In the rapidly evolving financial sector, balancing growth and risk mitigation has become more critical than ever. The CEO panel discussion, moderated by Manoj Agrawal and featuring industry stalwarts like Sudip Bandyopadhyay, Non-Executive Director, Inditrade Capital Ltd, Malcolm Athaide, Co-founder & CEO, Agrim Housing Finance, Gagan Singla, Managing Director, Blinkx at JM Financial, and Sunita Handa, Chairman, Toyota Financial Services India delved into the intricate interplay between upsurge and risk in the digital age. The dialogue illuminated the multifaceted strategies required to navigate this complex landscape.
The panel opened with a discussion on the current state of digital adoption in the financial sector. Sunita Handa acknowledged the significant strides India has made in digital transactions. According to the Reserve Bank of India’s annual report, more than 99% of retail transactions are conducted through digital modes. This remarkable achievement underscores the rapid adoption of digital payment systems like UPI (Unified Payments Interface). However, Handa pointed out a paradox that highlights the untapped potential in the digital landscape. Despite the high percentage of digital transactions, billions of cash transactions still occur at ATMs, branches, and even at fast terminals.
This paradox is a clear indicator of the digital divide that persists in India. While urban areas and tech-savvy users have embraced digital transactions, a substantial portion of the population, particularly in rural areas, remains reliant on cash. Handa emphasized that this gap needs to be addressed to achieve a truly cashless society. She cited the example of internet penetration, where India, despite having 75 crore internet users, has a penetration rate of only 52.4%. This low penetration rate places India behind even smaller countries like Fiji, which has an 88% internet penetration rate.
Malcolm Athaide brought a unique perspective from the affordable housing finance sector. He highlighted the challenge of providing credit access to millions of informal and lower-middle-class families. Traditional banking systems often exclude these segments due to the lack of formal income documentation. However, Athaide’s company, Agrim Housing Finance, leverages technology to approve home loans quickly, using digital title searches and credit analyses. He stressed the need for innovative solutions to bridge the credit gap, noting that there is a demand for around 100 million homes in India, driven not by lack of money but by lack of credit access. He noted that innovative methods for assessing creditworthiness, such as triangulating income data and analyzing spending patterns, can help extend credit to underserved segments. Athaide argued that as digital tools become more sophisticated, they will enable financial institutions to better understand and serve their customers, thereby driving inclusion.
Sudip Bandyopadhyay offered insights from the microfinance sector. Despite the digital disbursement of loans, he pointed out that repayment collections remain predominantly in cash. This indicates a significant gap in digital adoption among borrowers. “Digital adoption among individuals and households in India is higher because they are tech-savvy, but in Bharat, it is much lower,” Bandyopadhyay noted, calling for a revolution in digital payment methods to enhance financial inclusion, particularly in rural areas. He called for the development of digital payment solutions tailored to the needs of rural and low-income populations. He argued that reducing friction in digital technologies is crucial for broader adoption, emphasising the need to make digital solutions user-friendly for the general public.
Gagan Singla provided a broader, long-term view, attributing slow digital adoption among older, wealthier demographics to cultural factors. He projected that significant change will occur as younger, tech-native generations gain financial influence. “It is a generation issue, more than innovation issue,” he said. He argued that cultural factors play a significant role in digital adoption, with older generations often reluctant to embrace new technologies.
Singla projected that as the population ages and digital natives become the primary consumers, digital adoption will accelerate, leading to a more inclusive financial ecosystem. He praised India’s regulatory environment for fostering innovation, particularly in the financial stack. He highlighted the breakthrough of UPI functioning without internet access as a testament to India’s commitment to digital inclusion.
Power of Collaboration
The conversation then turned to the pivotal role of collaboration in driving digital adoption and managing risk. Moderator Manoj Agrawal interestingly observed that “collaboration is the new competition,” and asked the panellists how the digital ecosystem is facilitating collaboration.
Sudip Bandyopadhyay emphasised the importance of partnerships, particularly in the insurance sector. He pointed to the success of embedded insurance and frictionless digital transactions, which rely on seamless collaboration between different stakeholders. Giving the example of the seamless availability of insurance along with the airline ticket by paying a little extra, Bandyopadhyay advocated for leveraging existing infrastructures and partnerships to reach a broader audience efficiently. He noted that no single entity can achieve comprehensive digital transformation alone.
Arguing that complex and cumbersome digital processes deter adoption and increase the risk of errors and fraud, Bandyopadhyay called for a customer-centric approach to digital transformation, where technologies are designed to be intuitive and user-friendly. Gagan Singla echoed this sentiment, noting that regulatory changes necessitate collaboration. As regulations become stricter, businesses must operate within defined boundaries, making partnerships essential for expanding reach and offerings. He argued that collaboration allows firms to comply with regulations while still driving innovation and growth.
Malcolm Athaide illustrated collaboration through the concept of co-lending, where financial institutions share the burden of underwriting and capital provision. “This democratises credit access, allowing institutions with extensive distribution networks but limited capital to partner with capital-rich entities,” he remarked.
Athaide highlighted that co-lending not only expands reach but also distributes risk, making it a sustainable model for financial inclusion. Digital inclusion and risk mitigation are not mutually exclusive. Innovative technologies, such as behavioural analytics and alternative credit assessments, can help financial institutions better understand and manage risk. Athaide emphasised that by leveraging data and technology, financial institutions can extend credit to underserved segments while maintaining robust risk controls.
Sunita Handa expanded on the theme of collaboration by highlighting its necessity in customer grievance handling and fraud prevention. She described the complexity of UPI transactions, which can involve multiple participants, and stressed the need for seamless coordination to resolve issues swiftly. “NPCI has done magnificent work in this area, but much more needs to be done,” she noted. Handa advocated for stronger, real-time collaboration between banks, cybercrime police, judiciary, and regulators to combat fraud effectively. Timely and coordinated responses are crucial for maintaining customer trust in digital systems, she added.
The Reserve Bank of India has initiated several measures to facilitate this kind of collaboration, such as the Centralized Payment Fraud Information Registry (CPFIR) and platforms like Daksh. CPFIR is designed to collect and share information about payment frauds across banks, enabling quicker and more coordinated responses to fraud incidents. Daksh, on the other hand, is a reporting system that allows banks to report fraud in a structured and timely manner. However, Handa stressed that these initiatives need to be taken to the next level, where real-time information sharing and coordination become the norm. This would significantly enhance the ability of banks to prevent and respond to fraud, protecting customers and maintaining the integrity of the digital financial system.
Collaborative Digital Future
The panellists collectively painted a picture of a financial sector on the brink of a digital revolution. The path forward involves not only technological innovation but also deep collaboration across stakeholders. By reducing friction in digital processes, extending digital inclusion to underserved areas, and fostering robust partnerships, the financial sector can achieve a synergized upsurge while effectively managing risk.
Mastering the growth continuum in the digital age requires a holistic approach that combines technology, collaboration, and regulatory compliance. The insights shared by these industry leaders offer a roadmap for navigating the challenges and opportunities ahead. As the financial landscape continues to evolve, embracing a collaborative mindset and leveraging innovative technologies will be key to driving growth and inclusion while safeguarding against risks.
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