RBI dy guv red flags the other side of digitisation of financial services coin
Swaminathan said fintech firms often "operate outside the regulatory envelope and are unconstrained by legacy systems that typically encumber traditional banks"
After the euphoria, caution. Deputy governor of the Reserve Bank of India (RBI), Swaminathan J, has cautioned that fintech platforms are certainly fleet-footed and offer customised financial products to a large number of customers, but they are also amenable to misuse and fraud. The senior official was speaking at the Global Money Week 2024 in Paris this week when he emphasised their “agility and adaptability in offering customised financial products” but did not forget to raise the red flag over the sector as well.
Swaminathan said fintech firms often “operate outside the regulatory envelope and are unconstrained by legacy systems that typically encumber traditional banks.”
The risks that fintech entities typically carry include “cyberattacks, data breaches, and, often, some financial harm.” The other side of the fintech coin is offering immense benefits such as accessibility and hyper-personalisation.
“These new risks must be addressed through robust regulatory frameworks, enhanced cybersecurity measures, and increased consumer awareness initiatives,” said the RBI deputy governor while also reiterating that consumers could find redressal of grievances difficult especially due to lack of transparency these companies.
To raise the level of security, entities that are regulated have to deploy multi-level authentication for all-electric mode payments and have to constantly undertake risk assessments of digital payment products and continuously caution customers if these is any hint of suspicious transactions. However, Swaminathan said, “Despite all these measures, unauthorised transactions due to compromised credentials from phishing attacks or customer negligence are not uncommon.”
The deputy governor pointed out that there are certain tenets that should be followed to minimise risks associated with digitatisation. These are robust regulatory frameworks, improved cybersecurity measures and continuous consumer awareness exercise. He also reiterated that there is a vast constituency of customers — senior citizens to be precise – who are extremely vulnerable to cyberattacks and financial frauds on the web, a domain that is unfamiliar to most senior citizens.