BackComing on a screen soon: all your money
The government, under the Digital India initiative, has mandated an open architecture for the five programmes that can 'talk' to each other: Aadhaar, e-KYC, e-Sign, privacy-protected data sharing, and the Unified Payments Interface
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Imagine this. You need to pay your life insurance premium today. You’d like to check how much of your home loan is still left. You want to start one more systematic investment plan. You want to pay your credit card bill. You want to make a contribution to your Public Provident Fund (PPF) account. You want to check the balance in your Employees’ Provident Fund (EPF) account. You want to check when your car insurance is due. To do all of these you may just call your financial planner (who you pay a nice hefty fee each year for these servicers), or you could log in to multiple sites, put in 10 different usernames, remember 10 passwords. Two of the 10 sites will make you change your password. Some may have an error message. Some transactions won’t go through. And 2 hours later, you will be frustrated and cursing this clunky financial world we inhabit.
But plug into the fintech space and there is a lot of excitement around solving this problem that is aggravating you. If you’re old enough, you’ll be reminded of the big internet buzz 17 years ago. The excitement in fintech is similar, though the business ideas are much more on the ground than the pies in the sky of 1999. A mix of factors are pushing for huge changes in the way households engage with money. Technology is the enabler, regulation is sometimes keeping pace and a huge market gap is pushing supply. The year 2015 saw funding of fintech firms rise from $200 million in the previous year to $1,332 million.
Technology is making the world collapse into a smartphone. Back-end clunkiness—or the inability of different software, applications and programmes to talk to one another—make a tech-based process inefficient. The government, under the Digital India initiative, has mandated an open architecture for the five programmes that can ‘talk’ to each other: Aadhaar, e-KYC (know your customer), e-Sign (legally accepted digital document signing), privacy-protected data sharing, and the Unified Payments Interface or UPI that allows money transfer using a single identifier. Called the ‘India Stack’, this set of programmes is allowing fintech firms to make finance friendly. One of the fintech entrepreneurs shared the results of a survey that was done to find out why households do not access formal finance, and the top reasons were: lack of understanding, the difficulty in on-boarding and trust. Most firms are trying to solve these issues around household finance.
If technology is enabling, then regulators too are slowly changing and can no longer ignore the push of technology. But, regulations are moving at different speeds across the four financial sector regulators. All regulators want easier on-boarding, transactions and exit process; but have been unable to work with each other to give the individuals a common interface. To enable individuals to see their entire financial life on one screen, the Reserve Bank of India announced the final regulations of ‘account aggregators’ last week. You can read the regulation at https://mintne.ws/2bQx4dY.
The idea is to allow an individual to see all his accounts across financial institutions in a common format. This is not just about banking products like deposits and government securities, but also products that come under other regulators, such as for: stocks, bonds, mutual funds, insurance policies and the National Pension Scheme (NPS). You’ll be able to see details of all your insurance policies: life, health, home and vehicle. You should be able to see your NPS corpus, details of contributions and what your funds are returning. You should be able to look at all the bonds you have and what they are worth. The aggregator will be an non-banking financial company (NBFC) that will charge for this service. The data will belong to the customer and her consent will be needed before it can be shared with other businesses. Nothing in the regulation seems to prevent an aggregator from tying up with product sellers to enable transactions, but they themselves are barred.
Why should you care? Your financial life is going to get smoother in the next few years. The best brains, backed by lots of money and a more tech-friendly regulatory environment, are giving the much-needed push to this under-served area.
End note
I get calls from at least one fintech company a week. Most people want to just talk about their plans, get some free advice on what works, and of course, hope to get a mention in these pages. I mostly talk to everybody who calls. Plugging into the excitement is a big high. So many bright people. So many great ideas. I can only say that out of all this entrepreneurial excitement will come those two or three ideas that will truly transform Indian household finance. The demand side is huge and under-served.
Monika Halan works in the area of consumer protection in finance. She is consulting editor Mint, consultant NIPFP, member of the Financial Redress Agency Task Force and on the board of FPSB India. She can be reached at monika.h@livemint.com.
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