The financial sector is undergoing a significant transformation fueled by emerging technologies such as artificial intelligence (AI), blockchain, big data analytics, and cloud computing. These innovations are enhancing security, efficiency, and creating robust business models, thereby opening new opportunities. The panel discussion, “Emerging Technologies Reshaping the Future of Finance,” at Finnoviti-Technoviti 2024, was moderated by Pratik D Jeswani, Senior Manager at EY India where industry leaders to explore these transformative shifts.
The panel featured Kapil Jaiswal, Director Research (InfoSec & AI/ML), Government of India; Kinjal Shah, CTO, Yes Securities; Vamsi Ithamraju, CTO, Axis Mutual Fund; Deepak Bhatia, Information Technology Specialist, India Exim Bank; Subrata Das, Chief Innovation Officer, U GRO Capital; Kiran Belsekar, CISO & IT Governance, Bandhan Life; and Kailashkumar Varodia, COO & CFO, Receivables Exchange of India (RXIL). Their insights highlighted the critical role of technology in reshaping finance.
Pratik D Jeswani initiated the panel discussion by highlighting the crucial role of the BFSI sector in India’s aspiration to become a $5 trillion economy. He posed questions to the panelists about the emerging technologies that the BFSI sector needs to leverage to meet this ambitious goal, as well as the security concerns and inclusion priorities that must be addressed. His comments set the stage for an in-depth exploration of how these technologies are reshaping finance.
Kapil Jaiswal emphasized the importance of leveraging emerging technologies to accelerate India’s growth trajectory. “The mobility of money is crucial,” Jaiswal stated, highlighting the need for a robust backend infrastructure and secure digital interfaces. He pointed out that technologies like cloud computing and AI are essential for driving this transformation but stressed the importance of addressing security and privacy concerns. “The challenge with us is to have a very, very robust backend system,” he noted, emphasizing the need for security measures to protect data.
Jaiswal also discussed the impact of Gen-AI and its differences from previous AI models. Gen-AI models have a retention capability, he explained, cautioning that these models require robust security to prevent unauthorized data extraction. The evolving landscape of AI, with its advanced capabilities, necessitates a focus on Gen-AI security to safeguard sensitive information.
MF Management with AI & ML
Mutual fund AUM (Assets Under Management) has increased drastically in the last five years in India. Vamsi Ithamraju highlighted the potential of AI and ML to enhance the management of mutual funds. He emphasized the importance of getting the basics right before implementing sophisticated AI and ML models. “If you don’t have the basics right, you are not going to get anywhere with all this niche tech,” he remarked.
Vamsi discussed the need for financial inclusion and the role of technology in reaching a broader audience. “Today, it is private. We need to scale it to a citizen scale, population scale,” he said, advocating for the use of vernacular languages and platforms like WhatsApp to engage a diverse audience. He also highlighted the potential of AI and ML in extending financial products and services to a wider population, thus promoting financial inclusion.
Increasing Credit for MSMEs
Kailashkumar Varodia from RXIL addressed the challenges faced by Micro, Small, and Medium Enterprises (MSMEs) in accessing credit. India has almost 6.3 crore MSMEs, but only 11% have access to formal credit. One of the biggest problems MSMEs are facing is liquidity. Varodia emphasized the role of AI and ML in improving credit assessment and operational efficiency. “Technologies bring more readymade information and better monitoring capabilities,” he explained, pointing out that AI and ML can enhance the creditworthiness assessment and fraud detection processes.
Varodia also discussed the impact of digital platforms like the Trade Receivables Discounting System (TReDS) in facilitating MSME financing. “Based on the strength of the buyer, MSMEs are getting funds without the traditional financial assessment,” he said, highlighting how technology is streamlining the credit process for MSMEs. He emphasized the need for continuous monitoring and data analysis to ensure the financial health of MSMEs.
MSME Financing with OCEN
Subrata Das U GRO Capital elaborated on the Open Credit Enablement Network (OCEN) and its potential to revolutionize MSME financing. “The biggest challenge in MSME credit is the lack of formal income documentation,” Das explained, highlighting the sector’s heterogeneity. He pointed out that OCEN, through cash flow-based lending, can address these challenges by leveraging alternate data sources.
OCEN connects MSMEs with lenders through a bridge mechanism, Das said, emphasizing the scalability of this technology. He explained that by using data-driven intelligence, lenders can design credit solutions tailored to the unique needs of various MSMEs. “This is the only way we will give scale to MSME lending,” he asserted, predicting that OCEN will play a crucial role in achieving India’s economic goals.
Role of Blockchain
Kinjal Shah from Yes Securities discussed the potential of blockchain technology in the financial sector. “Blockchain is a solution looking for a problem,” Shah remarked, pointing out that many blockchain applications can be achieved through centralized systems. However, he highlighted the potential of decentralized finance (DeFi) and Web 3.0 to revolutionize inter-bank and inter-country payments.
Shah emphasized the use cases where blockchain thrives, particularly in zero-trust systems. “In cases where trust is an issue, blockchain can provide a reliable solution,” he said, citing examples of large inheritances and inter-family transactions. He also discussed the potential of blockchain in risk management and approval processes, where multiple parties need to collaborate.
Emerging Tech for Trade Finance
Deepak Bhatia from India Exim Bank discussed the challenges and opportunities in the trade finance sector. “There is a dearth of $2.1 trillion in global trade financing,” Bhatia noted, highlighting the significant gap. He emphasized the role of AI, blockchain, and interconnected systems in addressing these challenges.
Transparency, speed, and cost are the three main issues in trade finance, Bhatia explained. He pointed out that blockchain and AI can enhance transparency and speed by providing real-time data and reducing the need for intermediaries. Bhatia also discussed the potential of cryptocurrencies and digital payment systems in reducing transaction costs and improving efficiency in cross-border transactions.
No-Code Platforms in Finance
Kiran Belsekar from Bandhan Life highlighted the transformative potential of no-code platforms in the financial sector. “No-code platforms have really changed the way applications are developed,” Belsekar stated, emphasizing their role in speeding up digital transformation. He pointed out that these platforms empower business users to create technology solutions, thus reducing the time to market.
Belsekar stressed the importance of governance and security in using no-code platforms. “It is crucial to have the right governance and security measures in place,” he said, highlighting the need for secure development practices. He also emphasized the importance of training business users to use these platforms effectively and ensuring compliance with data privacy regulations.
Key Technologies to Watch
The panel discussion underscored the critical role of emerging technologies in reshaping the future of finance. The experts highlighted the importance of addressing security and privacy concerns, ensuring robust governance, and promoting financial inclusion through innovative platforms.
The panel concluded with each expert naming a technology they believe will have a significant impact on the future of finance. Blockchain and AI emerged as the top contenders, with most panelists highlighting their transformative potential.
The consensus was clear: emerging technologies like AI, ML, and blockchain are poised to reshape the financial landscape. By embracing these innovations, the financial sector can enhance efficiency, security, and inclusivity, paving the way for a more robust and dynamic economy.
As India aims to achieve its ambitious economic goals, leveraging these technologies will be crucial. By fostering collaboration between various stakeholders and continuously innovating, the financial sector can navigate the challenges and seize the opportunities presented by this technological revolution. The future of finance is bright, driven by the relentless pursuit of innovation and the transformative power of emerging technologies.
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