Fintech Fiasco: Risky Ops at the Core

February 7, 2024
1 min read

Fintech Fiasco: Operational Risk At The Core

How has the fintech landscape evolved since 2010? Explore regulatory milestones, Paytm’s ban fallout, and risk mitigation strategies.

The Evolution of Fintech: A Decade of Disruption

There has been a chorus on digital banking since 2010 when the Fintechs came into being. Brick and mortar banking, rather branch banking in physical form, was considered archaic and would serve limited purpose for effective future banking. The ease of payment transactions through a smart phone gave the real push.

Regulatory Winds of Change: Key Milestones in Digital Banking

Reserve Bank of India stirred the hornet’s nest with its decision to ban fresh deposits and top ups in Paytm Payments Bank effective February 29, 2024. During the last few years five interesting things happened in the regulatory regime of digital banking: 1.Account Aggregator – NBFC with AA was set up for data exchange with customer consent, 2.Bharat Bill Payment System, 3. Prepaid instruments, 4.Offline UPI payments, and 5.Rupay Credit Card via UPI.

Paytm Ban Fallout: Unpacking the Risks and Shareholding Dynamics

If we look at the happenings of the Paytm Bank, only 49 percent of the shares are held by multiple share holders while the rest is held by just one individual, Vijay Shekhar Sharma, a deft operator in digital banking and risk management.

Mitigating Risks in Fintech: Insights from RBI and McKinsey

The larger question is the reliability of the fintech as a bankable entity. During the last two to three years, several customers lost billions of rupees in a jiffy in their transactions.

The McKinsey research team see three trends that could shape the next phase of fintech growth.

Companies in the growth stage (series C and beyond) showed the highest sensitivity to 2022’s downturn. Fintechs in the early and pre-seed stages were more resilient. Funding for B2B fintechs was more resilient than that for B2C ones.

Don't Miss