Fintech & Banks: Collaboration for Scalable, Compliant Solutions - Joshi

New Delhi, Aug 7 (PTI) Financial Services Secretary Vivek Joshi on Wednesday urged the fintech community to work in close coordination with banks so that scalable and regulatory compliant solutions can be designed.

Addressing FICCI-IBA PICUP Fintech Conference, Joshi said the fintech sector is growing very fast and India has the highest fintech adoption rate vis-à-vis global average.

Observing that fintech has transformed the financial sector architecture by providing innovative solutions to various services, he said, "I would urge fintechs to work hand in hand with banks, rather than creating a solution themselves and then approaching banks...because banks especially public sector banks deal with the very large, bigger issues."

It would be more appropriate that the bank suggests the problem, and then a solution is provided by the fintech ecosystem, he said.

"Since you (fintechs) are not working hand in hand with banks, a lot of information about the kind of challenges the banking system is facing may be limited...so, that would be the direction we should be working towards. Many of the banks have started empanelling startups. Therefore, the idea is to give them the problems and then ask for a solution that would be very great," he said.

While the potential of fintech is immense, Joshi said there are challenges that come with growing use of technology.

"Digital growth has thrown certain unique challenges such as governance issues, regulatory and statutory compliances, consumer protection and fair practices. It is essential to strike a balance between fintech innovation and timely regulatory response," he said.

It is also equally important to ensure that innovation does not outpace the necessary safeguards, he said, adding, cyber security, data privacy, identity theft, digital financial fraud and financial literacy are other areas which require our attention.

Talking about the Budget announcement, Joshi said, banks should develop new models for giving loans to MSMEs.

Rather than depending upon the balance sheets or the returns generated by the MSME, he said, the new model will depend on the digital footprints created by the MSME, especially the micro and nano.

"I think there is a role where fintechs can help banks improve their digital lending capacities," he said.

Now given the large and growing market size, he said, there are huge opportunities for the fintech sector, due to the growing contribution of the MSME sector in exports.

Growing internet user base in India, enabling regulatory and policy environment, there is a huge potential for any entrepreneurial ventures, including fintechs, he said.

Joshi added that emerging technologies hold immense potential for this sector to improve the quality of services, enhance security measures and drive efficiency across the industry.

Speaking at the event, Indian Banks' Association (IBA) CEO Sunil Mehta said, fintech has revolutionised the payment space and now it's time for the sector to transform the lending space.