Flagging two items in this blog post
1. The General Data Protection Regulation (GDPR) comes into force from May 25, 2018 in Europe - Emma Firth has summarised ten points we should know
In India, we are just beginning to shape the way data is shared, with more discussion on what Indian legislation can look like.
2. What does Open Banking mean for banks? Chris Skinner in his blog gives a hint of the global dynamics:
We are hearing a lot about banks talking partnership and co-creation, but we haven’t seen much of that happening so far. There may be a lot more in the future, but true partnering between FinTechs and banks is few and far between today. In fact, it appears that most banks are a bit confused about what’s going on. Half of the major banks weren’t ready for Open Banking in time, and many are asking where’s the business case for doing Open Banking, especially if it demands high risk and costly investments in systems upgrades and replacements.
In summary, most of the attendees at my dinner felt there are a lot of things changing around the banks, but little changing in the banks themselves. They believe Open Banking and Open APIs will change banks, but it will be nibbling around the edges of the system and that, by 2025, the big banks will be leaner, faster and cooler, but they will still be the big banks
This is a bit of a dampner for those in India, who are optimistic of fintech taking the baton from banks and leading the spead of financial inclusion. Of course, there is the possibility that India could lead the world by showing a totally different pattern of partnership and dynamism.
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As the PMJDY and DBT mission have significantly improved access to banking and financial services, the government should now pay closer attention to the examples of exclusion that are coming to the fore. The hearings in the Supreme Court on Aadhaar have brought to light instances where authentication failures occur, and while the government has argued that authentication failures do not lead to denial of benefits, there is no data in the public domain. It is true that no system can be made perfect, however, the intention of the system must be to address failures where they occur, resolve them and ensure they do not persist.
It is therefore important for the government to institute a monitoring mechanism for transaction failures and denial of service at a granular level. Transaction failures occur for many reasons. For instance, the MicroSave and Helix Institute of Institute of Digital Finance survey, February 2018 showed that agents have differential experiences across software - Out of the agents who use only bank-specific software, 65% experience service downtime compared to 49% among those who use other platforms; out of the agents who use only mobile banking app, 30% experience service downtime compared to 61% among others and most importantly, among the agents who deny at least one customer per day, 38% reported fingerprint authentication as the primary reason for denial of service. The Economic Survey 2016-17 had also flagged the issue of higher failure rate of off-us transactions compared to on-us transactions. It is essential that the government go into the transactions data at the granular level and identify the specific glitches at each location. There is clearly a need for more data and analysis for greater understanding of where the transaction failures stem from.
At the crux of the challenge is that without granular data, specific problems at specific locations will not be understood and the growing challenges of exclusion, rising from digitisation of payments, will not be addressed.
Going one step further, a CGAP work has uncovered the many faces of social exclusion that can be addressed along with financial inclusion measures, provided the issues are identified correctly. For example, the CGAP data show that women above 55 years old have limited access to basic services such as electricity, clean water, sanitation or transportation, more so than their younger peers. This is clearly an area that should be prioritized since financial solutions can enable access to these essential services. The Niti Aayog can initiate work in this area for India, to identify the specific issues and their possible financial solutions.
Now that the universality of access to financial services has been addressed through the PMJDY and digital payments have taken root in the country, a closer look at the issues that are arising at a granular level will give India a much more inclusive society, financially and socially.
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