India

The challenges for fintech adoption in India

Policy confusion is understandable in an emerging sector but getting the policymaking architecture right is important

Fintech means a great many things to a great many people. In such a broad, fast-moving space, risk and uncertainty are par for the course. Late last week, the International Monetary Fund and World Bank attempted to create a framework within which the tradeoffs between risk and potential should be made. The Bali Fintech Agenda lays the bromides on thick. Embrace the promise of fintech and use fintech to enhance financial inclusion? Well, yes. But among its 12 points are a few that speak directly to some of the challenges India is facing in fintech adoption.

Promoting fintech in India is preaching to the choir. In 2005, then Reserve Bank of India (RBI) governor Y.V. Reddy used the term ‘financial inclusion’ for the first time in the central bank’s annual policy statement. In the decade and change since, it has become one of the leitmotifs of governance. Government efforts at the Centre and in the states have leveraged fintech to push for this inclusion, aided by the concurrent growth in internet and smartphone penetration. The Narendra Modi government’s demonetisation misstep and ‘cashless economy’ rhetoric provided a boost as well, even if a temporary one. Little wonder the sector is hopping. According to EY’s Fintech Adoption Index 2017, India has the second highest fintech adoption rate in the world.

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