AI, blockchain playing a key role in India’s fintech revolution: ReportNovember 27, 2018
Financial technology, or fintech, as it’s popularly known, has taken the finance world by storm by introducing path breaking innovations and a very novel way of banking, the world over. And recently, fintech has become the next big thing in India too. Buzzing e-commerce and product deliveries at the doorstep have risen the demand for ‘one touch’ banking that only fintech can provide. India is truly moving towards becoming a ‘knowledge-driven’, reasoning oriented and digitally empowered nation.
What facilitates fintech is a set of technologies and business models that are responsible for its growth and sustenance. Among the technologies that power fintech, Artificial Intelligence (AI) and blockchain have played a very significant role. This article discusses as to how AI and blockchain have played a central role in the fintech revolution in India, based on the joint report by the consulting giant KPMG and IT services giant NASSCOM.
In India, “Go Digital” initiative, together with the ever-growing e-commerce market, has been a significant catalyst for the fintech revolution. As India is inching towards a less-cash economy, digital payments are estimated to increase by at least ten times. Studies indicate that prepaid payment instruments registered gigantic volume growth of over 162% in the 2016-17 fiscal year. With the digitization of banking, interoperability and universal wallets are hassle-free and seamless.
The Government of India has proposed a two per cent discount in GST for users who make digital payments. This is a strategic move that will automate workflows, ensure best accounting practices, tax compliance and a new approach towards digital inclusion. In the insurance sector too, there is an increased usage of advanced data techniques and analytics to identify risks and avert potential dangers.
Public and private sector banks are implementing Artificial Intelligence and Machine Learning methods. Take, for example, Kotak Mahindra Bank and HDFC banks have introduced AI-powered chatbots for enhanced customer experience and efficient business operations, raising the productivity by leaps and bounds, as clearly shown by the profit margins of the various quarters. Added to that, robo advisors, the first of their kind provide comprehensive and accurate information to make the best possible decisions.
A lot of iterative processes can be avoided, and customer satisfaction is much higher because they are given the exact specifications that they are looking for, without much hassle. With AI, a lot of grey areas and ambiguity can be eliminated. These are some of the many wonders that AI is capable of! Of course, AI can solve problems with efficiency and speed that are beyond the purview of the human mind. Automation is the one thing banks and fintech companies are looking to achieve, and this is mostly backed by artificial intelligence and machine learning.
When everything went digital, a large group of people expressed concern over how they prefer human interaction. Well, AI has been able to fit that requirement to a large extent. There are many bots that are now ’emotionally capable’. One of the most significant advantages of using AI to power fintech has been the accuracy of fraud detection and pre-emptive policies based on predictive analytics. For example, based on behavioural patterns, bots can suggest users about their financial habits and suggestions for better handling of finances, all at the touch of a mobile screen. Even the most minute and seemingly insignificant data are analyzed by machine learning algorithms to form meaningful insights.
Another behemoth running the fintech revolution is the blockchain technology. Essentially, blockchain is a public ledger like a system that records transactions publicly and sequentially, for cryptocurrencies. Blockchain has been a robust system, making it much preferred for fintech. It is a formidable combination of public sharing and tight security. Aligning with fintech‘s vision, the blockchain technology empowers the user and makes for a friendly experience. With peer to peer money transactions becoming operational, blockchain has found a stable ground for itself.
The Indian government has recognized the role of blockchain technology in good governance. Andhra Pradesh has set up a Blockchain centre of excellence that has invited startups and experts to collaborate towards creating the first blockchain state in the country. Other states like Karnataka and Maharashtra are catching up fast with this trend. ‘India Chain’ of the NITI-Aayog is planning on implementing a fully enabled blockchain infrastructure to deal with e-governance, Aadhar, court cases, property records etc. On the educational front in India, several universities are providing fintech courses, replete with artificial intelligence and blockchain technologies and business models supporting the same.