Event ReportsPublished on Sep 18, 2018
CM’s aide inaugurates ORF Mumbai tech talk series

Mumbai is the natural commercial and financial capital of India. However, in order to take a lead as a global fintech hub, the city needs supportive policies, as well as an enabling ecosystem, remarked Kaustubh Dhavse, Officer on Special Duty, Chief Minister’s Office, Government of Maharashtra. Dhavse was delivering his keynote address at the inaugural Mumbai Tech Talk, organised by Observer Research Foundation at the Bombay Stock Exchange (BSE on 7 September 2018.

The theme for the inaugural Mumbai Tech Talk was “Mumbai: From India’s Financial Capital to a Global Fintech Hub” and the focus was on the ambitious Fintech policy of the Government of Maharashtra, announced in early 2018, which aims to establish a Global Fintech Hub in the Mumbai Metropolitan Region. The keynote by Dhavse was followed by a panel discussion on how to create an enabling ecosystem for fintech companies in Mumbai on par with other global fintech hubs.

Dhavse noted that the big game changer in the last decade has been the availability of new data. Suddenly, data could be correlated and used to offer new services and better access to services that the traditional banking system had been unable to do. A particular issue for any government is how to reach the whole population, and while before, expanding access to financial services meant new branches, today geography is no longer an issue. Instead, the focus is on how to use technology and data to bridge the gaps between the aspirations of the large population and what the government can do.

Seen from this perspective, fintech is a technology to deliver financial services to all. We need to weave an ecosystem to support the best ideas that come along. This has propelled the Government of Maharashtra to put together a policy framework that builds on the natural advantage that Mumbai and Maharashtra has in financial services in this State.

With respect to creating a fintech hub in Mumbai, Dhavse stressed on four key parts of the ambitious fintech policy the Government of Maharashtra is implementing:

1. To encourage new ideas, innovation and entrepreneurship, a fund of INR 250 crore has been set up. Entrepreneurs will be encouraged to participate in government programmes, and will be offered funding. 2. The Government of Maharashtra has employed a fintech officer from the private sector who works with the Government departments to implement the policy and strengthen the fintech ecosystem. 3. Maharashtra has set up the ‘Maharashtra FinTech Registry’ – a registry for companies, incubators and other organisations in the fintech ecosystem to enable better engagement between the fintech community and government. 4. The Government of Maharashtra will leverage the use of fintech technology and expertise, for example, in blockshain and artificial intelligence, to solve governance issues. Chief Minister of Maharashtra Devendra Fadnavis has set an ambitious goal of incubating 500 companies directly or indirectly through the policy in the next two years Dhavse ended by noting that the policy has received interest from elsewhere in India, and the Government of Andhra Pradesh is looking to implement the policy as well.

Earlier, Dhaval Desai, Vice-President, ORF Mumbai, in his opening remarks, noted that as India is entering the fourth industrial revolution, riding on the crest of digital innovation, blockchain and artificial intelligence, fintech will be one of the most disruptive sectors, holding great promise both for growth, job creation and inclusion.

Ashish Chauhan, MD and CEO, Bombay Stock Exchange, welcomed the audience to the BSE, and noted that this is an exciting time for Mumbai. The city lost out on the first IT boom, but should not lose out on the fintech boom. Mumbai should be the centre for at least half of the USD 100 trillion India will be creating in the next 40 years. India has about 23% of the world’s young population, and this is India’s future. A large portion of wealth is going to be created by this group.

Chauhan further noted that the present generation is the first to see such rapid technological change, making this period very different from previous ones. In the next 30-40 years, we will see many new disruptive technologies and the wealth that is going to be created in the next 40 years has not been created in the previous ten thousand years.

Elites used to learn the new technologies and then manage the people below, whether through class, caste or feudal hierarchies. However Mr. Chauhan believes we will see major disruption in these systems going forward as society – and business - is no longer relying on traditional hierarchical and linear ways of operating due to technological disruptions. We can expect non-linearity.

Samir Saran, President, ORF, pointed to three interlinked certainties for India. First, India will grow to a USD 10 trillion economy in the next 15-20 years. Second, growth will be accompanied by the rise of cities and provinces. India has to be reimagined, with the locus of interventions coming from municipalities and local governments, followed by State governments and lastly the Central government. Third, the bottom of the pyramid will rise, in terms of opportunities, per capita income, access to various government systems, and public provisions over the next 20 years, as India brings in more citizens as consumers of services. Therefore, the size of the Indian consumer market looking for insurance, pension plans, and other financial instruments, is going to be larger than the OECD market today.

Dr. Saran emphasised that fintech has a crucial role to play in catering to the demography that the old institutions have by design excluded. However, for this to become a reality, fintech needs to reinvent financial services and products, and their pricing, to offer appropriate instruments that are both accessible and affordable to the poor. Lastly, a larger challenge for fintech is to solve real world problems aligned with the Sustainable Development Goals. India has a plethora of challenges and problems for the fintech sector to solve, and in that sense, India is a land of opportunity.

The panel discussion that followed the inaugural session delved into challenges in the fintech ecosystem, and how to transform it. The panel was moderated by Lina Sonne, Fellow, ORF and included Amey Mashelkar, Head, Reliance GenNext Hub; Vishal Kanvaty, Senior VP Product and Innovation, NPCI; and Amit Shah, Chief Fintech Officer, YES Bank. The panel identified a number of challenges and opportunities in Mumbai’s fintech ecosystem.

With the new fintech policy, it is clear that Mumbai is headed in the right direction, encouraging people with experience to launch their own startups, Amey Mashelkar noted. At the same time, it is important to ensure that schemes within the policy are easily accessible. A current lacuna is advisory and guidance on regulatory risks in fintech, which is a fast-changing environment.

Amit Shah highlighted that a survey of fintech startups that Yes Bank had undertaken, showed that there is a lack of early stage capital in the ecosystem. Such finance, while small in ticket size, is needed to enable new firms to build and test their idea in order to get to the proof of concept stage, from where they can raise further funding.

It is important to have a mechanism to allow for early failure and validation, Vishal Kavaty noted. Early validation is critical to a startup, and an automated system where the industry can provide feedback to problems faced by the startups, would offer a huge boost.

Data is a key driver of fintechs, and today the main option is to partner with banks (for customer data). There is a huge opportunity, according to Amit Shah, for the government to offer digitised data in an organised and timely manner. Given the large amount of data collected on a daily basis, this could prove a boon for startups.

The panellists agreed that there is currently a lack of pipeline - a good number of emerging firms in fintech. Many fintech startups go through multiple accelerator and incubator programmes. While there are some good fintechs, there are not enough, and building partnerships and alliances to enable more startups to emerge and use available technology and data is crucial.

Related to the lack of pipeline, is a lack of talent with deep technical expertise. Vishal Kanvaty highlighted that India has a long way to go to match other prominent countries, with respect to deep expertise in new technologies. Amit Shah agreed, noting that most of Indian fintechs are not very deep-tech solutions, and those that have created such solutions have done it in collaboration with experts from other countries. In order to spur innovation in fintech, therefore, Mumbai needs to get the talent equation right, which requires significant investment.

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