Navigating Trends & Transformations in India's Payment Landscape

Aditi Olemann is a Senior leader in one of the leading payment aggregators in India with ten years of experience in fintech, AI, and the B2B technology space. She previously co-founded a company called Myelin Foundry, specializing in deep-tech AI. She also has experience working in tech & innovation at Tata Sons - the holding company of the Tata Group. Aditi received her engineering degree from IIT Guwahati and her management degree from London Business School. In an interaction with Thiruamuthan, a correspondent from Industry Outlook magazine, Aditi shares insights on regulatory impacts, digital payment trends, tech roles, and collaboration for a secure cashless economy in India.

How are recent regulatory changes impacting India's financial sector’s approach to payments?

Many regulatory changes in the last few years have directly impacted the financial services industry. Jotting down a few notable ones: 

The Digital Lending Guidelines released in 2022 had a large impact on shaping the future of the digital lending industry, especially from a perspective of putting accountability on the regulated lender and ensuring the fintech partners also have clarity on their role in the lending process.

The Master KYC guidelines released by the regulator were a major milestone in identity verification and on boarding. While this resulted in banks and regulated entities having to make important changes in their on boarding processes, it also helped the digital verification industry grow by leaps and bounds. 

The release of the Payment Aggregator guidelines was a watershed moment for the online payment industry in India since it established that only entities licensed and regulated by RBI could aggregate customer payments on behalf of merchants. This ensured only reputable, compliant organization could handle online payments by customers. A similar payment aggregation guideline for cross-border payments (PA-CB) has also been released to streamline international inward and outward payments.

 What key trends in digital payments do you see shaping the industry?

The digital payments industry has been evolving at a breakneck pace, both from an innovation and a regulatory perspective. 

A few key trends that I believe will play a critical role

Digital Identity Verification: With the increasing focus on security, the organization's payments industry is adopting robust digital identity verification mechanisms to ensure the safety of transactions. Embracing technologies like biometrics and two-factor authentication can enhance security.

Embedded Finance and API Banking: The trend of embedded finance, where financial services are integrated into non-financial platforms, is becoming mainstream. For example, you can avail yourself of a BNPL option on your favorite e-commerce marketplace or pay your credit card bill from your investment app.

Rise of vertical-specific fintech and Neobanks: While neobanks and B2C fintechs have been around for a while, and the concept of super app has been the ultimate holy grail, we are seeing more and more companies focusing on solving very specific problems for a customer vertical. Instead of being a one-shop-fits-all-all, companies focus on solving deep for a particular customer segment - for example, building a solution for Indian students studying abroad. These companies may have a smaller Total addressable market but have larger customer lifetime value due to high stickiness to vertical-specific solutions.

How can the finance sector leverage technology to enhance payment services and maintain a competitive position in the Indian market?

Technology has always been the center stage in building any financial services product. There is an increased focus on risk management and mitigation through Machine Learning based algorithms. Traditionally, card networks have been masters in this space for enabling fraud prevention. Still, we can see more fintechs, neobanks, payment providers, and banks adopting AI/ML-based risk and fraud management tools. The other basic but important tool is an API - APIs are like bridges, helping connect two systems and allowing them to interact seamlessly. Financial services companies are now interacting and sharing info and data through API Banking to provide a very rich experience to consumers. 

What measures should be taken to provide inclusive and customer-centric payment solutions, considering the diverse preferences of Indian consumers?

The financial services and fintech industry is continually building customer-centric solutions customized to the needs of Indian consumers. A few key things can be ensured. 

Focus on vocabulary: As a country with so much variety in regional languages, B2C fintechs focusing on solving consumer needs can provide deeply customized solutions in local languages that enable easier adoption for consumers. 

Design accessibility: India has a unique digital journey where the country skipped computer generation and leapfrogged directly into internet access via mobile devices. Malargemnumber app users are not very technology savvy, making it super important to have applications built with clear navigation, compatibility with lower-end mobile devices, and ease of use for the consumer. This becomes even more important for payments and financial services since you deal with people’s money. 

Inclusive and flexible on boarding & KYC: While Aadhar has become the all-encompassing KYC ID, India still faces the challenge of having different documents for verification - especially for address proof, KYB, etc. Giving the multiple ID verification option helps customers have a much smoother on boarding experience while staying c, compliant w, with government mandates. 

Given the government’s push for a cashless economy, how can the finance sector collaborate with regulators to ensure a secure and efficient payment ecosystem in India?

While the finance sector globally is one of the heavily regulated sectors, the Indian fintech and financial services industry has always been a good example of proactive collaboration and partnership with the regulator and the government to enable some of the world's leading innovations, such as UPI. 

A few things that the sector can continue focussing on:

Fostering open dialogue with the regulator, especially regarding new products and services, can enable the regulator to get early feedback on consumer trends and how to effectively balance them with compliance.

Active participation in industry bodies also enables healthy conversations and allows the industry to have its voice heard, especially in light of major regulatory changes. A good example is the Digital Lenders Association of India (DLAI), the collective voice of the digital lending industry in India. 

Financial Services and Fintechs should also play an active role in fraud and money laundering prevention by having robust internal risk processes in place - even if they are not a regulated entity - and doing report-outs to the Financial Intelligence Unit (FIU) in case of any suspicious activity by customers.