Financial inclusion, open banking are game-changers
The industry is witnessing a revolution led by innovations in payments and the leveraging of advanced technology solutions.
The advent of the COVID-19 pandemic has caused upheaval and change in every sphere of life and commerce. The banking, financial services, and insurance (BFSI) sector has been no different. Yet, as the pandemic created roadblocks, it also opened the doors for innovation.
The industry is witnessing a revolution led by innovations in payments and the leveraging of advanced technology solutions, said experts at the BFSI Leadership Summit 2021, organised by YourStory and EnterpriseStory, on July 16.
Watch the BFSI Leadership Summit 2021 themed ‘Banking on The Future’ here.
Financial inclusion, open banking, and data security are at the heart of this revolution, said industry experts during a discussion on ‘Accelerating the Innovation Agenda for BFSI’. The panel comprised Harsh Mittal, CFO of Shivalik Small Finance Bank, Shefali Rastogi, Assistant Vice President-Product at Axis Bank, and Amartya Singh, Senior Director, Banking Partnerships at Cashfree.
Here are some of the key takeaways and insights from the discussion:
1. A holistic approach to financial inclusion
The government has made incredible inroads through its Jan Dhan Yojana scheme, and Aadhaar-linked initiatives, said Shefali Rastogi of Axis Bank. But despite improved mobile connectivity, last mile issues persist, she added.
“We all know that the necessities are roti, kapda, makaan and education. So, in this era of digitalisation, I would like to add one more necessity that is very important today: internet connectivity,” said Rastogi of Axis Bank.
Although 80 percent of the Indian population has bank accounts, Rastogi pointed out that only 48 percent of those bank accounts are active. To make financial products that are truly inclusive and sustainable, policymakers, government regulators, financial service providers and other stakeholders must work together.
A holistic approach should include robust technology infrastructure, simplifying financial products, raising awareness about these products, and strengthening financial capabilities.
Harsh Mittal of Shivalik Small Finance Bank emphasised that the time has come to implement customised solutions and forego the ‘one size fits all’ approach. Simplified products are a great starting point, followed by improving accessibility, he said.
Therefore, product design and distribution are vital to create awareness of such financial products for the customer. Unfortunately, banks are unable to do so.
“The API (application programming interface) ecosystem will play a key role in ensuring technology integration between the distribution partners and financial institutions in real time,” said Harsh Mittal, CFO of Shivalik Small Finance Bank.
2. Open banking will lead the way
Cashfree’s Amartya Singh concurred that open banking will be a crucial part of financial inclusion. APIs enable companies to open their applications’ data and functionality to external third-party developers, and business partners.
APIs will be important for banks to digitally respond to varied needs and requirements of customers. Singh also said the mobile-first economy, the Unified Payments Interface (UPI) ecosystem, and cross-border payments will accelerate the evolution of digital banking and payments in India.
Shefali said open banking will create exciting mergers and acquisitions between banks and fintech players. Cloud computing, offline payments, and biometric authorisation will drive the innovation agenda for financial institutions, she added.
3. Security measures and best practices
The adoption of any kind of ground-breaking and disruptive innovation comes with risks, the panel said. To mitigate these risks, Mittal stressed on the need for strong threat detection and protection measures.
“While basic hygiene tools are a must, the time has come to consider advanced cybersecurity, and for organisations to have a security roadmap in place. In today’s time, risks always exist,” he said, adding that security measures to protect sensitive data go a long way in building trust with customers.
Singh pointed out how banks deftly responded to payment failures on UPI apps last year between November and December. The Reserve Bank of India (RBI) has been vigilant about how banks run their digital infrastructure and comply with local laws. “The RBI is focused on the end customer, so that their money is protected, transactions are protected, and they are able to enjoy all technological services that they want,” he added.
Watch all videos of the BFSI Leadership Summit 2021 here.