A rating system for fintech firms can help the entire financial industry, says ex-SBI chairman AK Purwar

A rating system to measure the products, services and security of fintech companies can help the larger financial industry, said AK Purwar, chairman, IIFL Finance and former chairman, SBI.

Speaking on a panel discussion at the BT Banking & Economy Summit 2023, the industry veteran said the lack of an agency that assesses the quality of fintech firms makes it extremely difficult for banks to choose the right fintech partners.

“I have led the largest bank in the country, today I am the chairman of one of the largest NBFCs in the country and I am also the chairman of one of the fintech companies. The biggest problem we find facing the fintech companies and these institutions is that despite the excellent work they do, there is hardly any agency that assesses the quality of their products, services and security.There is no rating system, and therefore it creates huge amount of complications on the part of banks on how and who to outsource , he said.

“If fintech companies can work out some sort of rating system, it will be a big help to the banking system as well as the entire financial industry,” he added.

He also recounted the resistance to computing in the early days and how banks have embraced the digital revolution to expand the scope of technology intervention into many areas, including mutual funds and insurance. He further said that the fear of computerization eating up jobs has been dispelled over the years and that it has created new types of jobs. He said with the advancements in automation and innovation, the world will see a very different kind of financial services environment in the next 5-10 years.

Pralay Mondal, MD and CEO of CSB Bank said that the era of competition between fintechs and banks is long gone that today there is complete clarity that for the good of the consumer and the good of the country, fintechs and banks must come together.

“Fintechs are getting a lot of customers into the banking and credit ecosystem. It’s a great partnership that’s developing, people have understood what the competitive advantages are, and it (the relationship) today is not just partnership, its revenue share, long-term collaborative and co-owner customers,” said Mondal.

Addressing the panel, AP Hota, Independent Director, Federal Bank and former Managing Director and CEO said that India has the best retail payment system in the world and there is a lot more to do in digital payments because the country has a lot more use cases for growth . “UPI generates around 8 billion transactions a month, but the dream is one billion a day, it is possible. A lot of work needs to be done. UPI should not be taken only as a payment product. UPI has triggered all adjacent financial services,” he said.

Hota asked fintech firms and banks in the country to build the next disruptive product by leveraging the capabilities of artificial intelligence and machine learning.

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