Majority retail transactions now through cards

Guidelines for FinTech regulatory sandbox soon

MUMBAI: The retail payment space in India has been taken over by ‘plastic’ as the card payments volume has reached 52 per cent of the total retail payments during 2017-18.

Disclosing the  transaction figures of digital business, Shaktikanta Das, Governor, Reserve Bank of India (RBI) said the national electronic funds transfer (NEFT) system handled 195 crore transactions valued at around Rs172 lakh crore during 2017-18 representing a growth of 4.9 times in terms of volume and 5.9 times in terms of value over the past five years.

Similarly, the number of transactions carried out through credit and debit cards in 2017-18 was 141 crore and 334 crore, respectively. “Prepaid payment instruments (PPIs) recorded a volume of about 346 crore transactions, valued at Rs1.4 lakh crore,” he said while talking on Opportunities and Challenges of FinTech at the NITI Aayog’s FinTech Conclave on March 25.

The RBI chief said that from the ‘start-ups’ through ‘big-techs’ to established financial institutions, all key players are harnessing financial technology or the FinTech edge along the financial services’ value chain to provide agile, efficient and differentiated experiences to the end-user, adding that this movement has the potential to fundamentally transform the financial-landscape in the country due to its efficiency in bringing lower operational costs.

A recent global survey ranks India second in terms of FinTech adoption, with an adoption rate of 52 per cent. It is reported that there are as many as 1218 FinTech firms operating in India, and this created a large number of jobs in the country. “They are also generating a healthy appetite for investment.”

However, Shaktikanta Das, never ignored the attendant risks involved in FinTech. He acknowledged that while opening a new world of opportunities, the FinTech revolution has its own share of risks and challenges for the regulators and supervisors. He said early recognition of these risks and initiating action to mitigate the related regulatory and supervisory challenges, is key to harnessing the full potential of these developments.

In order to ensure an orderly development of FinTech, to streamline their influence into the financial system, to protect the customers and to safeguard the interest of all the stakeholders, the industry needs to have appropriate regulatory and supervisory frameworks.

Informing that such frameworks should address associated risks while keeping in mind the growth requirements of this sector, Das said the RBI’s working group on FinTech and digital banking (Report of the working group on FinTech and digital banking, November 2017) suggested the introduction of a ‘regulatory sandbox/innovation hub’ within a well-defined space and duration to experiment with FinTech solutions, where the consequences of failure can be contained and reasons for failure analysed.

He underlined that a regulatory Sandbox’ would benefit FinTech companies by way of reduced time to launch innovative products at a lower cost. Going forward, he said, the Reserve Bank will set up a regulatory sandbox, for which guidelines will be issued in the next two months.

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