The RBI Governor highlighted the impact of digitisation on banking and highlighted challenges such as next generation services, affordable finance, cyber security and data privacy.
Mumbai, July 29 (PTI) Digitisation of finance is paving the way for next generation banking and improving access to financial services at affordable costs, Reserve Bank of India Governor Shaktikanta Das said on Monday.
In his foreword to the Report on Monetary and Financial Services (RCF) for 2023-24, the Governor also said that the flagship Unified Payments Interface (UPI) has revolutionised the end-user retail payment experience, making transactions faster and more convenient.
In the digital currency space, the Reserve Bank has been at the forefront with its pilot of a central bank digital currency (CBDC), e-rupee.
The digital lending ecosystem is thriving with initiatives such as the Open Credit Enablement Network, the Open Network for Digital Commerce, and the Public Tech Platform for Frictionless Credit.
He said fintech companies are partnering with banks and non-banking financial companies (NBFCs) as lending service providers. They also run platforms to facilitate digital credit. BigTech companies are backing payment apps and lending products as third-party service providers.
“Digitisation of finance is paving the way for next generation banking, improving access to financial services at affordable costs and enhancing the impact of direct benefit transfers by effectively targeting beneficiaries in a cost-effective manner,” Das said.
He noted that lending in the retail sector is becoming more instantaneous thanks to online payments and innovative credit scoring models, while e-commerce is also being driven by embedded finance.
“These innovations will make financial markets more efficient and integrated,” the Governor said.
At the same time, Das said digitalisation also brings challenges related to cybersecurity, data privacy, data bias, vendor and third-party risks, and customer protection.
“Greater interconnectedness can lead to systemic risks. Moreover, emerging technologies can introduce complex products and business models that carry risks that users may not fully understand, such as the proliferation of fraudulent apps and mis-selling through dark patterns,” he said.
Das further said digitalisation may pose talent challenges in the finance sector, which will require strategic investments in upskilling and reskilling.
This report looks back on India’s digital journey so far and explores new opportunities and challenges based on surveys of key stakeholders and data analysis.
The report provides empirical support for the positive role that regulatory frameworks play in enhancing consumer confidence in digital financial products, improving financial institutions’ operational and technological efficiency, and creating more liquid and integrated financial markets.
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