Press Release

Embedded Finance Is Set To Revolutionise The Banking Industry: Shri R. Gandhi

Embedded finance is set to revolutionise the banking industry, but it will not replace traditional banking and financial services

Embedded finance is set to revolutionise the banking industry, but it will not replace traditional banking and financial services, stated Shri R. Gandhi, Former Deputy Governor of the Reserve Bank of India, during his keynote address at the 2nd National Summit on Neo Banks. The national summit theme of “Banking on Embedded Finance” was organised by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The event's Chief Guest, Shri R. Gandhi, spoke on the concept of embedded finance, which involves the seamless integration of financial services with non-banking companies. "Embedded finance provides tremendous opportunities for innovation and expansion, but these ventures must be supported by banks, insurance companies, or brokerage firms," he said. To create a robust and regulated environment, the former Deputy Governor underlined the importance of coordination and cooperation among non-banks and financial institutions. He expressed confidence in embedded finance's capacity to broaden the spectrum of financial services and suit clients' increasing needs.

Shri Gandhi also underlined the importance of addressing the one-sided character of banking services, in which clients confront limited negotiating leverage and rising expenses. "Market reactions have resulted in the emergence of non-banking entities challenging traditional financial institutions' dominance. Non-banks have effectively entered different industries, such as automobiles and ATMs, carving out their own niche alongside regular banks. These non-banking businesses have used technology to disrupt the financial sector and provide specialist services that supplement bank offerings”, said Shri R. Gandhi.

While appreciating fintech start-ups' tremendous potential, Shri R. Gandhi emphasised that a complete disintermediation of banks is not feasible due to their extensive product portfolios and complex services. The significance of collaboration between fintech firms and traditional financial institutions in order to capitalise on their respective capabilities."

In terms of legislation, Shri R. Gandhi highlighted India's regulatory strategy, which prioritises extensive control of all financial services companies. He also stressed the need of risk management in the financial sector, as well as the need for rules to protect customers' interests and preserve the financial system's stability.

Shri S Ramann, CMD of Small Industries Development Bank of India (SIDBI), highlighted various critical aspects in his address regarding India's development beginning April 19, 2021. He remarked that there is a need for technology-driven disruption in the financial sector, particularly in delivering credit at a lower cost. The gap that still persists in access to bank loans, with the majority of the population dependent on microfinance organisations (MFIs) and money lenders. the significance of neo banking, claiming that it fills the void left by traditional banks in providing loans to individuals and small enterprises in remote places."

Shri Ramann highlighted the importance of incorporating microinsurance into loans to manage situations that can divert funds away from their intended purposes. He also explained the potential of technology, in expediting loan processing and risk assessment by using the GST data and digital scoring, The development of a solid infrastructure to assist the unserved segment, with the goal of bringing a significant number of companies onto the ODM registration platform."

Shri Ramann acknowledged the progress made in digitising the lending process but emphasised the need for continued collaboration and sharing of ideas to solve challenges and propel the country's development.