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At Snowflake, a cloud computing-based AI data cloud company, there’s a strong belief: there is no AI strategy without a data strategy in place. Data and AI together empower decision-making, create unparalleled data products and enhance customer experience -especially in the fintech sector. 

India has witnessed the rapid growth of swift and secure fintech solutions in the last decade. However, this growth has also prompted a rise in financial fraud, cyberthreats and other risk and security concerns. The sheer volume of online transactions has led to bad faith actors searching for vulnerabilities in the system. According to a survey conducted by Local Circles, nearly 47% of urban Indians have reported an instance of financial fraud in the last 3 years, with credit card fraud and fraudulent UPI transactions in the lead.

Beyond the pre-existing challenges of data governance, security and access, newer challenges are now cropping up in the wake of Generative AI. These include hallucinations, bias, toxicity and inaccurate results.

Can AI facilitate this growth and help mitigate risks within the industry? Furthermore, can AI and data be bolstered by robust security, making them trusted tools for collaboration? 

Snowflake recently brought together leading fintech companies for a conversation on India’s fintech landscape, market dynamics, and homegrown innovations. Leaders also discussed regulatory compliances and risk management associated with data, business models for monetising data in fintech, and the case for AI and data analytics in fintech. 

Joining Pravin Fernandes, Head Commercial Business, India, Snowflake, were guest speakers Pramod Mehar, Head of Product, myPaisaa; Aditya Prasad, Co-founder and CEO, 50fin; Praveen Varghese, Product Head, Credit Cards, Card91; Achal Ananth, Head of Analytics & Data Platform, PhonePe; Aditya Soni, Founder and CEO and, CheQ; Naveen Budda, Co-founder and CTO, Karmalife Ai; Abhishek Goel, Director and Head – Products, Yubi Securities; Priyesh Srivastava, Co-founder and CTO, OnFinance AI; Kruthika Kumar Muralidharan, Associate Director – Analytics & Data Science, Razorpay; Movin Jain, Founder, Skydo; Abhilash Thirupathy, Founder and CEO, AgriFi.AI; and Srivatsa D V, Chief Data Scientist, Kreditbee. The round table was moderated by Shivani Muthanna, Director – Strategic Partnerships & Content, YourStory.

Exploring the fintech landscape: Innovations, regulations and roadblocks

The panel discussed the current fintech landscape and its immense potential. According to “The Bottomline: Elevation Fintech Report 2023, by Elevation Capital and Mckinsey & Company, the Indian fintech sector is projected to have an annual revenue scale of $70 billion by FY30. Additionally, fintech funding has also grown, capturing 14% of startup funding in 2022.

Speakers praised the epochal United Payments Interface (UPI) and India Stack, crediting them for forming a solid foundation for fintechs in India. 

“Tech has unlocked growth for businesses and customers in a big way. Earlier, businesses would make customers spend an inordinate amount of time worrying about money movements, payroll, taxes and more. Now, the default expectation has become swift and efficient financial services. This is very good for the market and keeps us on our toes,” said Kruthika Kumar Muralidharan, Associate Director – Analytics & Data Science, Razorpay. Earlier, any banking formality had to be completed by visiting a physical branch and waiting in long queues for assistance. Today, Fintech platforms make these processes simple and streamline, with a few taps on a phone screen.

Pramod Mehar, Head of Product, myPaisaa, and Achal Ananth, Head of Analytics & Data Platform, PhonePe, discussed the immense potential of fintech products in Tier II and III cities, where 60-70% of PhonePe users live. This led to a discussion on building inclusivity into the fintech sector, particularly for India’s non-English speaking population. India has made some progress when it comes to financial inclusion. Several regulatory adaptations have made it possible for the use of technology and new business models in the financial services sector. Secondly, the development of digital systems such as Aadhar has eased the process of opening an account in India. Acts like the Pradhan Mantri Jan Dhan Yojana delivered many account openings since its inception.

Finally, UPI has drastically improved the experience of digital payments through a combination of regulatory changes and technological innovation. However, India’s size and diverse population defy easy solutions. Many open accounts remain inactive and half the PMJDY accounts reported a zero balance.

Praveen Varghese, of Card91, also discussed the gap in the modern financial landscape, where banks have the data to create unparalleled financial products but lack tech expertise. On the other hand, fintechs are well versed in drawing rich insights from available information, but lack access to data. He said this gap can be bridged through strategic partnerships. Moving from competition to collaboration, many banks and fintechs are joining hands to offer enhanced services. In 2021, ICICI Bank and Niyo Global sought to increase financial inclusion for Micro, Small and Medium Enterprises (MSME) workers by issuing tailored prepaid cards.

RBI regulations also came in for discussion. While panellists praised the regulatory body, they also discussed how the RBI could be an agent of change for the fintech landscape by capitalising on India’s immense technological prowess. Another shift in the landscape would be the collaboration of fintechs, banking institutions and regulatory bodies who would work with data to usher in a new era of streamlined, easy and trusted AI.

Abhilash Thirupathy, of AgriFi.AI, added a new dimension to the discussion by discussing farmer credit. He said carbon credits will be a game changer for financial institutions and will reduce fraud in agri insurance. 

The KYC conundrum

Many speakers recognised that reliable Know your Customer (KYC) data was one of the biggest challenges.

Abhishek Goel, of Yubi Securities, listed the problems with Central Know Your Customer (CKYC) data: customers with multiple supervising numbers, customers who own multiple PAN and Aadhaar cards, constantly changing regulations around linking Aadhaar and PAN, and the mismatch between customer names and details mentioned on documents. He said all these issues made it “hard to approve KYC documents for loans”.

Srivatsa D V, Chief Data Scientist, Kreditbee, agreed and recommended that the RBI impose certain guardrails to ensure that data collection is organised. However, he added that this was the case with just 20% of the data. 

Movin Jain of Skydo drew a rosier picture when it came to KYC, international remittances, and cross-border payments. 

“The moment you are regulated by the RBI, customers start seeing all these KYC processes as necessary. People are ready to take some of that pain, just because they know that this is mandated by RBI and not something that you’re doing just for fun. So I think that’s one way we get a lot of cooperation from customers” he said. 

From data-driven to data-savvy

Aditya Prasad, of 50Fin, put it succinctly when he said “In God, we trust. For everything else, please use data.”

Speakers across the roundtable agreed that fintechs have moved from data-driven companies to data-savvy companies.

Movin Jain of Skydo added to this, advising companies to ask the right questions from their data. “Don’t look at data before you have a hypothesis, or before you have a strategy. Data is not going to tell you the hypothesis or the strategy. Data is only going to validate or invalidate it. So, let data tell you the answer. But, first, you should have the question” he said.

Banks face unique challenges when it comes to data consumption. According to Praveen Varghese, of Card91, when banks move their data into data warehouses, it becomes difficult for them to pull it out, process it, and derive specific insights in real time. This is an area where fintechs are light years ahead of banks. 

The solution to bridge these gaps is standardisation across the entire financial services landscape, bringing regulators, fintechs, banks and other key players in the ecosystem to create protocols. 

The AI revolution in the fintech industry  

AI will have a long-lasting impact on the fintech industry, helping to solve critical problems – particularly when it comes to fraud detection, greater customer service, personalisation, and data-driven decision making. 

On the other side, key problems for the industry to overcome are a lack of clean data, biases, a reluctance to adopt AI and challenges like a lack of standardisation and harmonisation in using alternate data for AI model training. 

With reams of public data available from a variety of sources, it can become hard for financial institutions to identify the right kind of data.

However, Priyesh Srivastava, of OnFinance AI, said AI will enhance data harmonisation and take a significant burden off engineering teams by identifying data that is ready to be consumed. 

Srivatsa D V, Chief Data Scientist, Kreditbee, concurred, saying that very often identity data is a problem in personal loans. Oftentimes, fintech lenders will find three different identities from three sources, which poses a problem when it comes to underwriting the loan. However, AI is a powerful tool for credit scoring and financial risk management.

“Data has to be very clean. When it comes to anomalies in data, AI works really well, identifying if today’s data is similar to another day’s data,” he said. 

Finally, speakers agreed that companies should create robust data strategies that leverage collective intelligence and create simplified architectures, to speed up AI adoption in India. 

The roundtable ended with a discussion on the Snowflake’s Financial Data Cloud, with speakers discussing the logistics, ethics, and future of sharing datasets in a secure, clear room. 

The Snowflake fintech roundtable discussion was a comprehensive look at India’s fintech landscape and the crucial ways in which AI and data will restructure it. Challenges abound but it is undeniable that with the assistance of new technologies, the fintech sector will be up to the task.