Introduction :-

The Bali Fintech Agenda is a set of 12 policy elements established to help member countries harness the benefits and opportunities of rapid advances in financial technology (fintech), while at the same time also managing the risks that arise .The Agenda proposes a framework of high-level issues that countries should consider in their own domestic policy discussions and aims to guide staff from the two institutions in their own work and dialogue with national authorities. The 12 elements are distilled from members' own experiences and cover topics relating broadly to enabling fintech, building the foundations of the digital economy, ensuring financial sector resilience, addressing risks, promoting international cooperation, improve cross-border payments and remittance transfer systems. It provides a framework to support the Sustainable Development Goals, particularly in low-income countries,
where access to financial services is low. The International Monetary Fund (IMF) and the World Bank launched the Bali Fintech Agenda.

What is Fintech?

• Fintech (financial technology) is used describe new tech that seeks to improve and automate the delivery and use of financial services.
• At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones.

What are the risks of Fintech ?

• Fintech tends to be lightly regulated or unregulated in some jurisdictions and soundness and stability are concerns.
• Payments and e-money operators use essentially private money, which carries credit and settlement risks.
• Broader financial stability questions arise as fintech expands from a low base and linkages with banks grow.
• Combating cyber-security vulnerabilities is increasingly important.
• Crypto-currency raise issues related to excessive price volatility, lack of investor, illicit activities, and regulatory arbitrage and contagion.
• Other fintech risks relate to monetary policy transmission, financial safety nets, lender-of-last resort and questions regarding financial crisis management and resolution.
• There are increasing concerns associated with data privacy, data security and money laundering.

Fintech in India :- 

• According to EY’s Fintech Adoption Index 2017, India has the second highest fintech adoption rate in the world.
• With a range of options, including e-wallets, lending and insurance, the variety of services provided in this sector are immense and have changed the way consumers carry out their daily transactions.
• Fintech in India is especially advantageous, since the country boasts of an unrivalled youth demographic which is rapidly growing. Furthermore, smartphone penetration is likely to witness an upsurge - from 53% in 2014 to 64% by 2018.
• The financial services market in India is primarily untapped, with 40% of the population having no association with any bank and more than 80% of the transactions carried out through cash. This represents an opportunity for Fintech start-ups to massively spread their wings in different segments.

Challenges in India :-

• Adoption of Fintech: Adoption becomes complicated in an economy like India’s which is dominated by micro, small and medium enterprises (MSMEs). Going digital for payments can be complicated.
• Cost involved in Integration: Integrating with Fintech doesn’t come cheap. The cost can be prohibitive for MSMEs.
• Regulatory framework: Regulatory uncertainty in the fintech sector is posing a major challenge. This would require “the modification and adaptation of regulatory frameworks to contain risks of arbitrage, while recognizing that regulation should remain proportionate to the risks.” The regulatory framework for entering in Indian market and performing as one is highly restrictive in nature.
• Infrastructure: Poor infrastructure in terms of Internet Connectivity, unbanked population and low financial literacy level are another hindrance.
• Cash Dependency: The conservative approach of users and merchants to deal in cash is really hard to change. Since it’s not part of financial life but a way to their financial transactions.
• Frauds: Transaction can easily turn into fraud by tech people aware of glitches in software.
• Lack of government support: Lack of government support and some sort of Incentives for protecting the Interest of Fintech in India is demoralizing the start and entrepreneurs at very basic level.
• Lack of investors: Fintech do not get the required seed capital and other required investment on time which make their operations and functioning really below the mark.

Way forward :-

• Focusing on the end user: QR codes have been viewed by fintech companies as a way to acquire merchants at a low cost. End customers are either unfamiliar with navigating the app, or the person sent to make the purchase does not have a smartphone, does not own and control a bank account, or both. Fintech providers have to consider this audience while developing a payment solution.
• Ensure solution for better alternative: The availability of small change, which is often refused by banks owing to high storage and transportation costs, inevitably finds its way to small merchants and households, and is used for low-value transactions. Fintech needs to tap the market by ensuring easy small transactions.
• Identify and empower change agents: Fintechs could offer business value to merchants for encouraging end customers to pay digitally. A dedicated helpline or interactive voice response service (IVRS) for merchants can help address ongoing issues with using the QR-UPI solution.
• Establish clear business and customer value: Many businesses, which operate in the low-income space, have low profit margins. However, digital financial solutions can lower costs or increase revenue at a marginal cost, driving business value. Hence understanding the need of market becomes really important.
• Create an Enabling Policy Environment: The creation of a 'regulatory sandbox' - a 'safe space' for businesses and startups to co-create innovative products, services and business models, without any immediate regulatory consequences and also providing cyber security becomes important.
• Access to Risk Capital: This is critical to fund innovative ideas and startups. It can be addressed by developing funding mechanisms, including the government setting up a fund of funds or by instituting a matching fund concept along with the private sector.