Introduction
Recently, World Bank and the Cambridge Centre for Alternative Finance (CCAF) conducted a joint study to assess the impact of Covid 19 on the Fintech industry and the regulatory response to address the various challenges that have emerged. The study finds that regulators are responding to the challenges of Covid-19 and increasing digitalization of financial services by taking both sector-wide and, to a lesser extent, FinTech-specific regulatory measures, as well as accelerating the pace of regulatory innovation initiatives.
The Observed Impact of Covid-19 on Fintech Markets
- Regulators observed strong increases in the use or offering of many FinTech products and services since the outbreak of the pandemic, in particular digital payments, and remittances.
- Regulators in emerging market and developing economies are more likely to have reported increases in the usage of digital payments and digital banks
- Respondents see rising risks in the FinTech market concerning cybersecurity (78% referencing as a top three risk), operational risks (54%), consumer protection (27%) and fraud and scams (18%)
- The priority of FinTech for regulators has either increased, or remained high, in light of Covid -19
- Regulators recognize that FinTech can play a role in supporting regulatory objectives considering Covid-19
There is also variation in sectoral impact between emerging and advanced economies as shown below –
Regulatory responses to Covid 19
- The sectoral responses in terms of regulatory measures aimed at addressing the challenges due to Covid 19 include AML & Digital Identity/KYC measures (49%), economic relief schemes (42%), business continuity plans (39%), measures to enhance cybersecurity (29%) and measures focusing on promoting employment and talent (17%).
- Key internal challenges have emerged –
- Challenges in performing on-site inspections & in-person tasks (45%)
- Coordination with domestic agencies (39%)
- Access to accurate and timely data (29%)
- Restricted access to essential information & technology (28%)
- Regulators observed ongoing support by FinTechs to Covid-19 relief efforts in their jurisdictions.
- Regulators consider skill development (80%) and technical support (67%) as the key measures that would benefit industry the most
Short-term and Long-term learnings & Future Considerations
- There is a dire need of interoperability among various stakeholders – regulators, banks, financial institutions, vendors etc. Real-time facilitation/exchange of data between operating units is critical to ensure high availability of services during extenuating circumstances such as the Covid 19 pandemic.
- Access to real-time data on the field is a real challenge resulting in reduced efficiency and overhead costs
- Strengthen support for RegTech capabilities –
- Access to Developer Sandbox
- Open API services
- Expand eKYC and Digital KYC framework
- Consent-based data capture and exchange
- Frame large scale policies around digital inclusion and financial literacy
- National Policy framework around data privacy and data regulation
How has Decimal responded to accelerated digital needs of enterprises due to Covid
In the past year, RBI has introduced numerous regulatory measures to address the various challenges facing entities due to restrictions in movement and operations due to the pandemic-induced guidelines. These include tech-based features such as simplifying Digital KYC norms for individuals and entities to introduction of VideoKYC technology to accelerate customer adoption, various measures to facilitate credit services to small and medium businesses by introducing clauses and simplified checks and balances. All of this has led to rapid change in the way banks and financial institutions roll out their services to customers. Decimal has worked with major banks and FIs in the past year to facilitate such changes and ensure time-bound rollout to minimize business impact.
Decimal is working with leading technology and analytics partners to ensure that banks and FIs always remain ahead of the curve when it comes to adoption of regulatory changes.
To know how we can enable you as well, contact us at – sales@decimal.co.in.