CIO Insider

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The Right Recipe Of Success For Capital Markets

By Vikas Narula, VP- IT, AU Small Finance Bank

An experienced Senior Information Technology Manager with a demonstrated history of working in the banking industry. His areas of expertise include Storage Area Network (SAN), Requirements Analysis, VMware ESX, HP Products, and WSUS.

Capital markets are a key indicator of economic strength of any country. It is one of the best sources of finance, for the companies, and offers a spectrum of investment avenues to the investors. This in turn encourages capital creation in the economy. Capital Market is composed of institutions and mechanisms with the help of which medium- and long-term funds are combined and made available to in dividuals, businesses and government. Including both private placement sources as well as organized market like securities exchange.

Primary Market: Otherwise called as New Issues Market, it is the market for the trading of new securities, for the first time.

Secondary Market: Secondary Market can be described as the market for old securities, in the sense that securities which are previously issued in the primary market are traded here.

There are many challenges in Indian Capital market like lack of diversity in the financial instruments, lack of control over the fair disclosure of financial information, poor growth in the secondary market, Manipulation of security prices etc.

At the same time there are many initiatives taken by government to give a boost to this sector by economic liberalization, promoting more private sector banks, promotion of Mutual Funds, regulation of NRI Investments, DFI, online trading in Indian capital market and more.

Press and media have contributed a lot in popularizing the Indian capital market. Simultaneously the mutual funds and merchant banks have been asked to set apart a portion of their funds towards educating the public on the developments in the Indian capital market. The more the people are aware about the calculated

risk involved in earning money in capital markets the more number of people will gravitate towards it.

Fintech and BFSI:
Fintech refers to the scope of financial services available on digital platforms. This new disruption in the banking and financial services sector has had a wide-ranging impact. Key service offerings to emerge on digital platforms includes Peer-to-Peer (P2P) Lending Services, digital payment system, remittance services, Personal Finance or Retail Investment Services, Equity Funding Services, Cryptocurrency although it is not legalised in Indian market.

Fintech service firms are currently redefining the way companies and consumers conduct transactions on a daily basis like card less payment system, Aadhar enabled payment systems, payment wallets etc. This is why global investments into fintech ventures have been increasing at record speed. The figures for the year 2018 tripled over the previous year. The money raised by venture capital-backed financial technology companies in 2018 is up 120 percent from the previous year.

Fintech service firms are currently redefining the way companies and consumers conduct transactions on a daily basis

India has a large untapped market for financial service technology start-ups – India has long been a cash economy. Until November last year, nearly 95 percent of transactions were conducted in cash, with nearly 90 percent of merchants unable to accept any other form of payment. Under RBI’s current mandate, Indian consumers can be partially liable for bearing the cost of fraud if they fail to report it within three days of occurrence, so fraud concerns have a real potential impact on Indian consumers’ day-to-day lives and their ability to make ends meet.

In India traditional banks & NBFCs use technology to calculate credit scores, while fintech ventures use machine learning algorithms and alternative data points such as social media footprints, call records, shopping histories, and payments to utility service providers to increase efficiency and provide greater access to credit.

Through digitizing current process and data mining, applying new algorithms and machine learning which will help in understanding customers current and future needs will take fintech ventures to new heights.

Opportunities and challenges in fintech start-ups are in line with Indian economic growth. The government’s pro-start-up policies and flexible regulatory conditions of Reserve Bank of India (RBI is definitely going to play a major role in defining this fintech journey. The biggest challenge for this nascent sector is marketing the services and influencing financial behaviour. This task is not an easy. Fintech companies are trying to achieve this by using proprietary algorithms and use of Artificial Intelligence (AI).

Add to this a strong and responsive regulatory infrastructure to keep pace with the speed of technological innovation along with right incentives, policies; and we have a recipe for success. Right combination of incentives, policies, and regulation will make a global platform and favourable environment to achieve new raise in this sector. However, policies and governance will need to match the speed of innovation in this sector, particularly to ensure secure and transparent growth.

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