the
ecosystem, as outlined below:

1) A national financial information registry will be set up. This will serve as the central
repository of financial and ancillary information. This will help banks reduce risk and
smoothen the flow of credit.

2) The entity digilocker will help businesses and charitable trusts store their documents.
Enabled by a secure consent layer, these documents will be shared with financial institutions
as and when required. Fintech firms and banks will be able to use the digilocker for
customer onboarding, underwriting, and servicing.

4
3) Businesses will be able to use their PAN as a unique identifier while seeking clearances /
approvals from various central and state government departments. The digilocker may also
be used by the finance industry.

Booming Indian digital economy providing further impetus for growth

Fintech Market Snapshot

5
Key Players

FinTech Technologies

Within the financial services industry, some of the key used technologies which are driving
the growth include artificial intelligence, big data, robotic process automation (RPA) and
blockchain.

Artificial Intelligence (AI) and Machine Learning (ML)

Artificial Intelligence and Machine Learning are some of the most used technologies in
FinTech, offering the potential to play an even bigger role in the finance industry as
developments continue. AI and ML is used in various forms. AI algorithms can be used to
predict changes in the stock market, give insights into the economy, customer spending
habits and allows financial institutions to better understand their clients. Some of the
FinTech applications of AI and ML include credit scoring, fraud detection, regulatory
compliance, and wealth management, among others. Chatbots are another AI-driven tool
that banks have started using to help with customer services.

Big Data & Data Analytics

Data from customers and markets is of high value to FinTech companies. Through large
datasets, information about consumer preferences, spending habits and investment
behavior can be extracted and used to develop predictive analytics. Predictive analytics
refers to predicting how consumers are likely to behave using past information and a

6
mathematical algorithm. The collected data also helps in formulating marketing strategies
and fraud detection algorithms.

Robotic Process Automation (RPA)

Robotic Process Automation (RPA) refers to the technology that focuses on automating
process of manual and repetitive tasks to robotics instead of humans in order to streamline
workflows in financial institutions. These tasks just involve the input of information into a
system and do not require much skill. Thus, companies are replacing manual workforce with
RPA which can complete the task quicker and more efficiently. RPA can be used to increase
the productivity of the financial company. The most widespread applications of RPA in
finance are:

Blockchain

Blockchain technology is another financial technology which is being adopted at a large scale
in the financial industry, primarily due to its capability to securely store transaction records
and other sensitive data. Each transaction is encrypted, and the chances of successful cyber-
attacks are relatively low when blockchain technology is employed.

This technology is also the backbone of many cryptocurrencies. A blockchain is a

decentralized, distributed, and often public, digital ledger consisting of records called blocks
that is used to record transactions across many computers so that any involved block cannot
be altered retroactively, without the alteration of all subsequent blocks. This allows the
participants to verify and audit transactions independently and relatively inexpensively.

Factors Driving Growth of Fintech

India remains one of the largest markets where the structural enablers to setup and
incubate FinTech companies have come together strongly. The following factors are likely to
drive the growth of the Indian FinTech sector, in the medium to long term.

Government & Regulator Initiatives

The government and regulators are prima facie catalyst for the growth of FinTech sector in
India. As Niti Aayog CEO Amitabh Kant highlighted in a recent media statement, FinTech
market in India is likely to expand to $31 Bn in 2020. The government programs which have
played a key role in propping up FinTech are:
• UPI
• Jan Dhan

7
 • License for payments bank
• Digital India Programme
• Recognition of P2P lenders as NBFCs
• Regulatory sandbox by RBI for FinTech
India Stack
India Stack is a set of APIs that allows governments, businesses, startups and developers to
utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less,
paperless, and cashless service delivery.

It is the most ambitious societal initiative globally, aimed at putting up a public digital
infrastructure based on open APIs in order to promote public and private digital initiatives. It
has played a catalytic role in India’s digital foundation and evolution. An upsurge is evident
as a result of Aadhaar and UPI which are the most prominent components of the stack over
the years.

Technological Advancements
The rise of smartphone usage is amongst the key factors of boosting the technological
advancements and enabling it for mass adoption. In addition to it, other factors that are
playing a crucial role in the transformation are mentioned below:
• Identity confirmation technologies like biometric, face recognition, and iris scanning.
• Instant payments.
• Internet of things.
• Online KYC and digital signatures.

Technology is changing the way the finance industry operates and delivers services. The
overall market is undergoing a major transformation leveraging new and cutting-edge
technologies. Big Data and analytics offer tremendous potential to understand the needs of
customer and offer personalized products & services and drive operational cost efficiencies
that give rise to altered business models. This technological advancement has majorly driven
the growth of FinTech across the globe.

Adoption of technology by banks

8
The continuously increasing collaboration between banks and FinTech startups in the form of
supplementary offerings, partnerships, acquisitions, incubators, and investment is also one
of the key drivers of India’s FinTech growth as well.

Technology and IT infrastructure is the foundation of FinTech. The FinTech infrastructure

backbone has been strength- ened tremendously with the host of options available to
market participants such as BBPS, Bharat QR, India Stack, UPI.

Greater adoption on the consumer end

In the era of digitalization, FinTech companies are transforming in a sea way, providing new
variant of services, and adopting new technology to meet customer expectations. Another
most important element for FinTech companies is to concentrate on its customers. They
must find innovative and cost-effective ways to acquire and retain customer loyalty in an
environment where the obstructions to churn are lower. For e.g., gaining customer trust,
providing a seamless experience by reducing friction in digital transactions.

Key factors that influences consumer adoption of FinTech includes.

• Ease of setup, configuration and operate.
• Range of functionality and features
• Can be used with smart phones.
• Compatibility with daily operations and infrastructure
• 24/7 availability of services
• Transactions are paperless.

Challenges in Fintech

Uncertainty in Regulation
India is one of the few jurisdictions with a specific Payments and Settlements law to provide
for regulation and supervision of payments and settlement systems in India and to designate
the Reserve Bank as the authority for the purpose. After the regulatory fillip, India still has a
way to go in terms of providing security to business platforms. A few regulations including
regulations for safe investment exits, its stand on cryptocurrency, payment regulations by
NPCI etc. are still evolving and real time changes in the regulatory scenario shall need to be
incorporated considering the dynamism of the FinTech industry. Further, cross border
payments are currently not being channelized through new age startups and get conducted
through age old banking channels. A uniform standard of practice (across jurisdictions), a
common translated language and standardised KYC norms coupled with commensurate
regulations can open up a vast window of foreign transfers through FinTechs

Data Security Risk

Data leaks, platform downtime and information theft has become quite rampant in the
FinTech space. Data, artificial intelligence and machine learning are the backbone of
FinTech’s.
Developing strong mechanism to protect data is of paramount importance and players shall
have to invest deeply in mechanisms to control this risk and comply with regulatory
requirements towards data security. Further, control of data and choice of sharing the
personal data with various apps and websites should be exercised as a strong prerogative by

9
Indian mass; awareness and digital education to that extent is still lacking leading to data
leaks and inappropriate use of confidential data.

Lack of trust and awareness

Due to lack of technological advancements, awareness and adaptation to these FinTechs, the
penetration of these services has so far remained restricted to metros and top tier cities.
This inequality of access and its lack of rural penetration and mass adaptation in lower tier
cities shall remain the major hindrance and the major growth driver as well for the sector.
Till then, the reliance on local lenders and preference for cash transactions shall continue.

Systemic Risk
With the huge growth of the FinTechs and the rampant growth in underlying delinquencies
due to the nature of the credit flow, its imperative to have prudential regulation controlling
the system wide risk proliferation. Traditional banks give advances sourced from Deposits,
whereas these Fintech companies lend from Debt Funds/ Equity Funds. Thus, the risk can
permeate to various categories of people including investors, consumers and enablers.

Changes due to Consumer demand

The kind of product or service of a FinTech firm is one of the major factors that affect the
funding and growth of that firm. Also, it cannot be denied that the changes in consumer
demand due to the pandemic is huge. The curve has shifted to industries that hadn’t
gathered much attention before. FinTech companies involved with banking and business to
business transactions are less vulnerable. Digital investment management companies, retail
trading and brokerage companies, health insurance, multi-line insurance are likely to face
low-medium impact while trade finance, unsecured SME lending are expected to impact
highly.

The Future of Fintech

Financial technology is a term that has been garnering rapid followers over the fast few
years. There has been a gradual evolution in terms of including technology for back-end
services to incorporating it more for customer centric services to make the overall process
efficient.

Future of FinTech industry looks promising and growing rapidly on the back of
• Rise of startups in Fintech Industry
• Penetration of smart phones
• Continuous buildup of digital infrastructure
• Overall streamlining of financial process in many industries

In a report, by Research and Markets, as of March 2020, the FinTech market in India is
expected to expand at a compound annual growth rate (CAGR) of ~22.7% during the 2020-
2025 period

10
 • Over the past few years, India has essayed several guidelines and reforms such as
granting multiple licenses for differentiated banking to small finance banks, payment
banks and introduced the unified payment interface to include the unbanked
population of India in the formal financial services folder, strengthening the major
FinTech segments such as payments and lending ecosystem.

• Initiatives led by the government and regulators for digital India like demonetization,
Jan Dhan Yojana, Aadhaar, etc. aided by the growing internet and smartphone
penetration, has led to the adoption of FinTech.

• As more and more customers get on the digital board, FinTech’s will have to focus on
building trust and consumer engagement. Especially given the time when
cybersecurity is extremely vulnerable. To be critical and to stay ahead of the
competition than other FinTech brands, it is necessary to focus on the security along
with making the procedure simple for consumers.

• FinTech has been known for their coming-of-age technology owning towards offering
the most convenient and flexible options for consumers. It is not surprising that
going forward, financial services will offer a customized and local offering to their
customers using data analytics. The more and more advances in technology financial
services adapt to upgrade their strategies, more growth in this sector is foreseen.
This is just the beginning of a huge FinTech market in the upcoming decade.

• While the FinTech industry is still in its early adoption stage, we believe it is well-
positioned to witness long-term growth in the coming years. The changes will be
more focused on digital lending (alternative finance) and open banking. FinTech
growth will ultimately create outsized opportunities for firms and help empower
them in the digital age.

11
New Technologies Powering Fintech

Cloud Computing - Introduction, Technologies & Applications

The impact of cloud computing on fintech industry is immense. Cloud Computing has
revolutionized how financial services companies operate, allowing them to access, store,
and process data more efficiently and securely than ever before. This has opened up a world
of possibilities for Fintech companies and allowed them to develop new products, services,
and technologies transforming the financial landscape. This blog post will explore how Cloud
Computing changes the Fintech industry and what this means for businesses and consumers.

What is Cloud Computing?

Cloud computing is a type of computing that relies on remote servers and services rather
than local servers or physical devices. It allows users to access resources and applications
through the internet or other remote networks. This means that instead of having to
purchase, install, and maintain an on-premise chat server, for example, businesses can opt
for a cloud-based service.

Cloud computing offers an on-demand solution for businesses, allowing them to access
resources and services as needed. It has grown increasingly popular as businesses look to
reduce overhead costs associated with on-premise deployment and to gain flexibility in their
technology investments. Additionally, cloud computing can help create a more agile business
structure, allowing organizations to respond quickly to market trends and customer needs.

The Impact of Cloud Computing in Fintech

Cost-Effective Scalability

Cloud computing has revolutionized the way businesses, including fintech companies,
operate. One of the key benefits of cloud computing is the ability to scale up and down
quickly and cost-effectively. With cloud computing, businesses can move from costly
software deployments, such as an on-premise chat server, to a cloud-based service.
Software-as-a-Service (SaaS) products, such as customer relationship management tools,
ATS tracking systems, etc, allow businesses to pay for only the services they need when they
need them, which significantly reduces IT costs. These cost savings allow fintech companies
to focus their resources on other areas of their operations.

12
Improved Security

Security is a major factor when it comes to financial technology. With cloud computing,
fintech companies can ensure the security of customer data by relying on a secure and
reliable SaaS provider for their cloud-based services. On-premise deployments could be
more confident, as the responsibility for security lies with the company itself. This means
there's an increased risk of a data breach or malicious attack if an on-premise chat server or
other system isn't adequately secured. By using cloud-based services, companies can take
advantage of the provider's expertise in security and be sure that their customer data is
being protected. Furthermore, a cloud service provider can quickly adopt the latest
encryption standards and data storage solutions. This allows businesses to use the latest
security measures without investing in costly on-premise upgrades. With cloud computing,
fintech companies can enjoy the peace of mind of knowing their customer data is secure.

Enhanced Customer Experience

Cloud computing has significantly impacted the customer experience of fintech companies.
Cloud-based services are more reliable, efficient, and convenient than traditional on-premise
chat servers or deployments. With cloud computing, customers can access their accounts
anytime, anywhere, and from any device. They can also securely share information with
their financial service provider without worrying about data loss or security breaches. Cloud
computing also helps fintech companies create better customer experiences by providing
better insights into customer behaviors. This enables companies to offer personalized
products and services that meet their customer's needs more effectively. The result is an
improved overall customer experience for both the customer and the company.

Increased Speed to Market

In the Fintech industry, speed to market is key. Cloud-based services allow fintech companies
to deploy their services quickly and easily without worrying about complex on-premise
deployments. Businesses can spin up new services within minutes instead of months using
cloud-based solutions. This means they can be the first to launch new products and services,
enabling them to disrupt their industry.

Cloud-based solutions also provide an agile platform that allows companies to iterate
quickly. Instead of waiting for an on-premise deployment, developers can make and deploy
changes immediately, allowing for faster product launches and updates. This also helps
businesses react quickly to changes in the market, ensuring that their customers are always
up-to-date with the latest features.

Cloud-based solutions also offer improved scalability for businesses. This makes it easy for
companies to scale their operations as needed without worrying about investing in
expensive on-premise hardware. For example, businesses can use a cloud-based solution
that offers unlimited scalability and flexibility instead of purchasing an on-premise chat
server to handle customer queries.

13
Greater Data Insights

Cloud computing is revolutionizing the way. Fintech companies use data to gain insights into
their customers. With cloud-based services, companies can analyze data more quickly and
effectively, allowing them to make better decisions faster than ever before. By using cloud
technology, Fintech companies have access to greater amounts of data than ever, enabling
them to understand customer behavior and preferences better.

Using the cloud also eliminates the need for companies to maintain an on-premise chat
server or on-premise deployment of software solutions. Instead, these services are hosted in
the cloud, allowing quick and easy customer data access. This helps Fintech companies
streamline their processes and make decisions based on more accurate and up-to-date
customer information. Furthermore, by leveraging the power of the cloud, companies can
easily scale their data solutions as needed to accommodate customer needs.

Final Word

The cloud-based service is revolutionizing the financial technology industry. With increased
scalability, security, customer experience, speed to market, and data insights, Fintech
companies can quickly deploy new services and remain competitive. By moving away from
an on-premise deployment of a chat server and other services, companies can move more
quickly and cost-effectively while utilizing cutting-edge technologies. Companies can now
access more advanced analytics capabilities to understand customer behavior better, offer
tailored services, and automate operations. Ultimately, cloud computing has changed how
Fintech companies do business and created a more dynamic and efficient industry.

API Economy & Use Cases

A brief outline of API technology

APIs allow FinTech companies to make data and features of their applications available to
external custom software development companies, business partners, and internal
departments. Thus, services and products interact with each other using third-party data
and features via dedicated interfaces. The implementation of API protocols is required for
looking up the weather forecast in real-time, making a bank transfer, reading text messages,
and more.

RapidAPI Developer Survey 2020-2021 attests to the popularity of this tool. Namely, 61,3%
of software development companies said that in 2020 they had used APIs in their work more
frequently than in the year before that, while 71,1% of respondents were planning to
increasingly use them in 2021. Over 58% of organizations consider implementing the API
economy model to be their highest priority. In their view, APIs are mostly used in Telecom,
Healthcare, and Finance.

Rest APIs remain a dominant technology, and there is also a growing interest in Websockets,
Serverless & FaaS, gRPC, etc. For example, in 2020, the usage of AsyncAPIs and GraphQL
increased by several times. The larger a company is the more internal services and

14
communication protocols it uses. For example, 40% of major companies employing ten
thousand people and more reported that they simultaneously use over 250 internal APIs.
Three in four companies are inclined to rely on their own solutions while reducing their
dependence on external products.

The API market dynamics

According to MarketsandMarkets, the global API management market will reach $5.1 billion
by 2023 growing by nearly five times compared to 2018 and at an average annual rate of
32,9%. The forecast by Adroit Market Research, in turn, states that the global API market
growth will surpass $21 billion by 2028.

Tools for API platforms, analytics, and security are increasingly used thanks to the
advancement of mobile technologies. This motivates companies to develop their solutions
for internal and external use.

The above two pieces of research underscore the advantages of cloud technologies
compared to the on-premises approach when a company uses its own data centers. Cloud
technologies reduce companies’ expenses and speed up product development.

North America is the main region for the development of API technologies. There, API-
related technologies are commonly used, vendors supply API management solutions on a
massive scale, technology is constantly evolving, and there are skilled and knowledgeable
experts.

The rapid API market advancement is projected in the Asia-Pacific region with its
technological leap and increased number of users.

APIs are most commonly used in Telecom, the IT sector, Banking, Finance, Security and
Insurance, and public administration. The Banking and Finance industries are constantly
looking for cutting-edge, flexible, and efficient tools for providing their clients with digital
services. Numerous are developed by large organizations at a faster rate than by small and
medium businesses.

The following infographics show the API management market growth by region.

15
The main global market players are Adobe, IBM, Oracle, Google, Red Hat, Software AG,
Microsoft, SAP SE, and others. These are mostly US and European companies.

The API economy structure

Some companies following the global API trend don't fully understand how the API economy
structure is organized. Thus, their API implementation strategies are inconsistent and
fragmented.

The API economy is based on the following pillars:

 the right approach to API adoption;

 the choice of the right technology;

 API development management;

 the establishment of an ecosystem.

Let’s consider how the above stages are implemented within Banking, Finance, Security, and
Insurance.

The right approach to API adoption

Companies implement a business-driven approach to API management based on the

adoption of Payment Services Directive 2 (PSD2) and Open Banking. These regulatory
policies allow external financial service providers access to banking data, transactions, and
other financial data of banks’ clients and financial institutions via APIs.

16
The above approach is based on the API-first mindset and the top-down approach. The
former suggests shifting a company’s business and IT processes to applying key API
management principles. The latter requires that any solutions are made and the main
channels of communication with clients are established via APIs.

API reusability allows companies to develop their products based on already existing
solutions. This principle substantially speeds up product launches and allows companies to
get ROI faster.

To implement the right approach to API adoption, financial institutions must change their
organizational policies, ensuring communication with their clients and within their
organizations mainly via APIs. Financial institutions can develop them in-house, order them
from software development companies, or use open-source solutions.

The choice of the right API technology

The choice and comprehensive implementation of a suitable technological solution is

another crucial factor for establishing the API economy. This stage is required to build the
production environment. As a rule, companies consider the following tools and
technologies:

 API management platforms are the core of an entire API management system
allowing organizations to establish data security policies, choose communication
protocols and repositories, and get data analytics;

 Microservice architecture is a decentralized system for data processing and storing.

Thanks to it, companies perform the needed operations and establish
communication protocols within the IT architecture of their solutions. Thus, each API
is functioning independently, is easy to develop, and is testable and secure;

 API management catalog is a cataloging system that stores information about APIs
for their subsequent reuse or for the development of new APIs;

 API monitoring technologies are used for efficient platform and service management,
collection of statistics, and managing systems’ performance and user access.

The following infographics represent API architecture.

17
Companies face the challenge of choosing the right platforms for ensuring their production
and communication processes, organizing efficient and harmonious microservice structure,
and establishing effective API cataloging and monitoring. To do so, businesses look for
reliable finance software development companies that specialize in API development and
implementation.

API development management

This stage of the API economy implementation involves the adoption of Agile practices for
API development management. The following development teams are responsible for API
development:

Central teams manage API software architecture and processes on a platform level, establish
use standards and patterns, and work with API-related tools, defining API development
strategy.

Business unit design teams coordinate the interaction of API processes and standards within
departments. They manage API development based on legislation and company rules within
their industries, e.g. Finance, Insurance, or Banking. For these purposes, API capability
centers are established.

18
Finally, delivery teams whose work is based on DevOps principles finalize a product. They
rely on strategic principles and standards outlined by central teams, and on developments
achieved by business unit design teams.

Successful API development and implementation lie in the efficient distribution of tasks
between different teams, as well as in the interaction of customers with the key FinTech
development specialists on a project.

Building of API ecosystem

To ensure the stable functioning of the API economy within an organization it needs to
establish an ecosystem where API solutions are included in its production and marketing
strategies as a key element of the infrastructure. The API ecosystem establishment implies
using of developer portals for efficient support and transparent document flow.

It's recommended that an organization’s specialists would participate in technical

conferences, meetups, and hackathons where new ideas for the development of API banking
solutions are generated. After all, businesses should implement advanced, user-friendly, and
innovative software products to stay competitive in fast-evolving markets.

A consumer-first approach is also crucial for building a productive ecosystem. It implies

paying attention primarily to the development and improvement of services that are used by
an organization’s clients and business partners most.

Finally, companies successfully monetize their API ecosystems by leasing their tools,
adopting new payment methods, and enhancing client support.

To sum up

The API economy is the future of companies in the Banking and Finance industries. API
solutions help businesses to interact with each other at a new level establishing efficient and
convenient communication.

At each of the API economy levels specified above, companies face the challenge of
choosing the right API development and management strategies. Cooperation with top-
rated finance software development companies will help companies solve this problem.

The increasing dominance of APIs in fintech is easy to understand. Banks and payment
companies need to connect with third parties in order to expand their services and stay
competitive. Merchants need to make it easy for customers to pay using their preferred
methods and consumers want to be able to transfer funds, make purchases and perform

19
personal banking tasks on the go. And for developers, APIs make creating financial apps and
services faster, easier and more cost-effective than ever before.

Building Blocks for the New Fintech Era

The current success of many global tech leaders can be attributed to their strategic focus on
IT services as a series of building blocks that are both interoperable and reusable. By
providing apps and services for third parties to incorporate in platforms for their own
customers, these companies grow their business and development ecosystems. APIs serve
as the architectural components enabling this modular microservices strategy, and their
adoption is evident in the rapid transformation occurring throughout the financial industry.

API use is driving innovation across industry sectors, including:

 Payments and eCommerce: Connecting consumers, commercial websites and credit

card companies, fintech APIs enable customers to make purchases and transfer funds
through online platforms. Payment gateway APIs are a key focus for developers and
marketers alike—they provide a seamless customer experience, allowing users to
complete transactions without leaving a company’s website.

 Banking: Banks are using fintech APIs to keep up with increasing consumer
expectations for digital services and capabilities. A banking institution’s customer app
is a common example—these platforms often connect with third-party APIs to
provide services like credit score updates and mortgage tools along with standard
account access.

 Banking as a Service (BaaS): BaaS APIs provide third-party fintech companies with
direct access to banking data. In this arrangement, a fintech pays to hook into an
institution’s banking platform and create new offerings. For example, companies tie
into banking APIs to deliver personal finance apps offering spending tracker
functionality and investment recommendations.

 Accounting: Fintech APIs also integrate accounting capabilities with other key
business processes to improve efficiency. By connecting employee expense
submissions with a company’s accounts payable function, for example, APIs eliminate
time and resources spent on scanning, coding and entry tasks.

 Financial Market Data: In an industry landscape previously dominated by on-premise

data terminals, fintech APIs enable third parties to offer digital services that stream
real-time financial and investment data from a vast range of sources.

The Pros and Cons of Using Fintech APIs

Before fintech APIs were widely in use, financial services and apps were typically costly and
complex to develop. Simply connecting a platform with user bank accounts required
development teams to build an integration for each financial institution involved.

20
Now, with players across the financial industry releasing their own APIs, you can easily
integrate components to create a new offering or add capabilities. Using APIs as building
blocks allows you to avoid recreating functionality that already exists, saving time and
driving down costs.

Still, fintech APIs come with their own set of challenges. Some banking institutions have
legacy systems that aren’t designed for smooth integration with APIs. Certain APIs were
created quickly, under regulatory mandates lacking clear specifications or incentives to
ensure optimal function and performance. And ongoing concerns about the potential for
data breaches make secure connections paramount.

The Benefits of Fintech API Use Include:

 Faster solution development and accelerated time to market

 Significantly reduced development costs
 Reuse of components to eliminate unnecessary rework
 More time and resources to focus on innovation instead of repetitive development
tasks

Potential Challenges Include:

 Legacy banking systems that aren’t yet optimal for API integration
 Rapidly launched APIs limited in function or performance
 Customer or partner concerns related to security

Big Data , Data Analytics and Use-cases

Have you ever heard about Big data, fintech, and what these two things are capable of when
combined? The modern lifestyle is hard to imagine without data: our devices, which have
been firmly integrated into our lives and simplified them, collect data about our habits,
preferences, and behaviors.

As for the banking industry, the volume of data is growing by 700% per second. In terms of
the total amount of data captured, copied, and consumed worldwide, there are 79
zettabytes. The amount of data collected continues to grow along with the rapid evolution of
technology. On top of that, data has become a necessity for running a successful business,
thus boosting interest in data across a variety of fields, including FinTech.

How exactly is data finding its way into FinTech?

21
FinTech Big data is useful for gaining valuable insights and transforming how companies
build new business models. Big data analysis reveals a pattern about the target audience,
helping businesses better services and craft products that are tailored more closely to the
user’s needs.

All these advantages contribute to the better performance of financial institutions, banks,
and companies involved in finance. These enterprises are backed by customized financial
data accessed through Fintech institutions to get transactional data for the ongoing
monitoring of what customers are doing across a range of channels and silos.

What is Big data in finance?

Data is not a new universe unveiling, and everyone has probably heard that it is collected for
one purpose or another. But what about Big data? You may have heard the term, but do you
know why data has suddenly become Big data?

Big data is complex and voluminous sets of diverse information. After processing these data
sets, organizations can derive valuable insights that can benefit enterprises and institutions.

In fact, a treasure trove of consumer information can be found in these data assets that can
revolutionize business strategy, including in finance.

Big data’s value has already been realized in many fields, including finance. FinTech
companies are helping finance companies extract that value from Big data. With the
development of the Internet of Things (IoT), mobile technology, and more advanced
authentication mechanisms, Big data will become more and more valuable.

Consequently, there will be more demand for FinTech companies, which, in turn, will
continue to invest in data science teams to dedicate themselves to collecting and processing
data.

Now back to Big data. Volume, velocity, and variety are Big data’s three characteristics. They
are also called V-characteristics. They are also the things that differentiate Big data from just
data.

Let’s talk about each of them:

22
FinTech and Big data

Big data can be divided into several types:

We can also distinguish semi-structured information, which is collected from several sources.
The count of Big data in finance is already running to petabytes of data that can be used by
banks and financial institutions to both foretell customer behavior and elaborate strategies.

23
As for Big data in Fintech, in addition to consumer behavior projection, it is being used for
sophisticated risk evaluation, making more precise decisions, and offering a more
personalized customer experience.

FinTechs can use Big data to understand their consumers on an almost personal level, rather
than guessing or excessively cautious risk assessments.

Why does Fintech need Big data?

Big data has proven to be very useful in FinTech. FinTech helps modernize the sphere of
financial organizations, adapting it to the new technologically empowered human life. In
turn, Big data helps to make this real. Let’s take a look at why Big data is necessary for
FinTech.

Going online
Our world is adapting toward technology progressively. Many processes are becoming digital
and can be done on mobile and other devices. This is also happening in the financial sector.
People are choosing to avoid going to banks and solving problems remotely. If we were
talking about collecting basic data, this would be a barrier to collecting it. But not for Big
data.

Through the use of mobile devices, Big data FinTech companies can get information about
geolocation, more frequent user interactions, user behavior, and browsing history. All of this
information is extracted from Big data and used to make up for the gap in face-to-face
interactions with customers.

By obtaining customer data, FinTech companies can develop useful solutions that will meet
the needs of the user. Which becomes a big advantage for attracting and retaining
customers.

Social networks have valuable data for FinTech

Social networks have long been not only platforms for communication, but also for
commerce. Users make purchases and interact with merchants on social networks. Because
of this, FinTech companies’ interest in Big data from social networks is increasing.

For example, Big data on social media help banks assess credit risks in cases when a
customer doesn’t have a credit history.
Customer expectations are changing

24
Without information about customers, companies can’t guess what they require. Big data
helps FinTech companies not only foresee, but also stay ahead of customer expectations.
This is possible thanks to Big data collected from multiple channels, such as mobile apps,
websites, social media, and smart devices.

Thanks to Big data, FinTech companies can be more agile and react swiftly to shifting market
environments because cutting-edge technology platforms power them.

FinTech is becoming increasingly competitive

The rapid growth of the FinTech sector is driven by the advantages it offers to entrepreneurs,
start-ups, and well-established companies. Through the use of Big data, FinTech companies
can provide services that are crucial in this competitive industry. Their advantage is as
follows:

 Thanks to Big data, or more precisely real-time FinTech data ingestion and
processing, company operations can also be optimized on the fly. This facilitates the
provision of quality services based on the needs of customers, which in turn have
been exposed by Big data.

 Big data helps FinTech companies automate operational processes based on

customer needs. Automating operations are cost-effective, allowing for more
investment in marketing and lower prices for customers. Therefore, using Big data is
a win-win option.

The benefits Big data brings to FinTech

As in all other spheres, the success of a FinTech enterprise lies in its clientele and, more
precisely, in the level of customer satisfaction. In today’s technology-driven world, the
quality of service, in turn, depends on Big data and its analysis.

Let’s take a closer look at the impact of Big data on Business.

 Improved customer segmentation

In fact, it’s quite simple. The more you know about your customers, the easier it gets
to offer services that will benefit them the most and the better you can serve them.

Big data drives the building of a client profile and hence segmenting clients. Client
segmentation allows you to learn more about your customers and tell you about:

25
 Big data has made it possible for FinTech to analyze user profiles in greater depth and
identify a portrait of high-value customers who are most likely to shop. To identify
such customers, spending habits are analyzed and their relationship to age, gender,
and even social class is revealed.

Thus, Big data in FinTech helps create more customer-centric products and services.
For example, by having Big data and segmenting users, FinTech companies can
launch promotions at the right time that take into account users’ spending power,
which also becomes known thanks to Big data.

Choosing payment technologies and setting card limits that will suit your particular
customers is also achieved through segmentation and Big data.

It turns out that thanks to segmentation, offers are no longer generic and become
more tailored. And this, in turn, not only helps to attract customers but also
contributes to their retention.

Finally, customer segmentation through Big data can also work to help FinTech grab a
significant share of the market for its products. Thus, Big data presents FinTech with a
unique opportunity to gain some competitive advantage and get in line with
traditional banks.

 Customer-focused services
It’s a universal truth that people tend to go for services that meet their needs.
Placing ourselves in the place of a client, we know that generic and non-specific
services and products fall short. According to State of the Connected Customer
research, 66% of clients would like companies to understand and meet their needs.
How can a FinTech startup achieve this? Right, it’s all about data again.

Big data helps FinTechs get to know the customer all around and at an almost
personal level. Data is collected everywhere: from card transactions, ATM usage,
credit points, and other financial instruments, and the volume of this data is beyond
comprehension.

With Big data analytics, FinTech companies can easily compile and analyze relevant
insights into users’ banking transactions, identify pain spots, anomalies, and errors,
and respond accordingly.

User experience is what counts as a company’s reliability and trustworthiness. With

increasing frequency, this experience is coming to mobile. Switchboards, operators,
long queues at bank offices, papers, and never-ending hours of waiting to speak to
someone on the phone or face-to-face are all things of the past thanks to FinTech, AI,
and Big data analytics.

Digitalized simplification of finances is today’s preferred way of doing things. If your

app doesn’t live up to its claims or isn’t as intuitive as it expected, it will hurt both

26
 customer experience and trust. Targeting a better user experience is what custom-
centric service presents.

 Improved fraud detection and security protocols

It would seem that everyone realizes that financial things should be protected to the
fullest extent possible. But according to a study by Immuniweb, 98 of the world’s top
100 FinTech startups are vulnerable to cyberattacks. The numbers are catastrophic
and may make users want to stop using any FinTech product, or at least inquire about
the security practices employed in your product or service.

Unfortunately, it’s fair to admit that security issues are true for FinTech solutions.
These products are cyberattacked on a regular basis, including phishing and security
threats to web and mobile apps. The good news is that Big data can be useful to
address this problem as well.

Security protocols and fraud detection algorithms are tasked with protecting users.
Big data supplies information about what transactions people typically make, when
they make them, what geographic location they make them from, and their typical
behavior when using an app or website. With this information, Big data

FinTech companies have an improved understanding of how to create more robust

security protocols and design payment systems so that they can withstand hacker
attacks and fraudulent acts.

As mentioned, Big data knows user behavior. Therefore, using this information in
combination with data science, artificial intelligence algorithms, and ML helps
identify fake behaviors. Until the transaction is completed, AI and ML send a
transaction validation request to the competent department.

 More streamlined operations

The use of Big data in FinTech is not a new phenomenon. We’ve talked about using
Big data for sales, marketing, security, and customer service, but beyond that, Big
data can be used in customer operations. We think it deserves just as much attention
because operations predominantly determine the quality of the customer
experience. And as you know, the better the customer experience, the more
successful sales, and marketing.

“How can Big data be useful in the customer’s operational experience?” – you may
wonder.

Big data can be a winning option for use in operations like risk assessment, loan
servicing, human resources, and even legal department operations. With quick
access to Big data, employees can make the right decisions faster, both in routine
situations and in individual customer cases. This includes making service more
personalized again.

27
 In addition, with Big data, FinTechs can evaluate production, collect and review
customer feedback to remedy shortfalls, pre-empt future needs and strengthen
decision-making processes.

 More accurate credit risk assessment

In most cases, FinTech companies issue loans and credit cards. Credit risk scoring is
one of the major challenges FinTech companies face. The challenge comes down to
the lengthy and complex process itself due to limited data availability, a knowledge
shortfall in data analysis, and poor availability of, and access to, data management
tools. It’s critical to keep risks low.

Moreover, we live in a world where speed is king. This is where Big data comes into
play. They speed up data processing as FinTechs take advantage of access to all the
relevant information about their customers, past, present, and even future.
Possessing this information, companies can assess a client’s financial condition even
after a loan or credit card has been issued and detect any variations in order to
mitigate risks. But that’s not all the benefits that come with Big data.

Big data in FinTech has eliminated the importance of credit history for risk
assessment. Big data gathers information from social media, smartphones, and
search engines to assess potential customers’ creditworthiness almost instantly. They
can also send personalized marketing services to would-be low-risk customers.

It’s worth noting that we use the phrase “mitigate risk” because unfortunately, it’s
not possible to completely eliminate all risks. But not everything is as dazzling as we
would like it to be, and the FinTech industry still struggles with some Big data-related
barriers.

Big data-related barriers in FinTech

In today’s world, privacy is of high importance. However, when it comes to the FinTech
industry, concerns about data privacy serve as a constraint. FinTech companies must follow
regulations that control how banking institutions collect information about their users, such
as the Fundamental Review of the Trading Book (FRTB),Anti-money laundering (AML)/Know
Your Customer (KYC), and Foreign Account Tax Compliance Act (FATCA).

In addition, if FinTech companies follow the regulations currently in force, the companies’
business potential cannot be fully unleashed. In addition, the FinTech sector has difficulty
making more complex decisions and BDA models for the same reason.

As the situation has changed, regulatory changes are essential. If changes are brought about,
the FinTech sector will be able to further strengthen its potential to satisfy the customers’
needs.

 Fintech Big data infrastructure requirement

28
 While some countries are actively benefiting from Big data, others are just getting
started. Adapting the use of Big data in FinTech requires a proper IT infrastructure. It
is essential to cope with the sheer volume and variety of data and to sustain data
quality. Its absence poses hurdles for the overall FinTech value chain.

IT infrastructure goes along with the proper tools and techniques, the use of which is
essential so that Big data can be properly utilized and analyzed.

In addition to the technical component, implementing Big data also requires human
resources and financial inputs, which is another challenge for FinTech startups.

 Substandard data quality

When faced with a huge amount of data, maintaining data quality is a struggle.
However, data quality is vital in FinTech, as it determines the accuracy of Big data
analysis and the integration of Ml and AI into FinTech companies’ value chains.

If data quality is unsatisfactory, FinTech companies run the risk of the following
problems:

As you can guess, making and correcting such mistakes can cost a great deal, both for
customers and for the companies involved. In addition, poor data quality can also
compromise regulatory compliance, data privacy, and corporate image. In such cases,
the penalty varies.

What is Big data analytics?

Data is collected from all devices such as smartphones, laptops, smart devices, etc. As
mentioned above, the speed and volume of data collection are tremendous. But collecting
data is one thing, but how to benefit from it is another. This is where analytics comes in.

Analytics of Big data is the ability to process large amounts of data. As far as FinTech is
concerned, analytics helps you get more in-depth knowledge and information. In turn, it
helps create smarter and more personalized customer services.

In this way, the best Big data analytics companies can change the world of FinTech by
bringing game-changing benefits to both alternative financial institutions and traditional
banks. Bringing benefits allows financial institutions to:

29
Machine learning and artificial intelligence are opening up even more new avenues for
financial institutions, and the Fintech industry, thanks in large part to artificial intelligence
and machine learning, can grow at a rapid pace.

This why today, financial institutions tend to abandon their usual business models and seek
collaboration with Fintech companies owing to the opportunities afforded to them through
Big data acquisition and analytics.

Choosing between Big data and Big data analytics

The difference between Big data and analytics of Big data is really quite simple. Big data is an
accumulation of Big data-just a bunch of raw data. In turn, Big data analytics is the same Big
data, but subject to analysis and structuring.

FinTech Big data analytics is considered more reliable and of higher quality. They can be used
without bias and guesswork. Better data can further improve operations, sales, cost
management, and so on.

FinTech and Big data analytics strengths

Big data analytics in FinTech is no less important than Big data itself. Big data analytics makes
FinTech solutions stronger. Here’s a how it backs FinTech:

 Strengthened decision-making
With the help of data analysis tools, a complete picture of the client’s situation is
presented, which helps to make more well-founded decisions.

 An unbiased approach
Heterogeneity or insufficient data generates ambiguity. In turn, ambiguity breeds
bias, which affects decision-making. Big data analytics in finance helps to eliminate
bias.

 Cost-effective and less time-consuming

Big data analytics solutions are replacing a lot of manual processes. That’s why Big
data analytics in FinTech is considered cost-effective and less time-consuming.

30
Final note about Big data

Big data is proving to be the perfect ally for supporting a user-centric approach in a robust
and scalable way. Big data in FinTech has already brought tremendous change, not only to
within-company processes but also to the customer experience. It is the customer
experience that has become the determinant and the main driving factor in changing
customer expectations. In other words, FinTech companies have an offering that traditional
financial companies don’t have.

Big data is expected to drive myriad finance-related entities. With the profound customer
insights brought by Big data, the benefits Big data gives to business include but not limited
to:

 Improved customer segmentation

 Customer-focused services
 Improved fraud detection and security protocols
 More streamlined operations
 More accurate credit risk assessment.

In overall, the mentioned benefits allow companies achieve service refinement and a more
tailored product and service proposition. FinTech firms are the ones who are on their way to
a smarter customer experience, which has got real thanks to Big data. Leverage the benefits
of Big data to grow your company.

Introduction to Robotic Process Automation & Use-cases

Implementing RPA in Finance & Banking: Benefits, Use Cases, and Process

What if we tell you there is a solution that can improve your productivity by up to 92% and
compliance by up to 90%? Finance robotic process automation or RPA is an effective solution
against extremely time- and cost-consuming tasks, like manual data processing. RPA
technology is evolving quickly, with more financial institutions adopting it for finance
processing, accounting, and audit.

RPA: What is it?

Let’s kick it off by answering the first question. What is RPA in finance? Robotic process
automation is a technology that automates repetitive, manual, administrative, and time-
consuming tasks across the platform. RPA is widely adopted across various industries, from
healthcare to retail management. However, banks and finance and accounting departments
use it to limit human intervention and error in the financial sector.

The basic RPA model has limitations to what task it can learn and perform. Yet, with
advanced Machine Learning and Artificial Intelligence integration, you can have a software
robot that can handle complex procedures and adapt to real-time data.

31
Gartner revealed that more than 80% of financial executives plan to implement (or already
have) RPA in the work process. Let’s take a closer look at what is so special about RPA
technology and how it can boost efficiency.

Benefits of robotic process automation for finance and banking

In 2020 global RPA market was valued at $1,57 billion. According to Grand View Research,
those numbers will rise at CAGR of 32,8% by 2028. Such statistics highlight the necessity of
implementing RPA in the business to improve finance function

How can you benefit from finance robotic process automation? Here is a rundown of the top
advantages:

 Lowering operational costs by automating manual and time-consuming processes;

 Minimizing human error and increasing output quality;
 Ensured compliance with regulations and standards within the industry by
automating compliance checks and provisioning an audit trail of all processes;
 Improved accuracy and efficiency of the finance department through repetitive tasks
automatization like data entry, reconciliation, and report generation.

32
  Enhancing risk management through monitored transactions and alerts and real-time
view of potential risks;
 Elevated customer service in loan processing and other customer-facing activities,
allowing employees to provide personalized service.
 Improved data management by automating collecting and integrating data from
various sources for a more complete and accurate analysis.

What is RPA best for?

How can a robotic possess automation solution put into use and juice its full potential for
the company’s gain? Here are some real-task examples where you can apply RPA for finance.

What does the RPA for Finance & Banking development process look like?

After learning all the benefits and perks of implementing RPA for your business, you must be
eager to get started with development. So what does it take to power up your systems with
finance RPA?

33
  Discovery and identification phase. The first step is to identify which processes in
the banking and finance sector can benefit from RPA and prioritize them based o the
impact on the organization’s operations, efficiency, and customer satisfaction.
 Solution design. The next step is to gather specific requirements to design
customized RPA solutions, including defining process flow, identifying inputs and
outputs, and determining the technology requirements. At this stage, you should
validate your concept with the compliance officer to meet industry standards and
regulations. RPA tool selection. Organizations should choose RPA tools that suit their
needs based on the factors like cost, scalability, and integrations with other systems.
 RPA implementation and testing. Before final deployment, we recommend testing
the RPA tool in the real-life work cycle to ensure that it functions as expected and
provides highly satisfactory results.
 Deployment. After you validate robotic process automation works perfectly, you’re
ready to introduce it into the production environment. However, ongoing monitoring
of RPA performance is critical to identify opportunities for optimizations and validate
it delivers desired results.

4 real-life examples of companies using RPA in finance

Are you still not convinced RPA is the must-have for your organization? Take your inspiration
from success stories all over the globe. Here are four examples of companies that
completely transformed their internal financial process.

34
Introduction to AI and Machine Learning - its Use-cases

Artificial intelligence (AI) is machines’ ability to observe, think and react like human beings.
It’s grounded in the idea that human intelligence can be broken down into precise abilities,
which computers can be programmed to mimic. AI is an umbrella term that encompasses a
wide range of concepts and technologies, including machine learning (ML).

AI consists of many subfields that use techniques to mimic specific behaviors we associate
with natural human intelligence. For example, humans can speak, hear, read and write
language and glean meaning from it. The fields of speech recognition and natural language
processing mimic these abilities by converting audio signals into text and processing that
text to extract meaning from it.

Other subfields are building intelligent systems that replicate human behaviors, such as:
 Robotics: These systems replicate the human ability to move through our physical
environment
 Computer vision: Mimics our ability to see and process visual information
 Pattern recognition: Identifies and categorizes objects

AI algorithms have a variety of uses in the world today, with countless research projects
exploring new ones all the time

AI in FinTech has seen some important developments in the past few years. As a result, AI
technology is quickly changing the way the industry operates.

FinTech agents and some traditional financial industry players have gotten stronger
throughout the pandemic crisis. Many financial companies have been affected, but many
more are quickly adapting to offer financial services that are adapted for the world’s new
reality.

Some companies in the finance industry had already been strengthening their business
models with state-of-the-art and innovative HiTech solutions even before the pandemic
situation started. This process has now been accelerated. In particular, the use of Artificial
Intelligence (AI) and Machine Learning (ML) is redefining how many things are done within
the financial industry.

As more financial activities are done through apps, companies can obtain powerful insights
through new data points. This, in turn, allows new disruptive technologies to create many
opportunities for users and companies alike.

However, almost everyone thinks that AI and ML are only for big companies with tech
experts and large pools of capital. Nothing can be farther away from the truth. FinTech
companies large and small are using these technologies, paired up with powerful apps, for
all sorts of purposes.

35
In this section, we discuss some of the most important ways in which FinTech companies are
using AI and ML.

AI in FinTech: Use Cases of Artificial Intelligence and Machine Learning

Financial technology is nowhere near to replacing human intelligence, but it can surely
augment its powers. By using computer-based tools that rely on Big Data analytics, financial
firms can harness the power of tools like an Artificial Neural Network or other disruptive
tools to build powerful products and decision-making solutions to innovate in terms of
financial services. This is generating important changes both at an organizational and human
scale.

AI in FinTech has the potential to help companies achieve their growth objectives, gain a
competitive advantage, and make them more relevant to their clients. Additionally, it can
also help them reduce operational costs and make internal processes more efficient. Users
can benefit from this through better personal financial management.

These are just a few examples of the most important uses of AI and ML algorithms in
finance.

 Improved financial decision making

 Security & fraud detection
 Asset management
 Customer support
 Insurance
 Loans
 Forecasts
 Personalization

Improved Financial Decision Making

FinTech apps are developing new and interesting ways in which users can process
information. Thanks to the power of data science and visualization tools, analyzing data
through apps becomes easy, transforming it into digestible insights. As a result, users can
make use of complex information to improve their financial decision-making.

Security & Fraud Detection

As digital transformation processes take over the world, financial cybercrimes will also grow.
The silver lining to it is that thanks to AI and ML, companies and users are now able to
secure themselves and their accounts.

Cryptocurrencies and blockchain are often associated with financial cybersecurity. However,
in the near future, we will also associate AI and ML with digital security and anti-money
laundering solutions. Algorithms are capable of detecting suspicious activity, and even
better, they can notify users. These technologies can continuously monitor unusual patterns,
so there is no need to be vigilant 24/7. Users can keep track of everything that goes on
behind their backs while being confident that their assets are safe.

36
There has also been a great impact on behalf of these technologies regarding the detection
of other illegal activities like money laundering. Governments and other institutions have the
power, thanks to AI and ML, to use an army of bits and bytes to trace corruption networks.

Asset Management
Investment funds have been using complex algorithms for a while now to develop robust
forecasts and simulations. Thanks to this, the world of asset and wealth management has
been able to restructure many of its processes and offer new services like wealth
management tools. FinTech firms have taken notice of this and are implementing these
solutions into apps so that users can take advantage of them.

App users can now manage bank statements and make important transactions directly from
any of their devices. Most importantly, thanks to AI and ML solutions, users have the choice
to do so reducing the number of intermediaries. As a result, wealth management has been
able to remove unnecessary processes, helping reduce operational costs.

Customer Support
Bots are one of the most famous AI applications. Although they have been around for some
time, only recently have they started to get traction thanks to ML algorithms. We are now
seeing the rise of potent chatbots that can interact with customers to produce an immediate
response to a number of customer requests.

FinTech companies are using bots as a major channel to solve customer issues. Robo
advisors and automated customer support are some of the most common ML solutions.
Results have been impactful as chatbots allow companies to reduce costs and increase
customer satisfaction.

As physical distancing becomes the new normal, financial institutions will opt more and
more for this type of technology to solve customer issues, improving the Customer
Experience along the way. Brick and mortar offices are not expected to disappear anytime
soon, but they will most likely be relegated for specific activities.

Insurance
One of the most innovative ways in which AI and ML are being used is to reshape how
insurance policies are evaluated. Because this industry is heavily driven by financial tools,
FinTech apps are being used to determine risk levels. Companies can calculate someone’s
level of risk through their activity.

This has been used with success by the auto industry. A combination of IoT technologies and
FinTech app development has opened up for this industry the possibility to calculate a
person’s risk level by assessing their driving skills through a mobile app.

Smart contracts that use technologies like Blockchain and AI are also being used to innovate
within the insurance industry.

37
Loans
The world has seen a wave of money lending apps thanks to the possibility of using
someone’s financial habits and credit exposure to calculate their credit scoring, making the
underwriting process more efficient without the need for human intervention.

Loans through AI and ML can be done in a faster way while reducing inefficiencies.
Additionally, they tend to be more accurate than the traditional underwriting process thanks
to an improved client risk profile approach. Some experts even argue that this might help
customers by reducing biases that can occur through human decision-making.

Although this last is true, the opposite, negative biases, can also occur. Agents that use these
mechanisms need to make sure that they have everything worked out in terms of calculating
credit scoring, otherwise, they risk segregating an important pool of users from their
services.

Forecasts
Apps have the power to help users perform robust calculations on important matters like
their spending habits at a very low cost and in a personalized way. Making use of consumer
insights obtained through key data points, apps can help throughout the entire process of
analyzing data to produce powerful predictive analytics. This aids users to keep track of their
spending and calculate whether they will meet their financial goals.

Personalization
This leads us to the last item on our list. Although this might seem obvious, it is an important
way in which FinTech companies are using AI and ML together with Natural Language
Processing. The combination of these technologies, together with powerful apps, has given
companies and users the possibility to personalize finances.

One of the most successful products in this category is smart wallets, which allow users to
manage their finances in new and customized ways. What used to be a rigid industry is now
breaking outdated stereotypes to deliver a customized User Experience.

Introduction to Blockchain & Application in Cryptocurrencies, Smart Contracts

What Is Blockchain Technology?

Blockchain is a method of recording information that makes it impossible or difficult for the
system to be changed, hacked, or manipulated. A blockchain is a distributed ledger that
duplicates and distributes transactions across the network of computers participating in the
blockchain.

Blockchain technology is a structure that stores transactional records, also known as the
block, of the public in several databases, known as the “chain,” in a network connected
through peer-to-peer nodes. Typically, this storage is referred to as a ‘digital ledger.’

38
Every transaction in this ledger is authorized by the digital signature of the owner, which
authenticates the transaction and safeguards it from tampering. Hence, the information the
digital ledger contains is highly secure.

In simpler words, the digital ledger is like a Google spreadsheet shared among numerous
computers in a network, in which, the transactional records are stored based on actual
purchases. The fascinating angle is that anybody can see the data, but they can’t corrupt it.

Why is Blockchain Popular?

Suppose you are transferring money to your family or friends from your bank account. You
would log in to online banking and transfer the amount to the other person using their
account number. When the transaction is done, your bank updates the transaction records.
It seems simple enough, right? There is a potential issue which most of us neglect.

These types of transactions can be tampered with very quickly. People who are familiar with
this truth are often wary of using these types of transactions, hence the evolution of third-
party payment applications in recent years. But this vulnerability is essentially why
Blockchain technology was created.

Technologically, Blockchain is a digital ledger that is gaining a lot of attention and traction
recently. But why has it become so popular? Well, let’s dig into it to fathom the whole
concept.

Record keeping of data and transactions are a crucial part of the business. Often, this
information is handled in house or passed through a third party like brokers, bankers, or
lawyers increasing time, cost, or both on the business. Fortunately, Blockchain avoids this
long process and facilitates the faster movement of the transaction, thereby saving both
time and money.

Most people assume Blockchain and Bitcoin can be used interchangeably, but in reality,
that’s not the case. Blockchain is the technology capable of supporting various applications
related to multiple industries like finance, supply chain, manufacturing, etc., but Bitcoin is a
currency that relies on Blockchain technology to be secure.

Blockchain is an emerging technology with many advantages in an increasingly digital world:

 Highly Secure
It uses a digital signature feature to conduct fraud-free transactions making it
impossible to corrupt or change the data of an individual by the other users without
a specific digital signature.

 Decentralized System
Conventionally, you need the approval of regulatory authorities like a government or
bank for transactions; however, with Blockchain, transactions are done with the
mutual consensus of users resulting in smoother, safer, and faster transactions.

39
  Automation Capability
It is programmable and can generate systematic actions, events, and payments
automatically when the criteria of the trigger are met.

What Is Cryptocurrency?
A cryptocurrency is a digital or virtual currency secured by cryptography, which makes it
nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on
decentralized networks using blockchain technology—a distributed ledger enforced by a
disparate network of computers.

A defining feature of cryptocurrencies is that they are generally not issued by any central
authority, rendering them theoretically immune to government interference or
manipulation.

Key Takeaways
 A cryptocurrency is a form of digital asset based on a network that is distributed
across a large number of computers. This decentralized structure allows them to exist
outside the control of governments and central authorities.
 Some experts believe blockchain and related technologies will disrupt many
industries, including finance and law.
 The advantages of cryptocurrencies include cheaper and faster money transfers and
decentralized systems that do not collapse at a single point of failure.
 The disadvantages of cryptocurrencies include their price volatility, high energy
consumption for mining activities, and use in criminal activities.

Understanding Cryptocurrencies
Cryptocurrencies are digital or virtual currencies underpinned by cryptographic systems.
They enable secure online payments without the use of third-party intermediaries. "Crypto"
refers to the various encryption algorithms and cryptographic techniques that safeguard
these entries, such as elliptical curve encryption, public-private key pairs, and hashing
functions.

Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain
technology. As its name indicates, a blockchain is essentially a set of connected blocks of
information on an online ledger. Each block contains a set of transactions that have been
independently verified by each validator on a network.

Every new block generated must be verified before being confirmed, making it almost
impossible to forge transaction histories. The contents of the online ledger must be agreed
upon by a network of individual nodes, or computers that maintain the ledger.

Experts say that blockchain technology can serve multiple industries, supply chains, and
processes such as online voting and crowdfunding. Financial institutions such as JPMorgan
Chase & Co. (JPM) are using blockchain technology to lower transaction costs by
streamlining payment processing.

Types of Cryptocurrency

40
Many cryptocurrencies were created to facilitate work done on the blockchain they are built
on. For example, Ethereum's ether was designed to be used as payment for validating
transactions and opening blocks. When the blockchain transitioned to proof-of-stake in
September 2022, ether (ETH) inherited an additional duty as the blockchain's staking
mechanism.3 Ripple's XRP is designed to be used by banks to facilitate transfers between
different geographies.

Because there are so many cryptocurrencies on the market, it's important to understand the
types of cryptocurrencies. Knowing whether the coin you're looking at has a purpose can
help you decide whether it is worth investing in—a cryptocurrency with a purpose is likely to
be less risky than one that doesn't have a use.

Most of the time, when you hear about cryptocurrency types, you hear the coin's name.
However, coin names differ from coin types. Here are some of the types you'll find with
some of the names of tokens in that category:

 Utility: XRP and ETH are two examples of utility tokens. They serve specific functions
on their respective blockchains.
 Transactional: Tokens designed to be used as a payment method. Bitcoin is the most
well-known of these.
 Governance: These tokens represent voting or other rights on a blockchain, such as
Uniswap.
 Platform: These tokens support applications built to use a blockchain, such as Solana.
 Security tokens: Tokens representing ownership of an asset, such as a stock that has
been tokenized (value transferred to the blockchain). MS Token is an example of a
securitized token. If you can find one of these for sale, you can gain partial ownership
of the Millenium Sapphire.

Are Cryptocurrencies Safe Investments?

Cryptocurrencies have attracted a reputation as unstable investments due to high investor

losses due to scams, hacks, bugs, and volatility. Although the underlying cryptography and
blockchain are generally secure, the technical complexity of using and storing crypto assets
can be a significant hazard to new users.

In addition to the market risks associated with speculative assets, cryptocurrency investors
should be aware of the following risks:

 User risk: Unlike traditional finance, there is no way to reverse or cancel a

cryptocurrency transaction after it has already been sent. By some estimates, about
one-fifth of all bitcoins are now inaccessible due to lost passwords or incorrect
sending addresses.
 Regulatory risks: The regulatory status of some cryptocurrencies is still unclear, with
many governments seeking to regulate them as securities, currencies, or both. A
sudden regulatory crackdown could make it challenging to sell cryptocurrencies or
cause a market-wide price drop.

41
  Counterparty risks: Many investors and merchants rely on exchanges or other
custodians to store their cryptocurrency. Theft or loss by one of these third parties
could result in losing one's entire investment.
 Management risks: Due to the lack of coherent regulations, there are few
protections against deceptive or unethical management practices. Many investors
have lost large sums to management teams that failed to deliver a product.
 Programming risks: Many investment and lending platforms use automated smart
contracts to control the movement of user deposits. An investor using one of these
platforms assumes the risk that a bug or exploit in these programs could cause them
to lose their investment.
 Market Manipulation: Market manipulation remains a substantial problem in
cryptocurrency, with influential people, organizations, and exchanges acting
unethically.

Despite these risks, cryptocurrencies have seen a significant price leap, with the total market
capitalization rising to about $1.2 trillion.17 Despite the asset's speculative nature, some
have created substantial fortunes by taking on the risk of investing in early-stage
cryptocurrencies.

Advantages and Disadvantages of Cryptocurrency

Cryptocurrencies were introduced with the intent to revolutionize financial infrastructure. As
with every revolution, however, there are tradeoffs involved. At the current stage of
development for cryptocurrencies, there are many differences between the theoretical ideal
of a decentralized system with cryptocurrencies and its practical implementation.

Advantages
 Removes single points of failure
 Easier to transfer funds between parties
 Removes third parties
 Can be used to generate returns
 Remittances are streamlined

Disadvantages
 Transactions are pseudonymous
 Pseudonymity allows for criminal uses
 Have become highly centralized
 Expensive to participate in a network and earn
 Off-chain security issues
 Prices are very volatile

Smart Contracts
Smart contracts are simply programs stored on a blockchain that run when predetermined
conditions are met. They typically are used to automate the execution of an agreement so
that all participants can be immediately certain of the outcome, without any intermediary’s
involvement or time loss. They can also automate a workflow, triggering the next action
when conditions are met.

42
How smart contracts work
Smart contracts work by following simple “if/when…then…” statements that are written into
code on a blockchain. A network of computers executes the actions when predetermined
conditions have been met and verified. These actions could include releasing funds to the
appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The
blockchain is then updated when the transaction is completed. That means the transaction
cannot be changed, and only parties who have been granted permission can see the results.

Within a smart contract, there can be as many stipulations as needed to satisfy the
participants that the task will be completed satisfactorily. To establish the terms, participants
must determine how transactions and their data are represented on the blockchain, agree
on the “if/when...then…” rules that govern those transactions, explore all possible
exceptions, and define a framework for resolving disputes.

Then the smart contract can be programmed by a developer – although increasingly,

organizations that use blockchain for business provide templates, web interfaces, and other
online tools to simplify structuring smart contracts.

Benefits of smart contracts

43
Applications of smart contracts

 Safeguarding the efficacy of medications

Sonoco and IBM are working to reduce issues in the transport of lifesaving
medications by increasing supply chain transparency. Powered by IBM Blockchain
Transparent Supply, Pharma Portal is a blockchain-based platform that tracks
temperature-controlled pharmaceuticals through the supply chain to provide
trusted, reliable and accurate data across multiple parties.

 Increasing trust in retailer-supplier relationships

The Home Depot uses smart contracts on blockchain to quickly resolve disputes with
vendors. Through real-time communication and increased visibility into the supply
chain, they are building stronger relationships with suppliers, resulting in more time
for critical work and innovation.

 Making international trade faster and more efficient

By joining we.trade, the trade finance network convened by IBM Blockchain,
businesses are creating an ecosystem of trust for global trade. As a blockchain-based
platform, we.trade uses standardized rules and simplified trading options to reduce
friction and risk while easing the trading process and expanding trade opportunities
for participating companies and banks.

Fintech in Banking & Lending

Introduction to Banking Landscape

The Indian banking system is one of the largest and most complex in the world, with more
than 100 scheduled commercial banks and more than 96,000 branches. It has undergone a
significant evolution since the country’s independence in 1947, and today it plays a vital role
in the economic development of India. In the early days following independence, the Indian
banking system was primarily dominated by a few state-owned banks, with limited banking
services and limited reach, particularly in rural areas. However, in the decades that followed,
the Indian government, in consultation with the Reserve Bank of India (RBI), implemented a
series of economic and financial sector reforms that led to a significant expansion of the
banking system.

44
One of the most important changes in the Indian banking system was the nationalization of
14 major banks in 1969 and an additional six banks in 1980. This brought nearly 80% of the
banking system under government control and expanded banking services to many rural and
unbanked areas. Additionally, the government introduced policies that encouraged the
growth of regional rural banks and co-operative banks, further increasing the reach of the
banking system in rural areas.

In the 1990s, the Indian government liberalized the banking sector, allowing private and
foreign banks to operate in India. This led to increased competition and the entry of several
new players into the market. The introduction of technology, such as internet banking and
mobile banking, has also improved the efficiency and reach of the banking system.

Advantages:

 Wide reach: The Indian banking system has a wide reach, with branches and ATMs
spread across the country, making banking services accessible to even remote areas.

 Strong deposit base: The Indian banking system has a strong deposit base, with
individuals and businesses depositing large amounts of money in banks, providing a
stable source of funding for banks.

 Development of rural areas: Indian banks have been instrumental in the

development of rural areas, with several programs aimed at providing credit to
farmers and small businesses.

 Low-cost funds: The Indian banking system provides low-cost funds to the industry
and the government, which helps in the economic development of the country.

 Technological advancements: Indian banks have embraced technology, with several

banks offering digital banking services such as internet banking, mobile banking, and
ATMs, making banking more convenient and efficient.

Disadvantages:

 Low credit to deposit ratio: The Indian banking system has a low credit to deposit
ratio, indicating that banks lend out a smaller portion of their deposits.

 High Non-Performing Assets (NPAs): Indian banks have high levels of NPAs, which are
loans that are unlikely to be repaid. This erodes the banks’ profitability and stability.

 Limited access to formal banking services: Despite the wide reach of the banking
system, many individuals and small businesses in India still have limited access to
formal banking services.

45
  Fragmented banking system: The Indian banking system is highly fragmented, with
many small and regional banks, which can make it difficult for the system to achieve
economies of scale.

 Cybersecurity concerns: With the increasing use of technology in banking, there is a

growing concern about cybersecurity risks, such as hacking and data breaches.

Limitations:
 Lack of uniformity in banking practices and policies.
 Limited financial inclusion of certain segments of population
 Limited access to credit for certain sectors, like agriculture
 Limited access to banking services for certain regions and states

Drawbacks:
 Slow decision-making in public sector banks
 Limited efficiency in certain state-run banks
 High priority sector lending mandating certain percentage of loan portfolio to certain
sectors, leading to suboptimal allocation of credit
 Stringent lending regulations making it harder for start-ups and new business to get
access to credit.

In conclusion, the Indian banking system has undergone significant evolution over the years
and today plays a vital role in the economic development of the country. While it has several
advantages such as wide reach, strong deposit base, and technological advancements, it also
faces several challenges like low credit to deposit ratio, high NPAs, and limited access to
formal banking services. The government and the Reserve Bank of India (RBI) are taking
various measures to address these issues and further improve the Indian banking system.

Digital Banking - Retail & Corporate

The times we are in are unprecedented. With the advancement and adoption of technology
in the banking sector, the manner in which people interact and do business has significantly
changed. What then will be the future of banking and what will determine its future.

The evolving customer demand and expectations are expected to have a bigger say in the
future of banking, whether it is Mobile, Retail or Digital Banking.

The Future Of Banking: Mobile Banking

Mobile banking is one of the common methods employed by users to make payments,
deposits and monitor their spending and savings. A majority of banking users prefer the use
of mobile banking, considering its convenience and efficiency.

However, one of the biggest concerns for mobile banking users is security. The fear of data
breach increases the demand for services that can protect the data of users.

Mobile wallets are another revolution in mobile banking. Such applications emphasize
convenience, and it allows users to make purchases online without the need of a physical

46
debit or a credit card. Successful mobile banking options include money management
features that enable users to cut on spending and increase savings.

The future of Mobile Banking can be expected as pointing toward offering savings tools and
financial wellness scores. It can work among the millennials. Moreover, mobile banking apps
are expected to become much more secure than what it is today apart from being more
personal and user friendly. With innovative technology, mobile banking applications are
likely to provide a great user experience to their customers.

Mobile Banking Trends In The Future

Some of the future mobile banking trends could be as follows:

 Voice Payments
Voice-activated commands have already made waves with global consumers as voice
user interface improves customer engagement, conversions and insights.

 More effective fraud detection

As banks and financial institutions grow their revenue and expand their services, they
also run into a great security risk. However, another trend in mobile banking can
help fintech to safeguard their resources and protect their customers’ identity. The
use of big data allows banks and financial institutions to improve the risk assessment
process and also helps in streamlining customer experience while reducing the
impact of fraud.

 Use of cardless ATM withdrawals

While this mobile banking trend is not entirely new, its increasing adoption by banks
shows its swelling popularity, and it could be the future of banking. Earlier credit and
debit cards were replaced by mobile wallets for online purchases, and now it’s their
turn to step down at ATMs.

The Future Of Banking: Retail Banking

Retail banking refers to the specific services banks provide consumers like savings and
checking accounts, credit and debit cards, and loans. The growing desire of consumers to
access financial services from the digital medium has led to a surge in new banking
technologies that has caused the entire retail banking market to reconsider.

The use of technology to improve the operational efficiency of retail banks is positively
impacting the market. It can also cause an improvement in customer experience. Modern
banks are now less concerned about sales but are more about creating customer
experiences.

Retail banks are launching platforms in Banking as a service space to remain competitive.
Retail banks previously had played a massive role in finance and daily life of people with
customers visiting bank branches for banking services. Today these bank branches have
become obsolete with the coming up of digital apps and online service portals, providing a
faster and more convenient way to access their banking.

47
Retail bank design is expected to shift to meet the consumer needs by embracing both
physical needs of space designed not to sell but to connect and the rapidly changing
demands and expectations of consumers.

Retail Banking Trends In The Future

Some of the future retail banking trends could be as follows:

 Workforce preparation
Retail banks are increasingly equipping employees with digital capabilities to cope
with rapid technology disruption in the industry. This could continue in the future as
well.

 Collaboration with Fintechs

Banks are collaborating with fintechs to explore point of sale financing. Point of sale
financing is appealing to consumers who are in search of more flexibility than
traditional credit purchases allow.

 Removing friction from customer journey

We have already seen retail banks employing strategies to provide great user
experience and in the process, remove friction from the customer journey, thereby
strengthening the customer relationship. This could continue in the future.

 Use of big data, blockchain technology and AI

Banks are looking to blockchain technology to improve and streamline KYC and
identity management programs. Banks are expected to enhance the relationship by
streamlining services that involve customer interactions thanks to Artificial
Intelligence.

 Increasing commitment to innovation

In order for banks to stay relevant, they cannot take the support of outdated
technologies, but they are required to increasingly innovate with the evolving
technologies. In the future of banking, we may see banks following this pattern
where there is an intent to innovate.

The Future Of Banking: Digital Banking

Digital banking is the digitalization of banking services with a view to improve efficiency and
serve the customer better. It allows the customers to do banking transactions and access
banking services without even stepping out of their house. Digital banking is actually the
future of banking. With convenience and comfort, it offers to consumers, more and more
people are now vying for it.

Considering the impact of Covid-19 pandemic, now expect more people to shift their bases
from traditional banking to digital banking. With the Covid-19 related challenges like
lockdown and social distancing norms, many people who were earlier reluctant to use Digital

48
banking have been forced to use it, and now they are comfortable with it. It is expected that
more and more people will get on board.

How Will Technology Influence The Future Of Digital Banking?

The ways through which the future of digital banking could be impacted are as follows:

 Customized service for a tailor-made experience

The user experience is one of the essential factors in digital banking. With AI and
machine learning in Digital banking, it helps in providing customized and tailor-made
services for every consumer.

With the way new technologies are emerging, consumers may enjoy a service that is
suitable for their own banking activities.

 Fool proof banking security

The importance of security is supreme. That’s why the banking sector is a highly
regulated sector. Methods such as two-step authentication and biometrics are gonna
go a long way in the future providing a fool proof banking security. With an advanced
layer of security, more consumers will trust the digital platform with their hard-
earned money.

 Few accounting mistakes

With the human factor replaced with digitalization, the chances of error become less,
thereby increasing the productivity level. Use of machines reduces the chances of
error in calculations in banking.

 Business intelligence to enhance banking efficiency

The integration of business intelligence looks possible in digital banking. It is
expected to bring in a lot of benefits to banks. It provides accurate, unbiased and
function-specific insights based on historical, present and future banking trends. It
will further help in banks increasing their efficiency and will take their services to
another level and also generate more revenue.

Technologies that are expected to play a massive role in the future of banking include
Artificial Intelligence (AI), biometrics technology, blockchain, cloud computing, augmented
reality and quantum computing. These are poised to transform the nature of services that
banks provide and also how they are delivered and consumed.

Conclusion
As stated in the beginning, the future of banking is driven by consumers and especially
young generations who will play a massive role in determining where the banking sector is
headed. Another critical factor that cannot be ignored is the use of technology in the
banking sector which will also determine the course for mobile banking, retail banking, and
digital banking.

Corporate Banking

49
Banks have always been keen to embrace new technologies. They have to contend with
extremely high volumes, zero tolerance for errors and instantaneous processing
requirements, while at the same time pushing back against new entrants like digital-only
challenger banks.

Fin Tech start-ups and even Big Tech companies vying for a slice of the pie. All this
competition has led to banks moving rapidly to modernise their processes and innovate
when it comes to retail banking.

The story in the corporate banking and business banking space, however, is a bit different.
Banks have adopted a slower, more deliberate pace here because of a number of reasons.

For starters, corporate banking is considered more of a relationship-based service rather

than something transnational. While this is indeed true, it cannot be an excuse to skimp on
providing the best digital experience possible to customers. Especially when customers have
already built a preference for online/ mobile service delivery rather than face-to-face or
telephonic interactions.

Another reason for this delayed digitisation in corporate and business banking is the
inherent complexity of the products. However, the trend is unmistakably towards a new
paradigm in standardisation not just at a national level, but internationally as well. For
example, many countries are adjusting their local guidelines to closely match the EU
standards on digital identification which would eventually be a game changer for
international trade and trade finance products. This means more standardized corporate
banking products which require less operator intervention to deliver.

Continuing on this theme, here are 5 ways we think banks can use digital innovation to
transform corporate banking and increase profits:

 Increasing Wallet Share – A digital platform makes it easier for banks to cross-sell
related products to their clients. BigTech companies like Google, Amazon and
Facebook use customer behaviour patterns to pitch them only those products that
they are most likely to buy based on their usage history. A sufficiently advanced
digital banking platform can use data analytics to do something similar for a bank’s
client base and significantly increase product cross-sell. Cross-selling is one of the
most cost-effective ways for banks to increase their wallet share from existing clients
and will easily pay for the investments made to achieve it. By making it easier and
faster for customers to perform transactions, banks can also boost transactional
revenue.

 Enhancing Operational Efficiency – Customer servicing can be a significant cost

center for banks and manual servicing can lead to delays which can directly affect
revenue. To offset this, companies are using advanced chatbots which offer an easy-
to-use mechanism to deal with most simple queries at a minimal cost. This aids in
reducing the burden on customer servicing and improve operational efficiency as the
most basic queries can be taken care of through process automation. A more
advanced version of these customer service chatbots are virtual advisors which can

50
 offer tips and thus drive sales of related products. Finally, features like push
notifications from the app can further increase customer engagement as users are
more likely to view and trust notifications from apps that they have installed on their
own.

“A sufficiently advanced digital banking platform can use data analytics to do

something similar for a bank’s client base and significantly increase product cross-
sell.”

 Delivering Valuable Insights – Research suggests that clients want to use online/
mobile platforms for gaining insights on “market and industry trends” more than
anything else. Banks indeed have a treasure trove of data on this and packaging that
data into usable insights for their customers can really be a game changer. Rather
than relying on expensive third-party industry research reports, most clients would
prefer it if their own bank could provide them with research that is tailor made for
them. For example, a breakdown of how a regulatory change might affect an industry
or some insights into interest rate or currency exchange rate movements might be
shared with clients.

“Banks which do not adapt would have to suffice become nothing more than utility
service providers and lose the opportunity to directly engage with their own
customers!”

 Getting a head start – Customers are increasingly gaining a preference for having a
single unified platform for all their banking needs. In the European Union for
example, the PSD2 regulation allows service providers to amalgamate a customer’s
various bank accounts and offer a single window solution to view and initiate
transactions. PSD2 is essentially a regulatory shot in the arm for Open Banking and
APAC countries like Singapore, Australia and New Zealand have plans of their own in
this regard. This is something that is likely to spread to other jurisdictions as well as
Open Banking initiatives begin to gain traction.

What this essentially means is that banks which have a head start in providing
customers with an intuitive and valuable front-end digital banking experience, would
gain significantly by becoming their preferred choice for the future. Banks which do
not adapt, would have to suffice by become nothing more than utility service
providers and lose the opportunity to directly engage with their own customers.

 An Untapped Market – SMEs don’t usually have access to the same equity and debt
markets that their Fortune 500 counterparts do. In SE Asia, this has led to a situation
where 86% of the funding for SME’s comes from internal sources and only 6% is
funded by banks. In the Middle East, there is a massive $240 billion funding gap for
SMEs as well. The right digital banking platform can really help tap into this unserved
market. It gives banks a foot in the door so that they can start with less risky, non-
funded products and slowly build up the comfort to cross sell products that require a
direct exposure.

51
 Keeping the clients engaged with a versatile digital banking platform will mean that
the bank will have a top-of-the-mind recall advantage when they are ready to deepen
their relationship with the customer. From a credit risk point of view as well, having a
longer engagement history with the client would just make it easier to build trust
internally.

“No amount of relationship building can hold back the tide when some service
providers make it so easy for”

The Disruption is already here – Retail customers have been spoiled for choice when it
comes to having multiple options for buying financial products and services. And as the retail
segment gets ever more saturated, FinTech start-ups as well existing tech giants are focusing
their attention on the SME and corporate banking segment. Companies like EquityNet allow
SMEs to raise equity online, while companies like Transferwise and others allow for online FX
conversions for SMEs.

No amount of relationship building can hold back the tide when some service providers
make it so easy for customers to shift to an online platform. The trend in the retail banking
space has proven this beyond doubt. The most effective way to compete is by offering an
omni-channel service that matches or exceeds the service levels of online competitors.

Conclusion – Future Proofing

The financial services sector continues to be a rapidly changing industry. It is perhaps the
nature of the beast that the most valuable sectors of the economy are the ones that attract
the most attention and hence witness the greatest disruption. However, this disruption is
not something that is necessarily bad for the established banks. If anything, it is an
opportunity for them to use their vast treasure troves of data and their strong customer
relationship and marry those advantages with the benefits that new digital platforms bring.

Financial Inclusion powered by IndiaStack

India Stack
India Stack is a set of APIs that allows governments, businesses, startups and developers to
utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less,
paperless, and cashless service delivery.

52
It is the most ambitious societal initiative globally, aimed at putting up a public digital
infrastructure based on open APIs in order to promote public and private digital initiatives. It
has played a catalytic role in India’s digital foundation and evolution. An upsurge is evident
as a result of Aadhaar and UPI which are the most prominent components of the stack over
the years.

Open Banking / Neo Banking & Account Aggregation

Of late, the talk on neobanks has started to increase multifold. Many financial experts seem
to have conflicting opinions about these banks and their operations. While some believe
that neobanks are the next big financial revolution, others don’t seem to take them seriously
at all. One of the reasons for financial experts having such wildly differing views has to do
with the fact that neo banking as a concept is something that’s fairly very new.

In this chapter, we’re going to be looking at the concept of neobanks and how they’re
bringing about a change in the financial landscape. And while we’re at it, we’ll be touching
upon the concept of open banking as well. Okay so, without any further ado, let’s start with
the neobank meaning.

What is a neobank?
A neobank is essentially a bank that operates entirely online. What this means is that it has
no physical branches whatsoever, and all the banking operations are carried out online
through various digital channels.

Since neobanks provide their services through digital means, many tend to equate them
with digital banks. However, they’re not one and the same. Digital banks are basically online
subsidiaries of existing physical banking corporations, whereas neobanks exist purely online -
with no physical presence.

How do neobanks operate?

There are two primary types of neobanks in existence - neobanks that have a banking
licence and neobanks that don’t. In the U.K and other countries, there are special
regulations designed to provide these neobanks with restricted banking licences.

53
Neobanks with a banking licence operate just like regular banks. This means they are
allowed to accept deposits from customers too. On the other hand, the neobanks without a
banking licence are not permitted to hold customers’ deposits. And so, they partner with
traditional banks to provide banking services like deposits and withdrawals.

In India, the Reserve Bank of India’s regulations and guidelines mandate the existence of
physical branches for a banking licence. Therefore, none of the neobanks in India have a
banking licence of their own yet. So, they are not permitted to hold customers’ money. To
circumvent this issue, almost all of the major neobanks in India have partnered with
traditional banking institutions to provide regular banking services to their customers.

What are the advantages of neobanking?

Neobanking gives users many advantages, all of which make payments and transactions
much easier for them in general. Here are some benefits of neobanking.

 Hassle-free account creation

 Seamless international payments
 User-friendly interface
 Smart reporting

what is open banking ?

Now that you’re well versed with the neo banking meaning, let’s take a look at the concept
of open banking.

Open banking is a practice that essentially gives third party entities access to and control of
consumer banking data, transaction data, and other financial data. It uses APIs, or
Application Programming Interfaces, through which a third-party entity can access and
control the banking and financial data of a consumer. Having trouble understanding this
concept? Here’s an example that can help you out.

Let’s say that you have a savings bank account with ICICI Bank. Now, in order to access your
banking data, control your bank account, and effect fund transfers, you would have to either
use ICICI Bank’s mobile application or log into ICICI Bank’s netbanking webpage, right? Open
banking tends to do away with the need to use ICICI Bank’s infrastructure. In fact, with open
banking, you can use any third-party mobile application to access and control your ICICI
Bank account. Sounds neat, doesn’t it?

Wrapping up
The concepts of neo banking and open banking are relatively still in the nascent stage in
India. However, their potential is immense. With an increasing number of individuals
transitioning to digital channels for their banking needs, neo banking and open banking are
likely to gain even more traction in the near future. Simultaneously, digital payments are also
picking up pace. Head to the next chapter to learn more about payment innovations in India.

A quick recap
 A neobank is essentially a bank that operates entirely online.

54
  What this means is that it has no physical branches whatsoever, and all the banking
operations are carried out online through various digital channels.
 There are two primary types of neobanks in existence - neobanks that have a banking
licence and neobanks that don’t.
 Neobanks with a banking licence operate just like regular banks. This means they are
allowed to accept deposits from customers too. On the other hand, the neobanks
without a banking licence are not permitted to hold customers’ deposits.
 Open banking is a practice that essentially gives third party entities access to and
control of consumer banking data, transaction data, and other financial data.

Account Aggregator- India’s next digital innovation

In 2021, India unveiled the Account Aggregator (AA) network, a system for sharing financial
data that has the potential to revolutionise lending and investing by granting millions of
consumers greater access to and control over their financial records as well as increasing the
potential market for lenders and fintech firms. Account Aggregator is a type of RBI regulated
framework that helps an individual securely and digitally access and share information from
one financial institution they have an account with to any other regulated financial
institution in the AA network. It is to be noted that the data cannot be shared without the
consent of the individual. The AA system could much rather be termed as consent managers
given how they do not aggregate financial data in one platform, but instead, manage
consent of the user(s) for accessing data for financial services.

The data collection, collation and sharing of data is through open application programming
interface (API) connections.

Two terms important to understand here are, Financial Information Providers (FIP) and
Financial Information Users (FIU). FIP’s refers to any regulated financial firm that provides
banking, lending, asset management, insurance, and other financial services and products
and FIU’s refers to an organisation that has been registered and is under the supervision of
one of the financial sector regulators (including the Reserve Bank of India (RBI), Securities
Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India
(IRDAI), and Pension Fund Regulatory and Development Authority, which cover banking,
lending, financial planning and investments, insurance, and pensions) (PFRDA), etc.

Traditionally, if someone needs to apply for a personal loan, they would need to provide
documents such as bank statements, income tax returns and salary slips. However, under
the AA network, The account aggregator applications will gather data from various FIPs and
send it to FIUs using a consent-based approach. The user no longer needs to visit multiple
websites, download information required by financial service providers like lenders and
financial planners, share confidential login information, or physically provide hard copies of
documents from various entities (FIPs).

Recently, we saw India’s Account Aggregator (AA) ecosystem having 1.1 billion AA-enabled
accounts and 2.05 million users voluntarily sharing their financial data with banks and
financial institutions to avail of loans and get better and quicker deals on other financial
products. According to Sahamati (a non-profit collective of the AA framework), all major

55
public sector and private sector banks in the country have joined the AA network. SEBI
recently joined the platform as well.

With the evolution of the AA network in India, we can see the easing in domestic integration
of MSME’s in the financial systems. The role of MSME’s in India’s economy is critical.
However, with financial barriers like lags, delays, paperwork, etc, there is a lack of
accessibility in accessing financial services. Moreover, the flow of credit to MSME’s is also
critical to their growth in India.

With the coming of AAs, financial inclusion can be done by shifting from asset-backed
lending to cash-flow based lending. Account aggregation goes beyond the conventional,
assets-based approach used by credit rating agencies which rates on the basis of assets in
hand. Now, the shift is towards cash flow-based inputs such as income from multiple
sources, expenses, invoices, receipts, and tax returns. Through this, MSME’s which were
earlier not properly recognized for financial services, can now be properly facilitated for
accessing credit.

Under Budget 2023-24, the National Financial Information Registry (NFIR) was announced.
One of the aims of the registry is to make credit more easily available to those who are
currently considered undeserved by making it easier for lenders, including fintech
companies, to assess creditworthiness. This framework, once connected to the account
aggregator network, would significantly improve the state of MSME’s in India. The creation
of a registry as mentioned in the union budget would facilitate and strengthen cash flow-
based lending and increased credit flow and facilitate economic inclusion.

The account aggregator system, once evolved and recognized, has the potential to be the
next UPI for financial services in India.

Introduction to Lending Tech - Different Business Model & Key Trends

Lending Tech
Lending Tech can be broadly divided into two key subsegments – digital lending and Lending
SaaS. Both the segment use data and technologies like artificial intelligence and machine
learning for screening and advancing loans and providing aggregation services.

Digital Lending
 Retail or Consumer Lending (Direct to Consumer FinTechs)
The retail lending segment generally involves a suite of services like personal loan,
loan against salary/pay day loans, gold loans amongst others. The sector has
attracted multiple start-ups to engage, profile and underwrite new-to-credit and not-
so-creditworthy or sub-prime customers. Online-only solutions act as direct lenders
and offer various secured and unsecured loans on their own books. Along with the
standard data point for credit checks, the platforms may consider alternative data
such as education and employment history to determine credit eligibility.

 Merchant or B2B Lending (Direct to Businesses FinTechs)

56
 FinTechs generally tend to focus on fulfilling the credit needs of the underserved and
untapped segment. According to a news article, only 16 per cent of MSMEs in India
receive formal credit leaving more than 80 per cent of these companies under-
financed or financed through informal sources. This presents a huge opportunity to
formalise lending in the hands of FinTechs. Major services in this segment include
invoice discounting, SME lending, channel finance, credit scoring and collections.

Lending SaaS
 Intermediaries P2P Platforms
P2P platform aggregates lenders and borrowers, facilitates matching of lenders with
borrowers. The lenders earn an interest rate based on the profile of borrower.

 Aggregators
Aggregators list all the lenders and allows borrower to compare and find the most
suitable lender according to their requirement.

 Loan Origination Solutions

Software solutions to help lending focused organization to generate relevant and
quality leads

 Loan Management Solutions

Manage and track the loan from sourcing to closure – with business critical insights

 Collections focused solutions

Empowering lending organization to use digital solutions to ensure higher collection
rates from the borrower

57
Today the digital lending segment is focusing on needs of underserved and underfunded
businesses and individuals. Currently these customers rely majorly on unregulated sources
of financing which generally charge exorbitant rate of interest that tends to make the
underlying businesses unviable.

As per BCG estimates the total market size for FinTech lending is estimated to be US$ 1 Tn
(INR 72 Tn) by 2023.

The FinTechs in the lending segments are focusing on reduction of delinquencies in the loan
books, raising funds at lower costs, targeting/screening customer using AI and ML to
determine their credit worthiness.

Some likely trends that are and may emerge within this industry are as follows:
 Increasing Partnership between Lending FinTechs and Large Banks or NBFC
 Technology adoption fueling financial inclusion at a greater pace.
 Increase in use of data analytics with the help of AI and Machine learning will enable
the lending companies with predictive capability.
 Emergence of trusted independent platform for credit underwriting

Digital Payments

Evolution of Digital payments in India

The evolution of digital payments in India has been a transformative journey, marked by
significant milestones and innovations. Here's an overview of the key phases and
developments in the evolution of digital payments in India:

1. Pre-Internet Era (1960s-1990s):

During this period, electronic payment systems in India were limited to traditional banking
services such as checks, demand drafts, and physical cash transactions.
Credit and debit cards were introduced in the late 1980s and early 1990s, primarily for use in
ATM withdrawals and point-of-sale (PoS) transactions.
2. Online Banking and Card Usage (Late 1990s-2000s):
With the advent of the internet and the growth of online banking, customers gained the
ability to check account balances and initiate fund transfers electronically.
Credit and debit cards started being used for online purchases, albeit on a limited scale.

58
3. Mobile Banking and SMS Banking (Early 2000s):
Mobile banking services were introduced, allowing customers to perform basic banking
transactions using mobile phones.
SMS-based banking services, such as balance inquiries and transaction alerts, became
popular.
4. Introduction of Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer
(NEFT) (2000):
RTGS was launched by the Reserve Bank of India (RBI) for high-value interbank fund transfers
in real time.
NEFT was introduced for electronic funds transfer between banks in a scheduled manner.
5. Launch of the National Payments Corporation of India (NPCI) (2008):
NPCI was established to promote digital payments in India. It introduced several key
initiatives, including the Immediate Payment Service (IMPS) and the National Electronic Toll
Collection (NETC) program.
6. Rise of Digital Wallets and Mobile Payment Apps (2010s):
Digital wallet services like Paytm, Mobikwik, and FreeCharge gained popularity, allowing
users to store money digitally and make payments for a wide range of services.
Mobile payment apps, including Google Pay (formerly Tez) and PhonePe, leveraged the
Unified Payments Interface (UPI) for real-time transactions.
7. Demonetization (2016):
The Indian government's decision to demonetize high-denomination currency notes in 2016
accelerated the adoption of digital payments.
People turned to digital wallets, mobile banking, and UPI-based apps for cashless
transactions.
8. Unified Payments Interface (UPI) Revolution (2016-Present):
UPI, launched in 2016, has been a game-changer in India's digital payments landscape. It
allows users to link multiple bank accounts and make real-time payments.
UPI has seen exponential growth and is now the dominant mode of digital payments in the
country.
9. Introduction of Aadhaar-based Payments (2017):
Aadhaar-based payments, using the biometric identity system Aadhaar, further simplified
digital transactions and enhanced financial inclusion.
10. BharatQR Code (2017): - The BharatQR code was introduced to simplify merchant
payments and enable interoperability across payment networks.
11. Bharat Bill Payment System (BBPS) (2018): - BBPS was launched to enable centralized bill
payments for various services, including utility bills and subscriptions.
12. Contactless and Cardless Payments (2020s): - Contactless card payments and QR code-
based payments gained popularity, especially during the COVID-19 pandemic, as they are
hygienic and convenient.

The evolution of digital payments in India has been driven by a combination of technological
advancements, regulatory support, and changing consumer preferences. It has significantly
improved financial inclusion and made payments more accessible and efficient for people
across the country.
The digital payments revolution started in 2015-2016 when smartphones became ubiquitous
in the country. As smartphones and 4G were taking off, so were a lot of mobile-first
businesses. Serving this need while addressing the 5 C’s underpinned the vision for

59
payments in India: Coverage, Convenience, Confidence (integrity and security), Cost, and
Convergence was the need of the hour.

While India’s diverse requirements had necessitated the creation of various payment
systems – EFT, NEFT, NACH, RTGS, IMPS and more, the biggest problem was interoperability.
These systems didn’t talk to each other.

India’s payment rails needed to be united by a system that enabled all ecosystem entities to
talk to one another seamlessly.

Enter UPI (Unified Payments Interface). UPI was solely created to address this issue of
interoperability, but the brilliance of its design helped unleash a revolution in payments.
Several experts consider UPI one of the most advanced, if not the most advanced real-time
payments system in the world.

In 2016, when UPI was launched by NPCI, no one could have predicted the overwhelming
success it would become. The numbers speak for themselves.

 780 Crore transactions in December ’22, within 6 years of launch, making UPI the
fastest payment rails in the world to hit such volumes. Overall digital transactions in
Dec’22 stood at ~950 Crore.
 Multiple Payment Service Providers (PSP’s) with crores of customers, with PhonePe
alone at 44+ Crore registered users, that is one in four Indians are on the PhonePe
app
 December ’22 ended with INR 12,81,970 crores in value (and 780 Crore transactions)
being transacted on the UPI platform.

Growth of digital payments

The growth of digital payments in India has been remarkable over the past few years, driven
by various factors, including government initiatives, technological advancements, and
changing consumer preferences. Here's an overview of the growth of digital payments in
India:

1. Demonetization (2016):
 The demonetization move in November 2016, which involved the withdrawal of high-
denomination currency notes, was a significant catalyst for digital payments. It led to
an immediate surge in the use of digital wallets, UPI-based apps, and other cashless
payment methods.
2. Unified Payments Interface (UPI):
 The introduction of UPI by the National Payments Corporation of India (NPCI) in 2016
revolutionized digital payments. UPI allows users to link multiple bank accounts and
make real-time, seamless transactions using a single app. It gained widespread
adoption due to its convenience and interoperability across banks.
3. Government Initiatives:
 The Indian government launched various initiatives to promote digital payments,
such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) to increase banking

60
 penetration, the Aadhaar-based Payment System (AePS) for rural areas, and Direct
Benefit Transfer (DBT) for subsidy payments.
4. Rise of Digital Wallets and Apps:
 Companies like Paytm, PhonePe, Google Pay, and Mobikwik introduced user-friendly
digital wallet apps that allowed consumers to store money digitally and make
payments for a wide range of services, from utility bills to online shopping.
5. Increased Smartphone Penetration:
 The rapid proliferation of smartphones in India, coupled with affordable mobile data
plans, made it easier for people to access digital payment services on their mobile
devices.
6. Contactless Payments:
 The adoption of contactless payment methods, such as NFC-enabled card payments
and QR code-based transactions, gained momentum, especially during the COVID-19
pandemic, as they are hygienic and convenient.
7. Expansion of Payment Acceptance Infrastructure:
 The installation of point-of-sale (PoS) machines, QR code scanners, and digital
payment acceptance infrastructure at retail outlets, kirana stores, and small
businesses increased, making digital payments accessible even in remote areas.
8. Financial Inclusion:
 Digital payments played a crucial role in expanding financial inclusion by providing
access to banking and financial services to previously unbanked or underbanked
populations.
9. E-commerce Growth:
 The booming e-commerce sector in India drove digital payments, as consumers
preferred online payment methods for shopping, making online transactions more
secure and convenient.
10. Innovation and Fintech: - The fintech ecosystem in India has been thriving, with startups
and innovators continuously introducing new payment solutions, including peer-to-peer
lending, digital lending, and blockchain-based systems.
11. Regulatory Support: - Regulatory bodies like the Reserve Bank of India (RBI) and the
National Payments Corporation of India (NPCI) have played a proactive role in creating a
favorable environment for digital payments, issuing guidelines and standards to ensure
security and interoperability.
12. Cashback Offers and Rewards: - Digital payment providers have incentivized users with
cashback offers, discounts, and rewards, encouraging them to adopt digital payment
methods.

The growth of digital payments in India has not only improved the convenience and security
of transactions but has also significantly reduced the reliance on physical cash. It has paved
the way for greater financial inclusion, transparency, and efficiency in the country's financial
ecosystem.

Let’s deep dive to understand the Indian consumer and the changes in spending pattern as a
result of the adoption of digital payments.

Adoption of digital payments has been democratic across the country

61
India was estimated to have reached 80 Crore smartphones in 2022 with 2026 projected to
hit 1.2 billion smartphone users. What’s really interesting is how democratic the adoption
and rise of digital payments has been. If we examine the PhonePe Pulse data, geographically,
we can see digital transactions from across 19,000+ pin codes in 2022 constituting over 99%
of the country. Nearly 80% of PhonePe’s transactions come from tier 2 and 3 cities,
indicating how well and truly UPI has weaved its way into the psyche of the Indian
consumers across the country.

Just 6 years ago, India had a high propensity for using cash for high value transactions, but
UPI has succeeded in being a viable alternative and in promoting a ‘less cash’ society. UPI
has created a secure, truly interoperable, inexpensive user interface for payments, coming as
close to mimicking hard cash as any digital payment system can.

The numbers speak for themselves:

UPI transactions volume/value of 15 Lakh / 708 Crore rupees in December ’16 grew to 780
Crore / 12,82,055 Cr. rupees in December ’22 – that’s volume growth of over 5200 times and
a value growth of over 1800 times, all in a short span of 6 years.

To track the extent of the digitisation of payments, the Reserve Bank of India constructed a
composite Digital Payments Index (DPI) to capture the extent of digitisation of payments
across the country. The RBI-DPI, constructed with March 2018 as the base period, i.e. DPI
score for March 2018 was set at 100. The DPI for March 2019 and March 2020 was worked
out to 153.47 and 207.84 respectively while the index for March 2022 came in at 349.30 as
against 304.06 for September 2021. This further reinforces the trends we see with UPI
growth and what the RBI is seeing in terms of digitisation trends.

Growth in UPI merchant payments indicates the strong preference and acceptance
amongst consumers and merchants
Initially the key use case that fuelled UPI growth volumes was peer to peer (P2P)
transactions. In 2018, the share of merchant payments was just 12% and by 2021, it had
grown to 45%. Last year closed with merchants payments dominating UPI volumes with a
54% share.

This increase has been largely driven by the rapid proliferation of QR code based payments
that are now accepted by crores of merchants across India. The QR code acceptance stood
at 75% of the ~4 crore estimated business to consumer (B2C) merchants, as of 2020.

Pandemic accelerated this increasing preference for digital payments

The pandemic also further accelerated this growth in digital payments, especially for
merchant payments with consumers demanding digital payment methods in lieu of cash for
safety reasons. The increased digital payment acceptance amongst merchants further drove
customer adoption kicking off a virtuous cycle of growth. NPCI data showed a more than
50% jump in monthly transaction volumes across UPI (for payments), BBPS (Bharat Bill
Payments System), an NPCI operated system, built to make recurring bill payments
interoperable. The same trend of increasing preference for digital payment methods also
played out in other uses cases such as the FastTag electronic toll collection system.

62
In fact the BBPS system has seen the billing transaction volume grow from 3.5 Crore (for a
value of Rs 5202 Cr.) in April ’21 to 10 Crore (for a value of Rs 16,904 Cr) in December ’22 as
per the NPCI data.

The FastTag system which was started in 2016 with 30 Lakh transactions (Rs 88 Cr in value) in
December ’16 had grown to 11 Crore transactions (Rs 1841 Cr in value) in Feb’20 before the
pandemic induced lockdowns caused a drop in volumes. But it then quickly recovered since
things opened up to hit 24.2 Crore (3679 Cr in value) in Dec’21

Payments Ecosystem & Players

Digital payments FinTech have been the most funded and torch bearer of FinTech revolution
in India. Innovations like UPI, biometric payments, e-wallets are a testimony of forward
thinking of the RBI and the governments which has led to the payments revolution in India.
Factors such as cut in merchant discount rates, adoption of NFC payments which enables
transaction with a tap and UPI 2.0 with features like linking of overdraft, invoice in the inbox
and others have led to faster adoption of digital payments by merchants and users.

The payments ecosystem majorly encompasses the following :

Prepaid Payment Instruments: PPI’s are instruments of payment that facilitate buying of
goods and services, including the transfer of funds, financial service and remittances, against
the value stored within or on the instrument. PPI’s can be classified as below

 Closed System PPIs: These are PPIs issued by an entity for facilitating the purchase of
goods and services from that entity only. No cash withdrawals are permitted. These
instruments cannot be used for payment or settlement for third party services. The
issuance and operation of such instruments is not classified as a payment system and
does not require approval / authorisation from the RBI.

 Semi-closed System PPIs: These are PPIs issued by banks (approved by RBI) and non-
banks (authorised by RBI) for purchase of goods and services, including financial
services, remittance facilities, etc., for use at a group of clearly identified merchant
locations / establishments which have a specific contract with the issuer (or contract
through a payment aggregator / payment gateway) to accept the PPIs as payment
instruments. These instruments do not also permit cash withdrawal, irrespective of
whether they are issued by banks or non-banks.

 Open System PPIs: These are PPIs issued by banks (approved by RBI) for use at any
merchant for purchase of goods and services, including financial services, remittance
facilities, etc. Cash withdrawal at ATMs / Points of Sale (PoS) terminals / Business
Correspondents (BCs) is also allowed through these PPIs.

Accordingly, the FinTech landscape consists of semi-closed and open system PPIs
only.

63
Mobile and Digital wallets (Payment Aggregators): Digital Wallets are like a virtual Pre-Paid
Card where you can store value the money for usage. It also allows access to link your bank
account, Credit card or Debit Card to make transactions in an easy, effortless manner

Payment gateway: Payment gateways are a platform which allows an entity to receive
payments on their website. Some start-ups are further integrating their core payment
gateway business with a suite of cash management services and other banking services to
help their small and medium enterprise (SME) customers.

Payments Bank: Payments banks is an Indian new model of banks. These banks can accept a
restricted deposit but cannot issue loans or credit cards. Payments bank provide online and
mobile banking.
Innovative and proximity payment solutions providers: These payment platforms are
enabling payments through sound waves, scanning, tapping like NFC payments, Tap
payments on credit and debit cards, etc. This allows for contactless payments services.

Peer to Peer (P2P): Enables direct transfer of funds between two people without having to
store money in a digital wallet thereby enabling quicker transactions.

Few Start-ups in Digital payment space driving innovation

India's digital payment space has seen a surge in innovation, driven by various startups
offering a wide range of solutions. These startups have been instrumental in shaping the
digital payments landscape in India. Here are some notable startups in the Indian digital
payment space:
1. Paytm: Paytm is one of the largest and most well-known digital payment startups in
India. It offers a mobile wallet, UPI-based payments, bill payments, and a range of
financial services, including insurance and lending.
2. PhonePe: PhonePe is a popular UPI-based payment app that offers a seamless and
secure way for users to make payments, recharge mobiles, pay bills, and invest in
mutual funds.
3. Google Pay (formerly Tez): Google Pay is a UPI-based payment app by Google that
enables users to make payments, pay bills, and send money to contacts. It also
integrates with Google's ecosystem of services.

64
 4. Razorpay: Razorpay is a fintech startup that provides payment gateway solutions and
payment links to businesses. It enables online and offline businesses to accept digital
payments.
5. MobiKwik: MobiKwik is a digital wallet and payment platform that offers services
such as mobile recharges, bill payments, and digital loans. It also focuses on
providing financial services to underserved populations.
Impact of digital payment adoption on economy

The adoption of digital payments in India has had a significant impact on various aspects of
the economy and society. Here are some key impacts of digital payment adoption in India:
1. Financial Inclusion:
 Digital payments have expanded access to financial services, especially in rural and
underserved areas. People who previously had limited or no access to traditional
banking services can now use digital payments to save, transact, and access credit.
2. Reduction in Cash Usage:
 Digital payment adoption has contributed to a decrease in the use of physical cash
for transactions. This has led to increased transparency in financial transactions,
reduced the risk of counterfeiting, and decreased the cost of cash management for
businesses and the government.
3. Improved Security and Transparency:
 Digital payments offer enhanced security features compared to cash transactions.
They also provide a digital trail of transactions, which can be useful for auditing,
fraud prevention, and dispute resolution.
4. Convenience and Efficiency:
 Digital payments have made it more convenient for consumers to make transactions,
pay bills, and conduct online shopping. For businesses, digital payments streamline
payment processes, reduce administrative costs, and enable quicker reconciliation.
5. Economic Growth:
 The adoption of digital payments has the potential to boost economic growth by
reducing friction in financial transactions, promoting e-commerce, and enabling
smoother business operations.
6. Financial Literacy:
 As more people engage with digital payment platforms, they often gain a better
understanding of financial concepts, budgeting, and financial planning, contributing
to financial literacy.
7. Job Creation:
 The growth of the digital payments industry has created job opportunities in areas
such as fintech, mobile app development, customer support, and digital marketing.
8. Government Initiatives:
 Digital payments have facilitated government initiatives, such as Direct Benefit
Transfer (DBT), where subsidies and benefits are directly deposited into beneficiaries'
bank accounts. This has reduced leakages and ensured that funds reach intended
recipients more efficiently.
9. Small and Micro Businesses:
 Small businesses, including street vendors and local shops, have benefited from
digital payment adoption by expanding their customer base, reducing cash handling
costs, and improving record-keeping.

65
10. Financial Services Innovation: - The adoption of digital payments has spurred innovation
in financial services, including digital lending, robo-advisory services, and investment
platforms, making a wider array of financial products and services accessible to consumers.
11. Contactless and Hygienic Payments: - During the COVID-19 pandemic, contactless and
digital payment methods gained popularity due to their hygienic nature, reducing the risk of
virus transmission associated with handling physical cash.
12. Reduction in Black Money and Tax Evasion: - Digital transactions leave a digital trail,
making it more difficult for individuals and businesses to engage in tax evasion and
unaccounted cash transactions, thereby contributing to better tax compliance.
13. Environmental Impact: - The shift to digital payments can reduce the environmental
impact associated with the production, transportation, and disposal of paper currency.
14. Rural and Agricultural Development: - Digital payments have enabled farmers to receive
payments for their produce directly into their bank accounts, promoting financial inclusion
and rural development.
15. Cross-Border Transactions: - Digital payment platforms have made cross-border
transactions more accessible and cost-effective, benefiting businesses engaged in
international trade.

While the impact of digital payment adoption in India has been largely positive, challenges
such as digital literacy, cybersecurity, and ensuring equitable access to digital financial
services for all segments of society remain important considerations for policymakers and
stakeholders in the ecosystem.

Key Takeaways
The Digital payment FinTechs have been the flag bearer in the Indian FinTech space despite
India being a cash preferring society. The following are the key emerging trends:
• Majority of payment apps are now eyeing to become more than just a payment app
and offering varied services apart from the regular payments platform. The classic
example being PayTM. PayTM not only offers traditional payment and wallet services
but also increases customer interaction by providing PayTM mall, PayTM games,
enabling purchase of mutual fund units and has a complete spectrum of services and
goods under its umbrella. PayTM is moving towards becoming a Super App.
• A major push in digital payments is caused due to proactive government measures.
While Demonetization is a thing of the past, the government is focusing on
systematic reduction of cash payments. The government has introduced Radio
Frequency Identification (RFID) based Fastag system which enables toll payments
directly from the prepaid or savings account linked to it or directly toll owner.

Introduction to Global Payment Ecosystem & Cross Border digital payments

The arrival of game-changing payment methods like UPI, the domestic fintech space has
undergone transformation over the past few years. It has resulted in a massive jump in the
number of cashless transactions as it enables real-time payments without knowing the
payee’s account information. We now believe that there is an imminent need for a “UPI” in
cross-border payment space as well. Cross-border payments are those payments where the

66
payer and the payee are located in 2 different countries. This transaction may or may not
involve converting one currency to another.

According to RBI’s data, India receives the highest amount of inbound cross-border
remittances in the world. It accounts for almost 15% of the global share in inbound cross-
border transactions in 2019. Some of the major factors that have caused this spur in cross
border transactions include
1. Globalization of Value Chains
2. Growth in Smartphone users
3. Boom in the global eCommerce business
4. Increase in international travel for education, business, and pleasure

Unlike domestic payment methods which have a well-designed clearing system and
networks, like the RTGS, NEFT, and IMPS, there is no single payment rail that enables cross-
border clearing and settlement. As a result, usually, there are 2 legs to every cross border
transaction, Money Transfer and currency conversion

The different types of cross border transactions that can occur include
 Consumer to consumer cross border transactions – P2P transfers
 Consumer to Corporate: Ecommerce, Subscription, Collection
 Corporate to Consumer: Insurance, Payroll, refunds, dividends
 Corporate to Corporate: Supplier/ trade payments

Today, the Cross Border payments space is undergoing a fundamental change, both in terms
of the technology involved and the regulations governing it. This may be one of the reasons
for the RBI to choose “Cross-border Payments” as the theme for its second cohort of
startups in its Regulatory Sandbox.

Methods of Cross-Border Transfer

There are several methods to do cross-border payments. As there is no single payment
infrastructure that payment institutions use for cross-border remittances, banks often rely
on correspondent banks to act as an intermediary for inter-country transactions. They also
use financial messaging systems like Swift and Ripple to enable better visibility in cross-
border payments.

67
Disadvantage of Traditional Cross Border Transactions
 Time: Due to the different time-zones and banking hours in different countries,
traditional cross border transactions are not real-time and can often take 4-8
Business days
 Manual Processes: Some of the processes associated with cross-border transactions,
traditionally occur manually. Any delay in these processes could affect the timeline of
the entire transaction.
 Lack of Visibility: The number of fees being charged by the different players involved
in the transaction may not be visible to the Payer.
 Uncertainty in Currency Conversion: Due to the time taken for transactions and the
different players involved, it is impossible for the payer to know at which point the
conversion of currency is taking place, and the conversion rate applied.

The P2P cross-border remittance space is highly regulated by the central banks in each
country. This is to ensure that in case of any mishap, the payers’ funds are not put at risk.
The regulations ensure that proper precautions are taken against Money laundering and
Terrorism funding according to the FATF (Financial Action Task Force) guidelines. Cross-
border payments also have certain transaction limits imposed upon them in each country, as
unrestricted money flow across the border can have a huge impact on the economic stability
of a country.

In India, the guidelines put in place to regulate cross-border payments include The Foreign
Exchange Management Act, Prevention of Money Laundering Agreement, Rupee Drawing
Arrangement, the granting of AD-I and AD-II licenses to certain banks, and financial
institutions, etc.

The Role of Fintechs in Cross Border Remittances

The Arrival of Fintechs has been a major game-changer in the area of international
transactions. They have made inter-country transactions, 100% Digital, compliant to
regulations, fast, cost-effective, and transparent. This has been possible only through the

68
help of cutting-edge technology like Swift GPI, the availability of the right APIs, and
innovative business models.

In order to enable real-time international transactions, Fintechs usually create Nostro

accounts in the Payee’s resident country. This account is often pre-funded with foreign
currency. Once a transaction initiates – by the payer from his home country, a message is
passes on to the fintech with the payee details and transaction amount visa financial
messaging systems like SWIFT. The Fintech then moves the equivalent amount in foreign
currency to the payee’s account from its Nostro account. This mechanism enables real-time
cross-border transactions to take place.

In order for fintech to enable transactions between 2 countries, they must possess the
respective cross-border licenses of both countries. They must also ensure that they follow
the proper KYC, AML, and CFT guidelines of the countries.

A few Examples of Fintechs that have taken over the Cross Border Remittance Space
1. Ripple: uses blockchain to process and secure their RippleNet payment network.
With RippleNet, customers have access to a network of more than 200 banks
(including American Express, BMO, and PNC), and they can make cross-border
payments instantaneously. The company’s blockchain helps to encrypt each payment
and allows for each money transfer to be easily traceable.
2. TRULIOO: is a Regtech company that provides global identity verification mechanisms
which enable companies to do KYC in cross-border transactions. Trulioo enables
AML/KYC identity verification requirements by providing secure access to over 5
billion identities worldwide.
3. Flywire: Flywire helps craft personalized fintech payment platforms for a variety of
international industries, including travel, education, and healthcare. It can sometimes
be difficult to keep track of payments, especially when dealing with international
entities and different currencies. Flywire’s global collection network fully reconciles
global payments, and allows refunding, while keeping all involved parties up-to-date
in real-time.
4. Remitly: Remitly is a fintech company that aims to simplify international money
transfers and payments. Through its thousands of global bank and cash-pickup

69
 partners, recipients can have money sent directly to a bank account or collect it in
cash.
5. NIUM: NIUM is a global payments platform enabling customers and businesses to
perform cross-border transactions. The platform offers a wide range of payments
services grouped into three categories: Send, Spend and Receive.

It currently operates in over 90 countries, 65 in real-time, and in 63 currencies.

Formerly known as InstaReM, the company rebranded into Nium in October 2019

Conclusion
As innovative fintechs enter the space of international payments, the boundaries between
countries are becoming more and more blurred. The advent of new technology will ensure
that the transactions in this space become cheaper, faster, safer, and more transparent.
With catalysts like the rise of global eCommerce, driving this transformation, the arrival of
the “UPI” of cross-border payments does not seem to be too far from reality.

WealthTech

Evolution of Wealth Tech Space in India

The evolution of the wealth tech (wealthech) space in India has been driven by a
combination of factors, including technological advancements, regulatory changes, changing
consumer preferences, and the growth of the digital economy. Here's an overview of the key
stages in the evolution of wealthech in India:
1. Early Adoption of Online Trading (1990s-2000s):
The Indian stock market saw the early adoption of online trading platforms, allowing
investors to buy and sell stocks electronically. Companies like ICICI Direct and HDFC
Securities played a pioneering role in this phase.
2. Rise of Robo-Advisors (2010s):
The 2010s witnessed the emergence of robo-advisory platforms in India. These digital
platforms offered automated investment advisory services based on algorithms and data
analysis. Scripbox and Zerodha Coin were among the early players.
3. Growth of Mutual Fund Platforms (2010s-Present):
Online mutual fund investment platforms like Groww, Paytm Money, and ETMONEY gained
popularity, simplifying the process of investing in mutual funds and offering users a wide
range of fund options.
4. Regulatory Changes (2010s-Present):
Regulatory changes by the Securities and Exchange Board of India (SEBI) facilitated the
growth of online investment platforms by streamlining the onboarding process, ensuring
transparency, and promoting investor protection.
5. Wealth Management for High Net Worth Individuals (HNIs):

70
Traditional wealth management firms and banks expanded their digital offerings to cater to
high net worth individuals (HNIs) and ultra-high net worth individuals (UHNIs) through
digital platforms.
6. Expansion of Digital Banking Services (2010s-Present):
Digital banks like NiYO and RazorpayX began offering banking and wealth management
services, including salary accounts and expense management, to businesses and individuals.
7. Entry of Large Players (2020s):
Large financial conglomerates, including banks and insurance companies, entered the
wealthech space by launching their digital wealth management platforms, expanding the
reach of these services.
8. Integration of Investment and Financial Planning:
Many wealthech platforms evolved to offer not only investment services but also financial
planning tools, allowing users to set financial goals and receive personalized advice.
9. Robust Data Analytics and AI:
The integration of data analytics and artificial intelligence (AI) has enhanced the ability of
wealthech platforms to provide personalized investment advice, automate portfolio
management, and optimize investment strategies.
10. Expansion of Offerings: - Wealthech platforms in India have expanded their product
offerings beyond equities and mutual funds to include other asset classes such as fixed
income, real estate, and alternative investments.
11. Financial Education and Content: - Many wealthech platforms provide educational
content, webinars, and tools to improve financial literacy among users.
12. Regulatory Framework for Robo-Advisors (2020s): - SEBI introduced a regulatory
framework for robo-advisory services in India, ensuring compliance, transparency, and
investor protection.
13. Growing Investment from VCs and PE Firms: - Indian wealthech startups have attracted
significant investment from venture capital (VC) and private equity (PE) firms, indicating
confidence in the sector's growth potential.

The wealthech space in India continues to evolve rapidly, driven by innovation, increasing
digital adoption, and the desire for more accessible and efficient wealth management
solutions. As technology continues to advance and financial markets become more
sophisticated, we can expect further growth and diversification in the Indian wealthech
ecosystem.

WealthTech landscape - ecosystem & key growth drivers

India’s Fintech ecosystem and the underlying opportunities have earned global recognition
over the last five years. India’s Fintech accolades – from being the highest
global Fintech adoption rate, boasting amongst the highest number of startups in the
segment to the funding and investments the sector has received over the last several years –
has cemented its position as a global Fintech superpower.

While the subsegments of digital payments and digital lending have often earned the status
as the foundation of India’s Fintech emergence, another critical subsegment is on the cusp
of achieving almost ‘parabolic’ growth and with it, significant opportunities.

71
The Indian Wealthtech market is poised to grow to over $60 bn by FY25, from its current
market size of $20 bn. Wealthtech, or simply Wealth Technology, is defined as the
implementation of high-end technologies (such as artificial intelligence, machine learning,
big data, and advanced analytics) to provide more efficient and effective solutions and tools
for investments, to wealth-managers and consumers.

Some of the Wealthtech solutions that have emerged globally, and are starting to be more
ubiquitous in the Indian market include:
 Robo-Advisors: Digital platforms and interfaces that provide financial advice and
investment management solutions to consumers with limited human involvement.
The platforms use advanced software and algorithms based on the customers’
choices and variables (such as risk appetite, investment horizon, expected return,
objectives, etc)
 Digital Brokerage: Online platforms and software that provides consumers access to
the stock market and investment vehicles, along with comprehensive investment-
related information.
 Portfolio Management Tools: Digital platforms that enable consumers to unify their
investments and liabilities onto a single platform, for better analysis, convenience,
and management.
 B2B Software Services: Business solutions leveraging advanced technologies to
customize and create disruptive software and applications for wealth management
firms.

The aforementioned are just a few of the various segments and solutions that are at the
forefront of this emerging category. While the solutions and services have, in principle, been
created and tailor-made for Indian adoption, the opportunities are just now being realized.
An estimated 2% of Indians actively invest, as opposed to developed markets such as
the US where over 50% of the households hold investments.

While the lack of awareness has typically been an impediment to this industry, there now
exist various growth drivers and behavioural shifts that are poised to push 3X projected
market growth for this segment:

 High Awareness and Financial Literacy: Given India’s young demographic and rising
education levels, combined with the proliferation and access to high-quality financial
information, there has been a surge in the number of young investors buying
financial products and solutions, a category historically seen as ‘daunting’ and
‘aspirational’ due to the pre-existing (and incorrect) perspective of this segment as
being ‘risky’ and ‘capital-intensive’. The higher degree of financial literacy has
therefore enabled new investors to understand the associated risks, theories, and
solutions for all budgets and objectives.

 Higher Disposable Income: The story of India’s increasing wealth has been well
documented for decades now. Rising levels of urbanization, skilling, education, and
opportunities have made Indians ‘better off' now than we were twenty years
ago. India boasts one of the highest growth rates of disposable incomes in the world
at over 30% from FY15-FY19. Furthermore, Tier-2 markets and regions in India have

72
 seen even higher growth rates in income, education and technology penetration and
have created a valuable and underpenetrated target market for these solutions, as
things stand. Increasing levels of wealth coupled with higher degrees of financial
literacy and awareness have enabled more Indians to enter the market and invest in
solutions and products across various time and capital-related horizons.

 Better and Efficient Technologies: Motive without method usually results in inaction.
A key driver to the adoption of Wealthtech solutions has been the sophisticated,
seamless, and high-end technology solutions and products offered by various
domestic and international organizations. These platforms have not only focused and
invested in the underlying technologies of sophisticated algorithms and real-time
analysis of big data but have invested significantly in the user interface (UI) and user
experience design (UX) aspects as well. This factor is (and will continue to be) critical
in the widespread adoption, and retention of newer users. It is no surprise then that
one of India’s leading Wealthtech companies – Zerodha Broking Ltd. – is not just
amongst the top 20 websites visited by Indians daily, but has the highest ‘daily time
on site’ at more than 25 minutes amongst all of India’s top 50 websites.

 Millennialism, Media, and Mania: A key pillar for influence in India has always been
films and television. Indians are amongst the highest consumers of movies,
television, digital content, and media in the world. So vital are these sources to the
fabric of Indian society that national healthcare campaigns, missions, and awareness
drives (such as tobacco-awareness, Polio-drives, and Covid-19 awareness) have been
built for dissemination via these sources, and in turn, achieved widespread success.
In the last few years, the content revolving around investments, trade, and finance
has done immensely well, thereby ushering in a movement in consumer behavior.
India’s homegrown OTT show – ‘Scam 1992’ was amongst the highest-rated TV shows
of the last decade, so much so that a movie – ‘Big Bull’ is also due to launch in 2021,
to tap into the frenzy. Additionally, global stories pertaining to ‘GameStop’, ‘AMC
Entertainment’, and the cryptocurrency boom over the last few years has driven
several millions of consumers, led by a large millennial base, towards financial
literacy, investments, trading, and in turn, wealth management.

 COVID-19 Pandemic: While the pandemic brought with it significant economic and
business hardships and the inability to survive, it presented several sectoral
opportunities for businesses to reconfigure and even thrive. Various digital-led
sectors such as gaming, enterprise communication, and tele-health have fared
strongly during the pandemic, Wealthtech in India did also see a strong upsurge after
the first initial few months. After a significant decline in India’s stock market due to
the onset of the pandemic, India’s strong growth prospects, Government reforms,
record investments and fund inflows and strong fundamentals, created strong
headwinds towards not just recovery, but a stock-market boom, a boom that
investors (both retail and institutional) were keen to tap into. New retail investors
leveraged various digital platforms such as Zerodha (Kite), Upstox, Sharekhan, ICICI
Direct, Groww, Scripbox and Kuvera etc. during the pandemic, most seeing double
digital growth in user-base from March to October. Additionally, given the ‘new
normal’ of working from home and higher screen times, not just did the user-base

73
 grow but so did the average ticket sizes, of investments per user. While we are on the
tail-end of the pandemic, consumers continue not just to utilize wealthtech solutions,
but often refer family and friends to these. This shift in behavior has been a critical
cog, and launchpad, towards mass adoption of these solutions.

 Regulatory Support - SEBI has undertaken various initiatives to ensure that

Wealthtech as a sector in India flourishes under regulatory watch. These initiatives
include:
o Regulatory Sandbox for WealthTech firms to experiment on pilot basis
o Allowing e-commerce entities to sell Mutual funds from their platforms
o Permitting investments into Mutual Funds through payment FinTechs, albeit
with a cap on the investment amount

These steps, coupled with various other initiatives undertaken by the Government, is
aimed at ensuring ease of doing business by the Wealthtech firms within the
regulatory framework, while trying to reach to the vastly penetrated Indian Wealth
Management Market.

Different Business Model in Wealth Tech India

The wealth tech (wealthech) space in India encompasses various business models designed
to cater to different segments of investors and financial goals. Here are some of the
prominent business models in the Indian wealth tech space:
1. Robo-Advisory Platforms:
o Robo-advisors use algorithms and data analysis to provide automated
investment advice and portfolio management. They typically offer a
diversified portfolio of mutual funds and ETFs tailored to users' risk tolerance
and financial goals.
Examples: Scripbox, Kuvera, Groww.

2. Mutual Fund Investment Platforms:

o These platforms allow users to invest in mutual funds online. They provide
access to a wide range of mutual funds and facilitate the purchase and
redemption of fund units.
Examples: Paytm Money, ETMONEY, CAMSOnline.

3. Direct Stock and Equity Trading Platforms:

o These platforms enable users to buy and sell stocks, derivatives, and other
equity-related instruments directly through online trading accounts.
Examples: Zerodha, Upstox, ICICI Direct.

4. Digital Wealth Management for HNIs and UHNIs:

o Some wealth tech platforms cater to high net worth individuals (HNIs) and
ultra-high net worth individuals (UHNIs) by offering personalized wealth
management services, including customized portfolios and access to
alternative investments.
Examples: IIFL Wealth, Edelweiss Wealth Management, Motilal Oswal Private Wealth.

74
 5. Digital Banking and Neo-Banks:
o Digital banks and neo-banks provide a range of financial services, including
savings accounts, investment opportunities, and expense tracking tools, often
targeting both individuals and small businesses.
Examples: NiYO, RazorpayX.

6. Robo-Investment Tools:
o These platforms offer tools and calculators that help users plan and optimize
their investments. They provide insights into asset allocation, risk assessment,
and goal-based investing.
Examples: ValueResearch Online, ET Wealth's WealthCompanion.

7. Financial Planning and Advisory Services:

o Some wealthech platforms focus on providing comprehensive financial
planning services, including retirement planning, tax optimization, and estate
planning, often involving certified financial planners.
Examples: Planify, Tavaga.

8. Real Estate Investment Platforms:

o These platforms enable users to invest in real estate properties or real estate-
backed investment products, making real estate investments accessible to a
wider audience.
Examples: PropTiger, Square Yards.

9. Alternative Investment Platforms:

o Alternative investment platforms offer access to assets like private equity,
venture capital, and hedge funds. They allow users to diversify their portfolios
beyond traditional assets.
Examples: KredX, i2ifunding (for P2P lending).

10. Fractional Ownership Platforms:

o Fractional ownership platforms enable users to invest in high-value assets,
such as art, luxury cars, or real estate, by purchasing fractional shares.
Examples: Stockal, Upstox's COIN (for ETFs).

11. Wealth Education and Content Platforms:

o Some platforms focus on providing educational content, webinars, and tools
to enhance users' financial literacy and investment knowledge.
Examples: ET Money, Moneycontrol.

12. Hybrid Models:

o Some wealth tech companies combine multiple models, offering a mix of
robo-advisory services, mutual fund investments, and financial planning tools.
Examples: Goalwise, Finbox.

75
These diverse business models in the Indian wealth tech space cater to a wide range of
investor preferences, risk profiles, and financial goals. They leverage technology to provide
accessible, affordable, and efficient wealth management solutions to users across the
country.

Key Players

Key Challenges in Wealth Tech Space in India

While the wealth tech (wealthech) space in India holds significant potential for growth and
innovation, it also faces several challenges. These challenges are inherent to the financial
services industry and the specific dynamics of the Indian market. Here are some of the key
challenges for the wealth tech space in India:

1. Regulatory Compliance: Ensuring compliance with the complex regulatory

environment in India is a significant challenge. Fintech companies must navigate
through various regulations imposed by entities like the Reserve Bank of India (RBI),
Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and
Development Authority of India (IRDAI).
2. Lack of Trust: Many Indian investors still prefer traditional financial institutions like
banks and established wealth management firms due to trust issues with newer
fintech players. Building trust and credibility can be a hurdle for wealth tech startups.
3. Financial Literacy: A significant portion of the Indian population lacks financial
literacy and understanding of investment products. Educating users and helping
them make informed investment decisions is a challenge.
4. Data Privacy and Security: With the increasing use of technology in wealth tech, data
privacy and security become paramount. Protecting sensitive financial information
from cyber threats and ensuring compliance with data protection laws is essential.
5. Customer Acquisition Costs: Acquiring new customers in the competitive Indian
market can be expensive. Customer acquisition costs can put pressure on the
profitability of wealth tech startups, especially in the early stages.
6. Sustainable Business Models: Many wealth tech startups in India operate on thin
margins, and it can be challenging to establish sustainable revenue models. Achieving
profitability while offering low-cost or free services to users is a long-term challenge.

76
 7. Market Fragmentation: The Indian market is highly fragmented with diverse investor
needs, languages, and cultural nuances. Tailoring wealth management solutions for
various segments can be challenging.
8. Distribution Challenges: Distributing investment products and financial advice to
users across the country, including rural areas, can be challenging due to
infrastructure limitations and the digital divide.
9. Competition from Traditional Players: Established banks and financial institutions
are entering the wealthech space, creating competition for fintech startups. These
institutions often have greater resources and customer bases.
10. Market Volatility: Indian financial markets can be highly volatile, impacting the
performance of investment portfolios. Managing user expectations during market
fluctuations can be challenging.
11. Lack of Customization: Offering personalized investment advice and solutions that
suit the unique financial goals and risk profiles of users is an ongoing challenge for
wealth tech platforms.
12. Sustainability and ESG Investing: As environmental, social, and governance (ESG)
investing gains prominence, wealth tech platforms need to adapt and incorporate
ESG factors into their offerings to meet changing investor preferences.
13. Compliance with Changing Regulations: Fintech companies must stay updated with
evolving regulations and adapt their business models to remain compliant, which can
be resource-intensive.

Despite these challenges, the wealth tech space in India continues to grow and evolve,
driven by the vast untapped market and the increasing adoption of digital financial services.
Success in this space often requires a combination of innovation, regulatory compliance,
customer education, and a deep understanding of user needs and market dynamics.

Key Takeaways
The growth in WealthTech Industry in India is likely to be propelled by the following factors :
Increasing personal wealth and incomes
 Increased participation from retail investors
 High adoption rate of mobile & online channels
 Increased availability of financial information

As per recent reports, the Indian WealthTech market is expected to grow to about US$ 63 Bn
by 2025 from currently US$ 20 Bn.

Wealthtech is not only enabling digital and hassle-free onboarding but it is also providing
increased visual insights, providing informative analysis and a transparent operating system
which is leading to quicker adoption of this technology.

These points have touched upon some of the contributing elements towards the Indian
wealthtech opportunity. The underlying infrastructure and ecosystem have also witnessed
immense growth already, due to the funding the segment in the last few years.

77
InsurTech

Evolution of Insurtech in India

The evolution of insurance technology (insurtech) in India has been an exciting journey,
marked by several key developments and trends. Here's a brief overview of the evolution of
insurtech in India:
1. Early Adoption of Online Channels (2000s):
o In the early 2000s, insurance companies in India began offering online
channels for purchasing insurance policies.
o The availability of insurance products on websites and the ability to calculate
premiums online marked the initial phase of insurtech in the country.
2. Regulatory Changes (2000s):
o The Insurance Regulatory and Development Authority of India (IRDAI) played
a significant role in promoting technology adoption in the insurance sector.
o Regulatory changes, such as allowing the sale of insurance policies through
digital channels, facilitated the growth of insurtech startups.
3. Emergence of Insurtech Startups (2010s):
o The 2010s witnessed the emergence of several insurtech startups in India.
o These startups aimed to leverage technology to simplify insurance processes,
enhance customer experiences, and provide more personalized coverage
options.
o Companies like PolicyBazaar and Coverfox gained prominence during this
period, offering insurance comparison platforms.
4. Digital Payment Integration:
o The integration of digital payment platforms and mobile wallets facilitated
easy premium payments and claim settlements.
o This made it more convenient for policyholders to manage their insurance
policies.
5. Telematics and IoT:
o The use of telematics and Internet of Things (IoT) devices in the insurance
sector allowed insurers to collect data on policyholders' behavior and risk
profiles.
o This data was used to offer usage-based insurance policies, particularly in the
motor insurance segment.
6. AI and Data Analytics:
o Insurance companies started utilizing artificial intelligence (AI) and data
analytics to assess risk, underwrite policies, and detect fraud.
o Chatbots and virtual assistants were introduced to improve customer service
and streamline claims processing.
7. Blockchain Adoption:
78
 o Some insurers explored blockchain technology to enhance transparency and
security in the insurance industry.
o Blockchain was used for activities like policy issuance, claims processing, and
fraud prevention.
8. Regulatory Sandboxes:
o IRDAI introduced regulatory sandboxes to encourage innovation in the
insurance sector.
o This allowed insurtech startups to test new products and services in a
controlled environment.
9. Expansion of Product Offerings:
o Insurtech companies expanded their product offerings beyond traditional life
and health insurance to include niche products like travel insurance, pet
insurance, and cyber insurance.
10. Collaboration with Traditional Insurers:
o Many insurtech startups collaborated with established insurance companies
to combine technology-driven solutions with the industry's experience and
customer base.
11. Digitalization Post-COVID-19:
o The COVID-19 pandemic accelerated the digital transformation of the
insurance sector in India.
o Online sales, remote underwriting, and contactless claim processing became
more common.
12. Focus on Customer-Centric Solutions:
o Insurtech companies continue to focus on improving customer experiences by
offering user-friendly interfaces, instant policy issuance, and simplified claims
processes.
The insurtech landscape in India is dynamic and continues to evolve as technology
advancements, regulatory changes, and customer preferences shape the industry. Insurers
and insurtech startups are likely to invest in advanced technologies like artificial intelligence,
blockchain, and big data analytics to offer innovative products and services in the future.

Insurtech landscape - ecosystem & key growth drivers

InsurTech landscape is quite nascent in India at this stage. The current insurance penetration
is quite low, i.e. 2.76% in life insurance and 0.93% in non-life insurance compared to the
global average of 6.5%.

Economic Survey 2022-2023 observes that India is poised to emerge as one of the fastest-
growing insurance markets in the coming decade. The insurance industry has seen massive
drives over the last few years, with insurance penetration increasing from 2.7% in 2000 to
4.2% in 2020-21 in the country. However, the proportion of the uninsured and underserved
continues to be significant. The underserved population includes people living in rural areas,
Tier 3/4 cities, low income households and those working in the informal sector. This
population often faces financial instability and are at a risk of being pushed further into
poverty due to unforeseen events like illness, accidents or natural disasters.

79
Factors like rising awareness about the need for insurance, enhanced governmental support
through launch of new programs, opening up of regulations have helped create inroads into
the under-served segment. The government has launched several initiatives to promote
insurance awareness and incentivize people to purchase insurance products. For example,
the Ayushman Bharat Yojana that provides for family coverage in the poor and vulnerable
segment or Pradhan Mantri Jeevan Jyoti Bima Yojana, a government-backed life insurance
scheme, offering life insurance cover at a nominal premium of appx Rs. 1 per day. However,
more needs to be done to accelerate this process, and technology led models could be the
game changer.

The under-served segment faces challenges at multiple levels:

 Availability of suitable products that help them cover their specific financial risks
while at the same time being affordable
 Easy access to the products and a trusted partner to take them through the process
of explaining the product to actual usage and claim settlement

Technology has had a transformative impact on the insurance industry. Insurtech is being
seen as a way to bridge the gap by leveraging technology to offer affordable and accessible
insurance products to low income customers, customer in remote areas. The industry has
been able to disrupt by means of reducing costs, increasing efficiency and providing better
service models to customers through technological advancements.

The problem of access: In the past, the only means of reaching the end customer in this
segment was through a physical presence, however, with greater availability of mobile
phones including smart phones, internet and other digital platforms, touch points have
increased. This has also helped reduce customer acquisition costs to a certain extent. Digital
issuance has been increasing and with IRDAI allowing issuance through Digilocker, the
process has received a major boost. Additionally, initiatives like the Ayushman Bharat Digital
Mission (ABDM) (that is creating the necessary digital health infrastructure) reinforce the
government’s focus on digital.

The problem of suitable products: With increasing digital behaviour and history, companies
are able to use data analytics and AI for risk assessment and product pricing thus enabling
newer product development for this market. Technology has enabled insurance companies
and insurance distributors to reach out to a wider population and offer customized
insurance products and services that cater to the specific needs of the underserved
population.
In addition, digital platforms are enabling insurance providers to offer more flexible
insurance products such as pay-as-you-go or on demand insurance. These products allow
customers to purchase insurance coverage when they need it, providing more affordable
and accessible insurance for the new to insurance target population.

The problem of a viable distribution model: Financial Institutions have the willingness and
the appetite to design products for this segment. However, the dearth of suitable and
commercially viable distribution models was one of the factors for under penetration of
formal financial services, especially insurance and savings in this segment. Evolution of
newer digital marketplace or embedded insurance distribution models are increasing access

80
points for the end customers. Marketplace offers a plethora of choices of suitable multiple
products from different insurance companies to choose from while embedded insurance
models help provide access to insurance by bundling it with another product or service. Eg.
Rural based institutions have been working across the country over the last several years,
bundling insurance with existing offerings which helps leverage an existing network of trust.

Reduced costs of service: Technology has made it easier for insurance companies and
Distributors to onboard clients digitally and process claims, which is an important factor for
enhancing penetration of insurance products in low-income segments. Insurtech companies
are using AI and machine learning to automate claims processing, thereby reducing the
turnaround time for claims settlement. The ease of onboarding as well as access to
insurance benefits helps add to customer loyalty and trust and initiates a behavioural
change. According to PwC, the use of AI and ML in claims processing can reduce processing
time by upto 90%.

81
Challenges and Limitations
While insurtech in India has experienced significant growth and innovation, it still faces
several challenges that can impact its development and adoption. Here are some of the key
challenges in the insurtech sector in India:
1. Regulatory Complexity:
o India's insurance sector is highly regulated by the Insurance Regulatory and
Development Authority of India (IRDAI). Compliance with regulatory
requirements can be challenging for insurtech startups.
2. Low Insurance Penetration:
o India has a relatively low insurance penetration rate, with a large portion of
the population underinsured or uninsured. Educating consumers and
convincing them to purchase insurance can be a hurdle.
3. Trust and Awareness:
o Building trust among consumers and increasing awareness about the benefits
of insurance is a challenge, especially in rural and semi-urban areas.
4. Complex Claims Processing:
o The claims process in India can be lengthy and complex. Streamlining and
expediting claims processing through technology while ensuring fairness is a
significant challenge.
5. Data Security and Privacy:
o Handling sensitive customer data comes with significant responsibilities in
terms of security and privacy. Insurtech companies need robust data
protection measures to comply with regulations and gain customer trust.
6. Cybersecurity Threats:
o With the increasing digitization of insurance processes, insurtech companies
are vulnerable to cyberattacks and data breaches. Cybersecurity is a critical
concern.
7. Lack of Standardization:
o The lack of standardized data formats and interoperability between different
insurance providers can hinder the integration of insurtech solutions across
the industry.
8. Access to Data:
o Access to accurate and relevant data for underwriting and risk assessment
can be challenging, especially for startups without historical data.
9. Competition from Traditional Players:
o Established insurance companies are also investing in technology and
digitalization, posing competition to insurtech startups.
10. Customer Behavior and Expectations:
o Adapting to changing customer behaviors and expectations, especially among
younger demographics, is crucial for insurtech companies to remain relevant.
11. Infrastructure Challenges:
o In rural areas, where insurance penetration is low, infrastructure challenges
such as limited internet connectivity and access to digital devices can hinder
the adoption of insurtech solutions.

82
 12. Scalability:
o Scaling insurtech operations can be challenging due to the need for significant
capital, regulatory approvals, and the complexities of offering insurance
products at a national level.
13. Talent Acquisition:
o Finding and retaining talent with expertise in both insurance and technology
can be a challenge, as there is competition for skilled professionals.
Despite these challenges, the insurtech sector in India continues to grow and innovate.
Collaboration between insurtech startups, traditional insurers, and regulatory authorities
can help address some of these challenges and drive the adoption of technology-driven
solutions in the insurance industry.
While the impact of technology on the insurance sector in India has been largely positive,
there are some challenges and limitations that need to be addressed. One of the significant
challenges is the lack of digital literacy among the underserved population, which makes it
difficult for them to understand and access online insurance products and services.
Additionally, there is a need to address cybersecurity concerns and protection of individual
customer data.

New Evolving Business Models

The current InsurTech space in India is being dominated by few new-age insurers like Toffee,
Digit and Acko with their ability to attract and garner popularity among the millennial
population.

The key types of InsurTech startups/business model evolving at present:

• Digital Insurance Advisors are aggregator platforms that enable customers to search,
compare, find and buy insurance products at affordable premiums from multiple
carriers.
• The Digital Insurers are adopting the practice of offering insurance policies to
customers on the point of purchase of a product or services thereby gaining access to
large ecommerce consumers. Further they are not only focusing on issuance of
policies but also claim initiation and settlement digitally which enhances overall
customer satisfaction. Certain startups focus on developing platforms that digitalize
claims process using technology that provides quicker payouts.
• Emergence of Sachet Insurance which are small ticket insurance. Most of the sachet
offerings are disease-specific (vector-borne), travel-specific, for home appliances
(mobile, home protection, cycle theft) or for lifestyle needs (marathon, fitness). For
example, Max Bupa has tied up with Mobikwik to offer disease insurance covering
dengue, malaria. These are not comprehensive product but are a good starting
points for inculcating insurance habits. This allows getting covered by insurance
policy in an affordable manner.

83
84
The insurtech space in India has witnessed the emergence of several innovative startups that
are reshaping the insurance industry by leveraging technology. As of my last knowledge
update in September 2021, here are some key insurtech startups in India:
1. PolicyBazaar: One of the pioneers in the Indian insurtech space, PolicyBazaar is an
online insurance aggregator that allows users to compare and purchase a wide range
of insurance products, including health, life, motor, and travel insurance.
2. Coverfox: Coverfox is another prominent insurance comparison platform that helps
users compare and buy insurance policies online. They offer various insurance
products, including health, car, bike, and travel insurance.
3. Digit Insurance: Digit Insurance focuses on simplifying insurance products and
processes. They offer a range of insurance policies, including motor, health, travel,
and home insurance, with a focus on transparency and customer-centric solutions.
4. Acko: Acko is a digital-first insurance company that offers insurance products like
motor insurance, two-wheeler insurance, and health insurance. They have simplified
the claims process and offer policies tailored to customer needs.
5. Reliance General Insurance: While not a startup, Reliance General Insurance has
heavily invested in technology and digital platforms to offer a wide range of
insurance products, including health, motor, travel, and home insurance.
6. Digit Insurance: Digit Insurance is known for its data-driven underwriting and
customer-centric approach. They provide various insurance products, including
motor, health, and travel insurance.
7. Turtlemint: Turtlemint is a platform that helps customers compare and purchase
insurance policies. They also assist agents and brokers in managing their insurance
business efficiently.
8. Bajaj Allianz General Insurance: Bajaj Allianz is one of India's leading insurance
companies that has embraced digitalization and offers various insurance products
online, including motor, health, and travel insurance.
9. HealthifyMe: While primarily a health and fitness app, HealthifyMe has ventured into
health insurance by offering wellness-based insurance policies, encouraging healthy
lifestyles among users.
10. RenewBuy: RenewBuy is a digital insurance broker that offers a range of insurance
products, including motor, health, and two-wheeler insurance, with a focus on
making the insurance buying process easier.

Key Takeaways
InsurTech is changing the entire landscape of insurance industry. InsurTech not only focuses
on issuance of policy digitally but also on aggregation of details of various insurance policy
providers, claim settlement and also the new age context based insurance policy (Sachet
insurances) which enables policy holder to be protected against a specific situation. To
maintain profitable growth and to make sure that the products reach the target audience,
insurers, and intermediaries to maintain profitable growth and to make sure that the
products reach the target audience, insurers and intermediaries have started partnering
with service providers to form mutually beneficial relationships and design the products for
mass appeal with customizations.

85
RegTech
In today's rapidly evolving business landscape, where technological advancements continue
to reshape industries, regulatory compliance has become a critical aspect of organizational
success. However, with the emergence of Regulatory Technology, or RegTech, companies
now have a powerful tool at their disposal to streamline and enhance their compliance
processes. RegTech has gained traction as a game-changer in the financial services industry
and beyond, revolutionizing the way around regulatory compliance.

What is RegTech?
Regulatory Technology refers to the use of innovative technologies to facilitate and
automate regulatory compliance processes. It encompasses a wide range of tools, including
artificial intelligence (AI), machine learning (ML), data analytics, blockchain, and cloud
computing, among others. These technologies enable companies to effectively address
regulatory requirements, monitor risks, and ensure adherence to relevant laws and
regulations.

How can RegTech transform the fintech industry?

Stifled by bureaucratic processes and legacy infrastructure, organizations in the banking
sector are increasingly embracing RegTech solutions to address regulatory challenges and
requirements, and close compliance gaps much before deadlines. No wonder, RegTech is
topping the charts among all the ruling trends that are poised to transform FinTech going
forward.

However, not more than 17% of organizations have implemented RegTech solutions. Clearly,
this is because of the strained resources, a changing regulatory landscape, and the legacy
infrastructure. Nevertheless, RegTech promises to revolutionize the approach that banks
have toward compliance management and the future looks rosy for every financial
institution ready to embrace it.

The Need for RegTech:

The regulatory landscape has witnessed a substantial increase in complexity over the past
decade. Factors such as globalization, technological advancements, and changing regulatory
frameworks have made compliance a significant challenge for organizations. RegTech offers
advanced solutions to navigate the intricacies of compliance effectively.

Where Does it Work Best?

While RegTech growth is promising, does it serve as the solution panacea for all compliance
challenges? The answer is unfortunately negative. This is due to the level of subjectivity
considered in managing such risks. The areas where RegTech has the potential to deliver
unprecedented value include information-based obligations, quant-based obligations, and
risk management tools, such as:
 Compliance universe tools
 Training tools
 Activity-monitoring tools
 Risk Data warehouses

86
  Regulatory Reporting systems

Tools, such as Tableau, Pentaho, and Hadoop are placed on the top of the virtual lake,
allowing tailor-made reporting to be developed in a way that is malleable enough to meet
the regulatory requirements. These tools can further allow companies to leverage Big Data
and derive critical insights related to compliance management. For instance, Tableau is a
visualization tool that can recognize trends on the basis of data and develop regulatory
perspectives to identify outliers.

Evolution of Regtech in India

Regtech, short for "regulatory technology," has seen significant growth and evolution in
India as it has in other parts of the world. Regtech refers to the use of technology, including
software and data analytics, to help financial institutions and regulatory bodies meet
regulatory compliance requirements more efficiently and effectively. Here is an overview of
the evolution of regtech in India:
1. Early Adoption (2010s):
o The concept of regtech gained attention in India in the early 2010s as financial
institutions began to realize the growing complexity of regulatory compliance.
o Early solutions focused on automating reporting and compliance processes to
reduce manual efforts and errors.
2. KYC and AML Solutions:
o One of the earliest applications of regtech in India was in the Know Your
Customer (KYC) and Anti-Money Laundering (AML) space.
o Regtech companies developed solutions to streamline customer onboarding
and enhance due diligence processes to meet the regulatory requirements
set by the Reserve Bank of India (RBI).
3. Digital Transformation and Demonetization (2016):
o India's demonetization policy in 2016 and the push for digital payments and
financial inclusion led to increased adoption of regtech solutions.
o Fintech companies and banks began to leverage regtech to ensure
compliance with new regulations related to digital transactions and customer
data protection.
4. Fraud Detection and Prevention:
o Regtech solutions evolved to focus on fraud detection and prevention.
o Technologies like artificial intelligence and machine learning were used to
analyze large datasets to identify suspicious activities and potential fraud.
5. Regulatory Reporting and Automation:
o Regtech tools expanded to assist financial institutions in automating and
streamlining regulatory reporting.
o Solutions were developed to generate accurate reports in real-time, reducing
the risk of non-compliance.
6. Cybersecurity and Data Privacy:
o With the increasing emphasis on cybersecurity and data privacy regulations,
regtech solutions in India started addressing these areas.
o Companies developed tools to protect sensitive financial data and ensure
compliance with data protection laws.

87
 7. Collaboration with Regulators:
o Regtech firms in India began collaborating with regulatory bodies like the RBI
to develop and implement standardized regtech solutions.
o Such collaborations aimed to create a more conducive environment for
innovation while maintaining regulatory compliance.
8. Blockchain and Distributed Ledger Technology:
o Some regtech solutions in India explored the use of blockchain and
distributed ledger technology to enhance the security and transparency of
financial transactions and regulatory reporting.
9. Expansion Across Sectors:
o Regtech solutions expanded beyond traditional banking and financial services
to include insurance, securities, and other regulated industries.
10. COVID-19 and Remote Compliance:
o The COVID-19 pandemic accelerated the adoption of regtech as businesses
sought solutions for remote compliance monitoring and reporting.
11. Focus on Risk Management:
o Regtech solutions increasingly incorporated risk management tools to help
financial institutions assess and mitigate regulatory and operational risks.
The evolution of regtech in India is ongoing, driven by the need for financial institutions to
stay compliant with evolving regulations while optimizing their operations. As technology
continues to advance and regulations become more complex, the role of regtech in the
Indian financial ecosystem is likely to become even more critical.

Key Benefits of RegTech:

Enhanced Efficiency: RegTech solutions automate various compliance tasks, eliminating the
need for time-consuming manual processes. By leveraging technologies such as artificial
intelligence (AI), machine learning (ML), and natural language processing (NLP), RegTech
streamlines data collection, analysis, and reporting, enabling organizations to allocate
resources more efficiently.with up-to-date insights into compliance activities.

Regtech (regulatory technology) offers several key benefits in India, as in other countries, by
helping financial institutions and regulatory bodies streamline compliance processes and
enhance overall efficiency. Here are some of the key benefits of regtech in India:
1. Efficient Regulatory Compliance:
o Regtech solutions automate and digitize compliance processes, reducing the
time and effort required to meet regulatory requirements.
o Financial institutions can stay up-to-date with changing regulations and
ensure timely compliance.
2. Reduced Compliance Costs:
o Automation of compliance tasks reduces the need for manual labor and
associated operational costs.
o This cost-effectiveness is particularly crucial for smaller financial institutions
and startups looking to compete with larger players.
3. Enhanced Accuracy and Data Integrity:
o Regtech tools minimize the risk of human errors in regulatory reporting and
compliance tasks.

88
 o The use of data analytics ensures accurate reporting and timely identification
of discrepancies.
4. Real-time Monitoring and Reporting:
o Regtech solutions enable real-time monitoring of transactions and activities,
helping to identify and address issues promptly.
o This is especially important for fraud detection and prevention.
5. Improved Risk Management:
o Regtech incorporates risk assessment and management tools, helping
financial institutions identify and mitigate regulatory and operational risks.
o This results in a more resilient and compliant organization.
6. Faster Onboarding and KYC Processes:
o Streamlined Know Your Customer (KYC) and customer onboarding processes
reduce the time it takes to onboard new clients or customers.
o Enhanced due diligence and digital identity verification ensure compliance
with anti-money laundering (AML) regulations.
7. Enhanced Customer Experience:
o Efficient compliance processes lead to quicker account approvals and
transactions, improving the overall customer experience.
o Customers benefit from reduced paperwork and faster services.
8. Data Security and Privacy:
o Regtech solutions often include robust data security and privacy measures,
helping financial institutions protect sensitive customer data and comply with
data protection regulations.
9. Adaptability to Regulatory Changes:
o Regtech systems can be updated quickly to accommodate changes in
regulations, ensuring that financial institutions remain compliant without
major disruptions to their operations.
10. Collaboration with Regulators:
o Regtech firms often collaborate with regulatory authorities to develop
standardized solutions.
o This collaborative approach fosters innovation while maintaining regulatory
compliance.
11. Transparency and Auditability:
o Regtech platforms provide a clear and auditable trail of compliance activities,
making it easier to demonstrate compliance to regulators when required.
12. Reduction in Regulatory Fines and Penalties:
o By helping financial institutions maintain compliance, regtech solutions can
reduce the risk of regulatory fines and penalties, which can be substantial in
cases of non-compliance.
13. Facilitation of Remote Compliance:
o Regtech tools are adaptable to remote working environments, making it
easier for financial institutions to ensure compliance even during times of
crisis or remote work arrangements.
Overall, regtech plays a crucial role in helping financial institutions in India navigate
the complex regulatory landscape while improving operational efficiency, reducing
costs, and enhancing the customer experience. As regulatory requirements continue
to evolve, the importance of regtech is expected to grow.

89
  Cost Savings: RegTech solutions optimize workflows and streamline processes,
leading to cost savings and improved resource allocation.

 Data-driven Insights: RegTech leverages data analytics to extract valuable insights

from large data sets. These insights can help companies identify patterns, trends, and
potential risks, empowering them to make informed decisions and develop effective
risk management strategies.

Key Growth Drivers for RegTech in India:

Regtech (regulatory technology) in India is experiencing significant growth, driven by various

factors and drivers that are shaping the financial industry's approach to regulatory
compliance. Here are some of the key growth drivers for regtech in India:
1. Increasing Regulatory Complexity:
o Regulatory requirements in India are becoming more complex and stringent
across various sectors, including banking, finance, insurance, and securities.
o The need to navigate these complex regulations efficiently is driving the
demand for regtech solutions.
2. Digital Transformation:
o The digital transformation of the financial industry in India is creating a
greater volume of data and transactions.
o Regtech tools are essential for handling this data effectively, ensuring
compliance, and managing risk in a digital environment.
3. Cost Efficiency:
o Financial institutions are under pressure to reduce operational costs, and
regtech provides a cost-effective solution by automating compliance
processes.
o Smaller banks and financial startups, in particular, find regtech appealing as it
enables them to compete with larger players without significant overhead.
4. Data Analytics and AI:
o The use of data analytics and artificial intelligence (AI) is becoming crucial for
regulatory compliance and risk management.
o Regtech leverages these technologies to analyze vast amounts of data for
compliance and risk assessment.
5. KYC and AML Compliance:
o Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations are
a priority for financial institutions. Regtech solutions automate and streamline
KYC and AML processes, making them more efficient.
6. Cybersecurity and Data Protection:

90
 o Cybersecurity and data protection regulations are increasingly important in
India, and regtech plays a vital role in ensuring data security and compliance
with these regulations.
7. Real-time Monitoring:
o Regtech solutions enable real-time monitoring of transactions and activities,
allowing financial institutions to identify and address compliance issues
promptly.
8. Rapid Regulatory Changes:
o Regulatory changes can happen swiftly, and staying compliant is a constant
challenge. Regtech solutions can adapt quickly to these changes, helping
financial institutions remain up-to-date.
9. Enhanced Risk Management:
o Regtech tools provide advanced risk assessment and management
capabilities, helping financial institutions identify and mitigate risks
proactively.
10. Collaboration with Regulators:
o Regtech companies often collaborate with regulatory authorities to develop
standardized solutions that benefit the industry as a whole.
o Regulatory support and encouragement of regtech adoption further drive its
growth.
11. Global Standards Adoption:
o As Indian financial institutions expand globally, they need to adhere to
international regulatory standards. Regtech can help ensure compliance with
these global standards.
12. Increased Competition:
o Competition in the financial industry is intensifying, and institutions are
looking for ways to differentiate themselves through efficient operations and
compliance.
o Regtech allows organizations to streamline compliance and focus on their
core competencies.
13. Remote Work and Digital Operations:
o The COVID-19 pandemic has accelerated the shift towards remote work and
digital operations. Regtech is essential for maintaining compliance in remote
and digital environments.
These growth drivers indicate that regtech will continue to play a crucial role in the Indian
financial landscape. As regulatory requirements evolve and digitalization progresses, the
demand for innovative regtech solutions is expected to increase significantly.

Challenges and the Way Forward:

RegTech has the potential to revolutionize the way organizations approach compliance. Its
integration with AI, blockchain, and cloud computing enables advanced functionalities such
as identity verification, fraud detection, and data privacy management. RegTech solutions
also facilitate regulatory reporting, risk management, and audit processes, making
compliance a strategic advantage rather than a burden.

91
With RegTech, financial institutions have several opportunities to enable control
management and regulatory assessment. As we venture into this new paradigm, firms
should start:
 Making the most of the data they have
 Leveraging the technology investments that prove to be a powerful solution to
overcome challenge
 Conducting comprehensive research to identify organizational regulatory technology
 Identifying what their competitors or peers are doing to stay ahead of the
competition
 Embracing new technology

Key Players & Take aways

1. ComplyAdvantage: ComplyAdvantage provides AI-driven regtech solutions for

financial institutions to detect financial crime, perform customer due diligence, and
stay compliant with anti-money laundering (AML) regulations.
2. Signzy: Signzy offers AI-powered digital onboarding and identity verification
solutions, helping businesses automate and streamline KYC and customer
onboarding processes.
3. Cyclops Medtech: Cyclops Medtech focuses on healthcare compliance and offers
solutions for medical device tracking and inventory management, ensuring
adherence to regulatory standards.
4. Regtechy: Regtechy provides regtech solutions for financial institutions, including
compliance automation, risk assessment, and reporting tools.
5. Finbox: Finbox offers regtech solutions that help businesses with financial data
management, reporting, and compliance, particularly for regulatory filings and
reporting.
6. DVS Sciences: DVS Sciences specializes in anti-money laundering (AML) and fraud
detection solutions, helping financial institutions identify and prevent financial
crimes.
7. Regology: Regology offers a regulatory compliance platform that helps businesses
monitor and adapt to regulatory changes, ensuring compliance in real-time.
8. AIndra Systems: AIndra Systems leverages AI and computer vision for KYC and AML
compliance, providing automated identity verification and fraud detection solutions.
9. Netrika Consulting India: Netrika offers regtech and risk management solutions,
including compliance advisory services, fraud detection, and background verification
services.
10. OneClickProcure: OneClickProcure focuses on procurement and supply chain
compliance, helping organizations automate procurement processes while staying
compliant with regulatory requirements.
11. Uniken: While primarily a cybersecurity company, Uniken's solutions also address
regulatory compliance challenges by securing digital interactions and transactions.
12. Astrum Labs: Astrum Labs provides regtech solutions for the insurance industry,
helping insurers automate underwriting, policy management, and claims processing
while staying compliant.

92
 13. Xarista: Xarista offers compliance management and reporting solutions, helping
businesses streamline regulatory compliance across various industries.

Please keep in mind that the regtech startup landscape is continually evolving, with new
entrants and innovations

• With formalization of the economy, Regtech are gaining importance. The RegTechs
are focusing on easing compliance procedures and automating routine time-
consuming tasks.
• Majority of the RegTechs are also focusing on enabling the user to fill in the base
data and tend to automate end results.

93