Technology, these days, has an influence on everything we do – right from shopping to socialising. It has been turning the financial sector upside down for the last few years. A crop of Fintech startups has come up in recent times, which, in my opinion, is another example of how technology has lost its way. It is particularly appealing to a generation that has grown up with mobile devices. We can invest, make payments and even avail loans just the way we shop for clothes.
While we are amazed at how easy these technologies have made our lives, we forget to give due consideration to the risks posed by these. One of the biggest apprehensions about Fintech is that its advancement is outpacing its governance. It is largely believed to be one of the biggest threats to global financial security. This could be largely attributed to the lack of regulations. Fintech companies find newer avenues and applications for themselves on a regular basis. What started as a mere payment platform, today, is capable of offering all the services that a full-fledged financial institution can, and maybe more. This makes it very difficult to define the scope of Fintech and thereby to regulate it.
Cyber security is another area of concern. We trust faceless operators and bodiless institutes with our financial data – data which could potentially leave us destitute. We don’t have to go too far back in history to look for instances of data leaks. Fintech companies do not have a robust safety mechanism. Most of them rely on the capabilities of technologies like Blockchain to protect themselves. This needs to be addressed. There must be multiple layers of security guarding the users’ data. Otherwise it won’t take good hackers long to find a minor vulnerability.
Another thing we should be losing our sleep over is how easy Fintech makes it to replace humans from the system. It can be quite easily concluded from the fact that the median employee strength of Fintech companies in India is only 14. Technology is supposed to assist human beings, not replace them. It is useless to make superior quality services if there are no takers for those. With the increasing application of systems like AI, the continuation of Fintech at this pace will lead to the implosion of the financial sector around the globe.
There are about 400 Fintech companies currently operating in India. Of these, 64% have been operational for more than 3 years. Interestingly, only 7% of these are profitable. There is a lot of investment riding on Fintech firms. It is reminiscent, not so subtly, of the dot-com bubble. Looking at the numbers, one cannot help wondering if this is also moving in the same direction.
The fact that Fintech has revolutionised the way we handle our finances is unquestionable. But what it has for us in the future is still open to a lot of scepticism. After all, we are the ones who need to decide where to draw the line.
Prabhul Prasad
