Navigating the Fintech Landscape in India

India boasts the world’s third-largest startup ecosystem with more than 100 unicorn businesses valued at U.S.$340.78 billion as of September 2022. Owing to the Covid-19 pandemic’s effects and the government’s initiatives fostering the growth of the ecosystem, more than 80 million adults made their first digital merchant payment in the country during the pandemic and the number of startups recorded a 15,400% jump over the last six years. India’s fintech segmentis driving the innovation boom in this ecosystem, accelerating the pace of digital transformation across sectors such as insurance and ecommerce. The Indian government proactively promotes the use and adoption of technologies to make India a cashless economy through its ‘Cashless India’ program and with instruments such as the Unified Payments Interface (UPI), digital wallets, Aadhaar and more. The rise of entrepreneurship in India shows no signs of slowing in the coming years. That said, fintech entrepreneurs are also facing multiple challenges, including low financial literacy and cyberthreats.

BOLSTERING FINANCIAL INCLUSION THROUGH FINTECH APPLICATIONS

Fintech firms are disrupting the prevailing financial order in the markets to build a more inclusive financial system to offer more affordable and accessible financial services to both people and businesses. Financial inclusion enables a wider range of a previously underserved audience to access more financial products and solutions at a lower cost in today’s digital era. For example, fintech firms can provide microfinance services to people who are unable to access traditional loans due to a lack of collateral or credit history. They can also use machine learning tools and alternative data sources to harness the power of data and assess the creditworthiness of individuals.

BLURRING THE LINES

Fintech companies and startups are creating a more inclusive financial ecosystem with a growing number of affordable options available to consumers. However, the underserved population may become exposed to a new type of risk in the financial ecosystem – financial crime. India’s fraud rate has increased by nearly 24% from 2021 to 2022, partly because of its explosive fintech growth. Faster payment processes are growing at a rapid rate, so fraudsters and cybercriminals are in hot pursuit, adapting quickly to target a newly exposed and vulnerable population.

Unlocking the power of data in a safe environment is critical for faster innovation and increased productivity

RISK OF DATA AND SECURITY BREACHES

Efficiency and ease are two key design elements of fintech products. Fintech startups tend to break through the traditional business model and take financial services and experience to another level, which may be less regulated, leading to associated risks. Fraudsters may try to exploit these vulnerabilities and attempt to acquire unauthorized access to sensitive data and systems, while users have little control over how their personal information is stored and who can access it.

CONSTANTLY CHANGING REGULATORY REQUIREMENTS

To combat cybercrime, the Indian Government published a draft of the Digital Personal Data Protection Bill in 2022. The bill proposes a comprehensive data protection regime to protect customer data and ensure privacy with a reliable infrastructure. Earlier this year, we launched our first Asia-Pacific data center in India to help local and multinational companies do business with confidence through access to digital identity intelligence and authentication.

STRIKING THE BALANCE

The unprecedented growth of the startup sector has exploded in recent years and we have seen a range of innovative products and services in mobile channels. To navigate fraud risks, organizations should adopt a dynamic fraud prevention model that incorporates adaptable authentication methods such as behavioral biometrics.