How Emerging Technologies Can Boost the Fintech and Payments Ecosystem -Rajsri Rengan

In a world of new age technologies, futuristic products and advanced ways of doing things, the Indian banking and payments industry has undergone a major transformation in recent times. While traditional banking has been slow to adapt to changing times, FinTech has been at the forefront of change, delivering better, faster and more convenient services to customers.

Emerging technologies have the potential to transform the payments and financial services ecosystem in India. FinTech has become one of the biggest beneficiaries and uses them to provide better services to its customers. The emergence of these technologies has also spurred the growth of the payments ecosystem. Together, these developments have helped transform the payments landscape in the country and are likely to further strengthen the country’s position as a global FinTech hub.

Let’s see how today’s new technologies are boosting India’s fintech and payments ecosystem:

blockchain

The Digital Ledger Technology (DLT), more commonly known as “Blockchain”, is like any good old ledger, except that it is digital, immutable and able to chronologically record all the transactions that are carried out, in real time. Although still in its infancy, this new technology has caught the attention of start-ups, businesses and laypeople alike by bringing transparency, efficiency and security to banking transactions. The fact that Blockchain is a decentralized network means that no one within the system has to know or trust anyone, which translates into excellent fraud protection.

So what is the method behind the magic?

Blockchain collects transaction information and stores it in groups called “blocks,” which are then linked to other blocks, resulting in the formation of chains that are part of an entire timeline that cannot be changed or changed. Peer-to-peer lending is among the fastest adopters of blockchain to ensure efficiency and transparency. Security is not the only strong point of Blockchain; it can also help reduce costs by eliminating the need for middlemen. This new era technology has opened avenues of improved security, fraud prevention, lending ease and effective customer KYC in the banking and payments landscape and nearly 56% of Indian businesses turn to this innovation.

Artificial intelligence and machine learning

In the digital age, technologies such as artificial intelligence (AI) and machine learning (ML) have become household names. It was only a matter of time before AI and ML crept into the world of banking. Banks and FinTechs that boast of an AI mindset are well on their way to becoming the banks of the future, as customer behavior and expectations have changed dramatically. Today, customers are looking for offerings such as wealth management, enhanced customer support, fraud detection, real-time data tracking, cost reduction, and AI-powered decision making. It is not uncommon to encounter AI-based authentication for digital banking, via biometric modalities such as iris, fingerprint, face or voice detection. In what really looks like the future of banking, software or even robotic processes are replacing manual tasks with much more efficiency, security and precision. Credit scoring is another crucial area where AI and ML are making waves of transformation. Lending is an essential element of the operation of a bank, an element that is full of challenges. These new-age technologies can help assess creditworthiness and better monitor data.

Integrated financing

With this new and emerging technology, non-financial entities can also integrate financial products and services into their system through the use of Application Programming Interface or API. With this feature, users do not have to leave the app or platform website they are currently using to make payments or transactions. Instead, payments and transactions can be done on the same platform. The global integrated finance market is expected to grow tenfold to reach $230 billion by 2025.

Digital Wallets

Digital wallets have significantly paved the way for the FinTech revolution in India. Thanks to this new era innovation, digital payments could be made in seconds, in a secure way. Usually in the form of an app, these online payment tools have truly changed the way India makes payments and put us on the fast track to a cashless economy.

Buy now Pay later

FinTech services like Buy Now Pay Later (BNPL) have changed the way India shops. Consumers who previously booked with a credit-based payment system are now benefiting from the offers of this new technology, thanks to its short and interest-free credit period of only 15 to 45 days. On top of that, BNPL-run platforms typically charge no processing fees or annual fees, unlike traditional credit cards. The main cohorts that prefer the use of BNPL are Gen Z and Millennials, and those more familiar with digital payment options. What sets BNPL apart is that, unlike credit cards, people with a bad credit history can also access and use this offer.

Map Tokenization

The Reserve Bank of India has given the green signal for tokenization or card on file tokenization, the latest innovation in the FinTech world. When making an online purchase, you cannot complete the purchase without providing your PIN or card details. This opens the door to fraud in two ways: the details could be recorded during the transaction, or the details could be stored in an insecure way, allowing fraudsters to gain access to them.

But what if your card was actually “tokenized” instead? This would mean that instead of your card details being processed, a separate ‘token’ representing your card details is processed. This prevents your card details from being used in unauthorized transactions and helps protect your card information. All sensitive card and account information is replaced with non-specific identifiers or a unique set of numbers and characters, a measure that will enhance security throughout your transaction process. Tokens are issued to the user’s device through a secure method known as the token issuance process, which makes the entire course impossible to hack or reverse engineer.

Portable payment devices

India is making great strides towards fully becoming a cashless economy, and wearable payment devices are a step in that direction. One of the great advantages of portable payment devices is that they are almost ten times faster than traditional payment methods. Payments are made through these devices using a technology known as Near Field Communication (NFC); users do not need a PIN or signature during the process, instead NFC technology links the device to your debit, credit or prepaid cards and is activated when the smart device is near the payment terminal. These “tap and go” devices are a great way to save time and enjoy easy payments, however, they are expensive devices that few people can afford.

The essential

India is now one of the fastest growing FinTech ecosystems in the world, and the emergence of these new era technologies is playing a huge role in positioning India as a global leader in banking. and FinTech. The monumental shift from a cash-rich to a cashless economy, along with the adoption of all things digital, are the key growth drivers responsible for this transformation. Additionally, government initiatives pushing the transition to a more digital ecosystem are another crucial causal factor. Being a geographically large and diverse nation, many parts of the country are still underserved – this is a challenge that the banking sector is constantly grappling with. However, the emergence of these new technologies truly presents enormous growth potential for India’s banking and payments ecosystem, which will be easily accessible to all corners of the country.

Disclaimer: The views expressed in the article above are those of the authors and do not necessarily represent or reflect the views of this publishing house. Unless otherwise indicated, the author writes in a personal capacity. They are not intended and should not be taken to represent the official ideas, attitudes or policies of any agency or institution.


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