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How Can Emerging Technologies Boost The Fintech And Payments Ecosystem?

Emerging technologies have the potential to transform the payments and financial services ecosystem in India

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In a world of new-age technologies, futuristic products, and advanced ways of doing things, India’s banking and payments industry has undergone a major transformation in recent times. While traditional banking has been slow to adapt to the changing times, FinTech has been the forefront of change, providing 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 emerged as one of the biggest beneficiaries and is using them to provide better services to their 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 bolster the country’s position as a global FinTech hub.

Let us look at how today’s new age technologies are boosting India’s Fintech and payments ecosystem:


The Digital Ledger Technology (DLT), more commonly known as ‘Blockchain’, is like any good old ledger, the only difference being it is digital, immutable, and capable of chronologically recording all transactions that are made, in real-time. Although still in its nascent stage, this new age technology has gained considerable attention from start-ups, enterprises, and laymen by bringing transparency, efficiency, and security to banking transactions. The fact that Blockchain is a decentralised network means that no one within the system must know or trust anyone, resulting in great fraud protection. 

So, what is the method behind the magic? 

Blockchain collects the transaction information and stores it in groups known as “blocks”, which are further linked to other blocks, resulting in the formation of chains that are part of an entire timeline that cannot be altered or changed. Peer-to-Peer lending are some of the fastest adopters of blockchain to ensure efficiency and transparency. Safety is not the only strong point when it comes to Blockchain; it can also help cut costs by eliminating the need for intermediaries. This new-age technology has opened up avenues of better security, fraud prevention, easy lending, and efficient customer KYC within the banking and payments landscape and close to 56 per cent of Indian businesses are moving towards this innovation.

Artificial Intelligence And Machine Learning

In this digital era, technologies like Artificial Intelligence (AI) and Machine Learning (ML) have become a household name. 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 track to become the banks of the future as customer behavior and expectations have changed drastically. Today, customers look for offerings such as wealth management, enhanced customer support, fraud detection, real-time tracking of data, lowered costs, and AI-powered decision-making. It is not uncommon to encounter AI-powered authentication for digital banking, via biometric modalities such as the detection of iris, fingerprint, face, or voice. In what truly looks like the future of banking, software or even robotic processes are replacing manual tasks with much more efficiency, security, and accuracy. Credit assessment is another crucial area where AI and ML are making waves of transformation. Lending is a critical part of a bank’s functioning, one which is rampant with challenges. These new-age technologies can help assess creditworthiness and monitor data in a much better way. 

Embedded Finance 

Thanks to this new and emerging technology, non-finance entities too can integrate into their system, financial products and services through the utilisation of Application Programming Interface or API. With this feature, users do not have to leave the platform’s app or website they are currently using to make payments or transactions. Instead, payments and transactions can be made on the same platform. The global market for embedded finance is all set to grow by a staggering tenfold to reach USD 230 billion by 2025. 

Digital Wallets 

Digital wallets significantly paved the way for India’s FinTech revolution. Thanks to this new-age innovation, digital payments could be made in seconds, in a secure way. Usually in the form of an app, these online payment tools truly changed the way India made its payments and set us on the fastrack 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 had reservations with a credit-based payments system are now enjoying the offerings of this new age technology, thanks to its short and interest-free credit period of only 15 to 45 days. In addition to this, BNPL-led platforms typically do not charge any processing fee or annual charges, unlike traditional credit cards. The main cohorts who prefer the use of BNPL are the Gen Z and millennial demographics, and those who are more familiar with digital payment options. What sets BNPL apart is that, unlike credit cards, people with a poor credit history too can access and make use of this offering. 

Card Tokenisation 

The Reserve Bank of India gave the green signal for tokenisation or card on file tokenisation, the latest innovation in the world of FinTech. When you make a purchase online, you cannot complete the purchase without providing your PIN or card details. This makes room for fraud in two ways: the details could be recorded during the transaction, or the details could be stored in an insecure way, thereby allowing fraudsters access to the same. 

But what if your card was actually ‘tokenised’ instead? This would mean that instead of your actual card details being processed, a separate “token” representing your card details is processed. This prevents your card details from being used in any unauthorised transactions and helps to keep your card information safe. All your sensitive card and account details are replaced with non-specific IDs or a unique set of numbers and characters, a move 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, making the entire course impossible to hack or reverse engineer. 

Wearable Payment Devices 

India is taking big strides to fully become a cashless economy, and wearable payment devices are a step in this direction. One big win for wearable payment devices is that they are close to ten times faster than traditional payment methods. Payments are made through these devices via a technology known as near-field communication (NFC); users do not need a PIN or signature during the process, instead, the 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 costly devices that not many people may be able to access. 

The Bottom Line 

India is now one of the fastest-growing FinTech ecosystems in the world, and the emergence of these new-age technologies plays a huge role in positioning India as a global banking and FinTech leader. The monumental shift from a cash-laden to a cashless economy, as well as the adoption of all things digital, are the major growth drivers responsible for this transformation. Furthermore, government initiatives that push for the transition to a more digital ecosystem are another crucial causal factor. Being a geographically vast and diverse nation, several 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 huge growth potential for India’s banking and payments ecosystem, one that 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 noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Rajsri Rengan

Rajsri Rengan is the Head of Development - Banking & Payments, India & Philippines, FIS

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