The advent of numerous fintech companies on the horizon is a great advertisement of the enormous business opportunities that India provides, and can, also significantly advance the cause of financial inclusion in the country.
As we observe World Consumer Rights Day 2022 on March 15, for which ‘Fair Digital Finance’ has been chosen as the theme, it would thus be fitting if the occasion could lead to a relook by fintech companies at their technology platforms and algorithmic models to find out how these may be improved to better serve customer interests.
At a time when a large quantum of transactions is being done digitally, technology vulnerability of fintech companies, especially their inability to adequately safeguard customer data, could have adverse connotations not just for the specific entities and their clients, but the entire financial sector. The cumulative value of digital transactions in India surged from Rs 15,887.88 crore in April 2021 to Rs 23,099.34 crore in February.
In April, a World Bank Group Policy Research Paper titled ‘Consumer Risks in Fintech – New Manifestations of Consumer Risks and Emerging Regulatory Approaches’ had also emphasised this fact by stating: “Platform or other technology malfunctions can have adverse impacts on consumers ranging from inconvenience and poor service to monetary loss and loss of data integrity, the risk of which may be increased due to heavier reliance on automated processing of transactions”.
Making the algorithmic process fairer could ensure that it is not being discriminatory towards any demography, socio-economic category, and place of stay of likely customers. More importantly, a periodic review of the algorithms used could prove handy in determining whether these are in line with international best practices, and appropriately factors in the India context.
The 2,000-plus fintech companies operating in India — the overwhelming majority of which have come up in the last five years — could also examine whether their governance models and existing systems and processes are robust enough to handle rapid growth, while not compromising with the quality of service they provide to customers.
Embarking on such an exercise could benefit the fintech segment overall in terms of being able to identify and address the likely pain points that may emerge in future through an unbridled rise in transaction numbers. An initiative of this kind could also make the sector more resilient through the introduction of upgraded systems and processes, including the way it meets its manpower requirements and trains employees for their assigned jobs.
From an individual fintech company’s perspective, the gains from such efforts could be in the form of becoming more sustainable, an increase in its customer-centricity, and a rise in its attractiveness among potential investors. All these combined could help a company stand out from its peers in a market that is increasingly getting commoditised.
Given the importance of the financial sector in the economy, authorities, too, may consider stepping up their vigil to ensure that fintech startups are not overreaching themselves to achieve ‘unicorn’ status at the earliest and, also, not luring customers with lofty promises that they may find difficult to meet later. Authorities taking a closer look at how the fintech companies are going about their jobs could lead to the long-term sustainability of the sector by ensuring that its operations remain within a defined rule-bound framework. Moreover, it would reduce the likelihood of some fintech firms trying to play fast and lose to earn more money in the quickest possible time.
Significantly, it would further increase the faith of ordinary people in fintech companies as authorities could nudge fintech companies to provide more information on customer grievance handling processes, including likely turnaround times to settle complaints.
There is little chance of some level of pro-activism shown by authorities to protect customer interests coming in the way of the growth of the Indian fintech sector, including overseas investment flows into this arena. No progressive fintech company or likely investor would mind that as they too realise that for authorities anywhere citizen interests would always come ahead of everything else.
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