Dr.

GRD COLLEGE OF SCIENCE

GRD INSTITUTE OF MANAGEMENT
BBA & BBA RETAIL MANAGEMENT
BATCH 2021-2024

SUBJECT: INTRODUCTION TO FINTECH

SUBJECT CODE: 21416C

 Department of Management
BBA & BBA RM
Batch 2021-2024

Subject Name: Introduction to FinTech

Unit -1
Meaning : FinTech
The word ‘FinTech’ is simply a combination of the words ‘financial’ and ‘technology’.
FinTech is just technology that is used to improve the delivery of financial services.

FinTech is coming to represent technologies that are disrupting traditional financial services, including
mobile payments, money transfers, loans, fundraising and asset management. It is giving rise to new
business models, applications, processes and products.

FinTech, a portmanteau of "financial technology", refers to firms using new technology to compete with
traditional financial methods in the delivery of financial services. Artificial intelligence, block chain,
cloud computing, and big data are regarded as the "ABCD" of FinTech.

Which is the first FinTech company in India?

The story of FinTech unicorns in India started way back in 2015 when Vijay Shekhar
Sharma's Paytm became India's first FinTech unicorn. It took three more years for India's FinTech
startup ecosystem to produce the next few unicorns, with PolicyBazaar, PhonePe and Billdesk
turning unicorns in 2018.

Basics of FinTech

It was the launch of the first handheld calculator and the first ATM installed by Barclays bank that
marked the beginning of the modern period of FinTech in 1967.

Dee Ward Hock (March 21, 1929 – July 16, 2022) was the founder and CEO of the Visa credit card
association. He is to be considered as the father of FinTech.

FinTech or financial technology means offering financial services over the internet. Everything right
from mobile banking apps to mobile payments apps, block chain and crypto currency, stock trading, etc
can be included in this FinTech innovation.

In simple words, every business can use FinTech for their services and enhance or automate their work
and procedures.

Examples of FinTech: Online and Mobile Payment Systems - Google pay or Whatsapp payment or
anything else.
 FinTech Transformation/ Evolution :
➢ FinTech 1.0 (1886-1967) is about infrastructure

This is an era when we can first start speaking about financial globalization. It started with technologies
such as the telegraph as well as railroads and steamships that allowed for the first time rapid
transmission of financial information across borders.

The key events on this timeline include first transatlantic cable (1866) and Fedwire in the USA
(1918), the first electronic fund transfer system, which relied on now-archaic technologies such as the
telegraph and Morse code. The 1950s brought us credit cards to ease the burden of carrying cash. First,
Diner’s Club introduced theirs in 1950, American Express Company followed with their own credit card
in 1958.

Morse Code

Morse code is a method used in telecommunication to encode text characters as standardized

sequences of two different signal durations, called dots and dashes, or dits and dahs. Morse code
is named after Samuel Morse, one of the inventors of the telegraph.

➢ Fin tech 2.0 (1967-2008) is about banks

This period marks the shift from analog to digital and is led by traditional financial institutions. It was
the launch of the first handheld calculator and the first ATM installed by Barclays bank that marked
the beginning of the modern period of fintech in 1967.

There were various significant trends that took shape in the early 1970s, such as the establishment of
NASDAQ ,  the world’s 1st digital stock exchange, which marked the beginning of how the financial
markets operate today.

In 1973, SWIFT (Society For Worldwide Interbank Financial Telecommunications) was established
and is to this day the first and the most commonly used communication protocol between financial
institutions facilitating the large volume of cross border payments.

The 1980s saw the rise of bank mainframe computers and the world is introduced to online banking,
which flourished in 1990s with the Internet and e-commerce business models. Online banking brought
about a major shift in how people perceived money & their relationship with financial institutions.

By the beginning of the 21st century, banks’ internal processes, interactions with outsiders and retail
customers had become fully digitized. This era ends with the Global Financial Crisis in 2008.

➢ Fintech 3.0 (2008-2014) is about start-ups

As the origins of the Global Financial Crisis that soon morphed into a general economic crisis become
more widely understood, the general public developed a distrust of the traditional banking system.
This and the fact that many financial professionals were out of work, led to a shift in mindset and paved
a way to a new industry, Fintech 3.0. So, this era is marked by the emergence of new
players, particularly FinTech startups, alongside the already existing ones (such as banks).

The release of Bit coin v0.1 in 2009 is another event that has had a major impact on the financial world
and was soon followed by the boom of different crypto currencies (which, in turn, was followed by
the great crypto crash in 2018).

Another important factor that shaped the face of fintech is the mass-market penetration of smartphones
that has enabled internet access for millions of people across the globe. Smartphone has also become
the primary means by which people access the internet and use different financial services. 2011 saw
the introduction of Google Wallet, followed by Apple pay in 2014.

➢ FinTech 3.5 (2014-2017) is about Globalization

Fintech 3.5 signals a move away from the western dominated financial world and contemplates
the expansion in digital banking around the globe, with improvements in fintech technology.

It puts the focus on consumer behaviour and how they access the internet in the developing
world. For example, in China and India, markets that never had time to develop Western levels of
physical banking infrastructure and so were open to new solutions more quickly.

This era is marked by an increasing number of new entrants and their last mover advantages.

➢ Fintech 4.0 (2018-today) is about disruptive technologies

Blockchain technologies and open banking are continuing to drive the innovation of the future of
financial services. The game changers here are neo-banks that challenge the pricing and complexity of
traditional banks, while earning customers’ trust through simplified, digital-only experiences and low-
to-no fees.

Machine Learning, on its part, is transforming the way people interact with banks and insurance
companies, receiving bespoke offers and support. Germany’s N26, for example, relaunched its premium
account in 2019 to cater to the specific needs and tastes of its subscribers, such as discounts in co-
working spaces and in online travel booking sites.

ML also has security applications: British Revolution, for example, unveiled a new AI solution in 2018
to combat card fraud and money laundering, developing deep insights and predictions around customer
behavior to dynamically identify new card fraud patterns without human intervention.

Another major event in this period is the new wave of integrated payment providers, with platforms
that can offer payments as an additional strand to an already comprehensive business management
system.
And lately, mainstream use cases for NFTs, like creators strengthening their earning power with
digital representations of their contents, or artists ensuring royalty distributions, or NFTs as tickets or
membership cards.

Importance of FinTech :

• Rise of new age FinTech start-ups rolling out innovative solutions using low-cost technology
• Strategic partnerships between incumbents (Industry )and FinTech
• Launch of new digital products or digital-only banks by incumbents
• Government intervention through creation and operationalisation of FinTech policies, launch of
initiatives such as smart cities, portals for quick approval of loans for small and medium scale
enterprises (SMEs), etc.

Challenges in FinTech Transformation :

Top three challenges companies face with their FinTech transformation

Challenge 1: data security and privacy concerns

Challenge 2: compliance with regulations

Challenge 3: lack of tech expertise

FinTech – Typology (Types )

FinTech covers a wide range of use cases across business-to-business (B2B), business-to-consumer
(B2C), and peer-to-peer (P2P) - markets.

1.Blockchain and Crypto currency

Blockchain tech for finance - Blockchain technology is a data management system using complex
cryptography to power many cryptocurrencies and other decentralized applications. At their core,
blockchains are accounting systems and digital ledgers that facilitate auditing.

Blockchain tech for others - A blockchain allows a person to safely send money to another person
without going through a bank or financial services provider. Many in the financial services industry refer
to blockchain technology as distributed ledger technology. And some see blockchain as a more reliable
database than their existing databases.

Cryptocurrencies - Cryptocurrencies like Bitcoin are a unique type of financial technology that has the
potential to transform the vertical of the fintech sector; right from investment and trading to payments
and lending.
Smart contracts - A smart contract is a code that enforces the completion of an agreement in a digital
way without any paperwork or input from third parties. The simple idea behind this technology has
become a cornerstone for a number of digital financial services.

2.Insurance (InsurTech)
Online distribution - The service that can be provided to the consumers through this channel is also
more online-friendly in terms of it leading to instant gratification, which online consumers are typically
used with Convenient & faster response times are very less.

Policy Management - An insurance policy administration system with RPA tools can extract change
requests from emails, call transcripts, web forms, or other sources and sync them. Thus, reducing
processing time for policy issuance, updating, and cancellation.

Claims Management - Claims management solutions are applications that support end-to-end claims
workflow and collaboration for life insurance products, from the entry of claims information through
claims payments.

Innovative on demands – the insurance policy has taken by the policy holders by the way of requisition
by online mode it creates the demand for the insurance.

Data & Analytics - Big data makes the insurance industry a perfect sphere for data analytics to construct
basic patterns, get fundamental insights about the insurance business, and manage the complex relations
between agents and clients.

P2P Insusrance - Peer-to-Peer (P2P) insurance is a risk sharing network where a group of individuals
pool their premiums together to insure against a risk.

Employee benefits - a type of general liability insurance coverage that safeguards various organisations
in case of an administrative error, or when omissions occur.

IoT/ Sensors/Tele - The specific characteristics of IoT devices such as low price, low power, and low
computational capability as well as the heterogeneity and large-scale of the network limit the
applications of common security mechanisms
 3. Regulatory (RegTech)

The Financial Conduct Authority defined RegTech in 2015 as “a subset of FinTech that focuses on
technology that may support the delivery of regulatory obligations more efficiently and effectively
than existing capabilities.” RegTech refers to the use of cutting-edge technology to improve
compliance and the implementation of simple, secure, and cost-effective regulations.

4. Lending (LendTech)
Fin tech companies in this sector make it easy for business owners to raise money. Some of them connect
accredited investors with vetted startups. Others use crowd funding models and allow anyone to invest
in new businesses. In sum, they simplify the business fundraising process.

P2P Lending - Peer-to-peer (P2P) lending is a form of financial technology that allows people to lend
or borrow money from one another without going through a bank. P2P lending websites connect
borrowers directly to investors. The site sets the rates and terms and enables the transactions.

Loan Marketplace - Marketplace lending uses online platforms to connect borrowers with investors
willing to offer loans. It offers both new loans and refinancing.

SMB Lending - Small business loans are types of financing provided to companies for different
purposes by various lenders.

Supply Chain finance – Supply chain finance (SCF) is a term describing a set of technology-based
solutions that aim to lower financing costs and improve business efficiency for buyers and sellers linked
in a sales transaction. Supply chain finance is a set of tech-based business and financing processes
linking the parties in a transaction for lower costs and improved efficiency.

Student Lending –the student loan is a type of loan designed to help students pay for post-secondary
education and the associated fees, such as tuition, books and supplies, and living expenses that the
processof the loan by technology.

Real Estate and Industry specific originators - Property FinTech creates an effective way for real
estate investors to cut out redundant intermediaries in real estate transactions. The benefits of fintech
include helping to reduce costs, reducing friction, and increasing investment opportunities throughout
the property evaluation and purchase process.

Marketplaces - An online marketplace (or online e-commerce marketplace) is a type of e-commerce

website where product or service information is provided by multiple third parties. Online marketplaces
are the primary type of multichannel ecommerce and can be a way to streamline the production process
 5. Payments (PayTech)
Online Payments- Online payment is the electronic transfer of funds via the internet, usually
between a merchant and a consumer. These payments can be made in various ways, such as via credit
and debit cards, banking apps or web pages.

Processing/acquiring- Acquirers enable merchants to accept and process credit and debit card payments
from card-issuing banks within a card association or card scheme (card network) (for example Visa and
Master card).

Recurring- Recurring Payments is a financial service infrastructure that allows digital services to
provide payment processing automation.

International P2P - the funds from one currency can be exchanged into a secondary currency and
deposited into the international account. With peer to peer (P2P) payments, the middleman is removed.

Merchant acquiring - Merchant Acquiring Business is an integral part of digital ecosystem by

providing necessary infrastructure to acquire merchants and facilitates the merchants to accept payments
through Debit/Credit Card, UPI, Aadhaar Enabled Payment System (AePS) etc.

B2B - also called B-to-B, is a form of transaction between businesses, such as one involving a
manufacturer and wholesaler, or a wholesaler and a retailer.

6. Mobile Payments

RegTech is being utilized to deliver regulatory solutions in a variety of ways, including regulatory
reporting, risk management, transaction monitoring, and compliance. Regis-TR, Provenir, Continuity,
and Identity Mind are several RegTech platforms that provide such solutions.

7. Trading (TradeTech)

TradeTech is essentially the use of information technology to lower the information costs of
international commerce, streamline trade finance, and promote transparency in trading processes for
both business models and consumers. International cooperation is critical for realizing its full potential
and advantages. TradeTech uses IT systems in supply chain financing and asset distribution platforms
to simplify and support cross-border commerce.

8. Robo-Advising and Stock-Trading Apps

Robo advisory - Robo-advisors (also spelled roboadvisors) are digital platforms that provide automated,
algorithm-driven financial planning services with little to no human supervision.

Brokers - Broker-dealers are also exploring and leveraging new technologies such as cloud storage,
machine learning, and blockchain to enhance their overall operational infrastructure and compliance
functions. All of these FinTech-related changes are contributing to an evolving landscape for broker-
dealers’ operations.

White label trading platforms - white label software basically refers to software a fintech company
purchases from a service provider and then rebrands as its own. White labeling is a simple solution to
an expensive problem.

Predictive analysis - Predictive analytics is the use of statistics and modeling techniques to determine
future performance automation powered by predictive analytics clears away humans from potentially
tedious work is in the implementation of fully automated risk management systems based on current
and historical data.

Market research - Fintech companies to develop a deeper understanding of their target audience’s
needs, wants, and behaviour.

Quantitative trading - Quantitative trading (also called quant trading) involves the use of computer
algorithms and programs—based on simple or complex mathematical models—to identify and capitalize
on available trading opportunities.

AI assistants, bots - AI-driven chatbots can simulate human conversations, solve clients’ issues in a
matter of seconds, and undertake routine tasks, allowing human staff to carry out more complicated and
important matters.

PFM - Personal financial management, or PFM, is the term used to describe the software that powers
many different personal finance and mobile banking tools.

9.Personal Finance (Wealth Tech)

This branch of FinTech focuses on improving wealth management and retail investment services by
leveraging technology to augment and provide operations in a more efficient and automated manner.
These digital solutions are utilized to improve existing solutions and develop new ones to make them
available to new groups of investors. Monie is an example of a personal finance app for Egypt.

WealthTech facilitates the streamlining of the investing process, allowing investors to manage their
investment portfolios more easily. WealthTech is being incorporated into the finance sector through the
use of Micro-Investment, Robo-retirement, Portfolio management systems, and other technologies

10. International Money Transfers

Through the integration of technology into payment channels that may be utilized to enable international
money transfers, barriers have been removed. Traditional methods of payment are less efficient and
effective in this field of FinTech, since newer and more effective methods of payment exist now, making
the entire process more streamlined, secure, quicker, and simpler for customers and business models.

11. Equity Financing

This is a means of raising cash or capital by selling shares of a firm to the general public, financial
institutions, or investors. The funds raised are then utilized to fund new business ventures or to develop
existing firms.

Crowd funding may reach a larger population of investors by utilizing technology. Kickstarter, Pebble,
and numerous other crowd funding sites provide prizes to their participants.

12. Accounting

Machine Learning, Artificial Intelligence, Cloud Computing, Digitized Tax Platforms, and other
technological breakthroughs are being utilized to improve accounting automation and transparency.
Through the use of software and tools, the use of technology in this field of finance has improved data
access and analysis.

The introduction of financial technology and software has lowered the number of time accountants need
to execute tasks such as invoice management, cash flow forecasting, and other accounting services.

13. Consumer Banking (BankTech)

Many financial institutions are using digital technology to deliver services in a more streamlined and
efficient manner. BankTech is the use of digitized platforms to provide banking solutions and
products to consumers. BankTech has several advantages over traditional banking methods,
including improved user experience, lower costs, and less operational friction

Emerging Technologies in FinTech :

1. Digital Payment Services
 1.2 Big Data and Analytics

1.3 Block chain Technology

1.4 Personalization

1.5 Robotic Process Automation

Challenges Faced By Fin tech Companies

Data Privacy and Application Security Challenges

a. Regulatory and Compliance Laws

b. Focusing on the Customer Experience

c. Changing Revenue and Business Models

d. Personalized Services

.Introduction to Regulation :

Regulate to control something by rules, regulation and official rule made by government or other
authorities or controlling something by rules.

FinTech-related policy measures can be usefully divided into three groups:

• Direct organizers of FinTech activities: It concerns regulating activities such as digital banking,
Robo-advice, and payment services.
• Those who focus on using new technologies in the delivery of financial services: regulations
involving new rules or guidelines for market participants to use technologies such as biometrics
or artificial intelligence.
• Those who specifically promote digital financial services: Arrangements that enable policy
initiatives such as digital identities, data sharing, and innovation centers.

1. Data Privacy

• Data privacy is one of the most important legal issues in the fintech industry. Fintech companies
collect and use large amounts of customer data. This raises concerns about how this data will be
used and protected.

• One of the most critical issues in developing financial technology is risk assessment and data
breach(law ) prevention. When regulatory bodies uncover a data leak, they may be able to
identify the perpetrator due to noncompliance with anti-data-leak regulations.

• In countries that are members of the European Union, noncompliance (failure to act) with anti-
data-leak financial technology regulations may result in hefty fines.

2. Money Laundering
 • Money laundering is a process whereby the proceeds of criminal activity are transformed into
legitimate funds.

• This legal issue is particularly relevant for the regulation of the FinTech industry because of the
way FinTech companies facilitate payments and transfers. FinTech companies are required to
comply with anti-money laundering (AML) regulations. These require financial institutions to
take measures to prevent and detect money laundering.

• AML laws and programs for FinTech regulation should include customer identification and
screening, transaction monitoring and reporting of suspicious activity.

3. Cyber attacks

• Financial institutions are a common target for cyber attacks.

• FinTech companies hold large amounts of data. This makes them attractive targets for
cybercriminals. Also, FinTech firms may be less prepared to defend against cyber attacks than
traditional financial firms.

• All financial firms need to have robust cyber security programs in place to ensure proper
protection. These programs should include data encryption, firewalls and intrusion detection
systems.

FinTech Regulations :

The concerns of FinTech regulators have focused on investment fraud, securities of cryptocurrencies,
systemic risk regulation, central bank functions, money laundering, and taxation.

In addition, regulators are concerned about the possibility of artificial intelligence (AI) making money
through deception.

However, just accepting laws is not enough to control FinTech. Regulators will need to be much more
proactive at this point than ever before.

New technologies help new players perform activities traditionally run only by strictly controlled
institutions.

Therefore, arrangements should be made to prevent migrating commercial activities from migrating
between businesses seeking mild regulatory control.

India’s financial regulators are fragmented.

The primary regulator in the fintech sector is the central bank, i.e. the RBI which regulates the payments
and settlement functions in India.

In addition, RBI is also the regulator of foreign exchange and cross-border transactions. Further, the
RBI also regulates the financial entities in the ecosystem such as banks, NBFCs, etc. as well as credit
information companies (“CICs”).

The key set of laws governing fintech sector are set out below

PSS Act: The principal regulation governing payments in India is the Payment and Settlement Systems
Act, 2007 (“PSS Act”). In exercise of powers under the PSS Act, RBI from time to time has been
enacting various directions, notifications and regulations to regulate fintech sector in India.

PA Guidelines: The payment aggregators are regulated primarily through Guidelines on Regulation of
Payment Aggregators and Payment Gateways issued vide notification dated March 17, 2020, and as
amended from time to time (“PA Guidelines”). The PA Guidelines requires entities proposing to engage
in activities of a payment aggregator to seek an authorisation from the RBI.

PPI Directions: The issuance and operations of PPIs are governed by the RBI through the Reserve Bank
of India Master Directions on Prepaid Payment Instruments, 2021 (“PPI Directions”), which require
authorisation from the RBI and such PPI issuers are required to adhere to the PPI Directions and other
notifications issued by the RBI

KYC Directions: The RBI has issued Reserve Bank of India KYC Directions, 2016 (“KYC Directions”)
which, inter alia, prescribe KYC requirements to be complied with upon commencement of account-
based relationship with regulated entities or in certain cases in case of non-account-based relationship
as well.

Outsourcing guidelines: The RBI has enacted separate outsourcing guidelines for various regulated
entities such as banks, NBFCs, PSOs, etc. in the event such regulated entities are outsourcing certain
specified services like financial services, payment and settlement related services, etc. to third parties.

Data localisation requirements: The RBI has stipulated data localisation requirements through a
notification which, inter alia, requires the storage of payment systems data only in India. These
requirements are, inter alia, applicable upon all PSOs and all banks operating in India.

NPCI guidelines and circulars: With respect to prominent payment systems in India like UPI and
RuPay, the guidelines and circulars issued by the NPCI also become relevant.

Data privacy laws: The Information Technology Act, 2000 and rules made thereunder currently
prescribe data privacy and data protection related requirements and compliances. Currently, the
Personal Data Protection Bill, 2019 (“PDP Bill”) is pending before the Joint Parliamentary Committee.
Regulatory sandbox: Various regulatory authorities in India including RBI, SEBI and IRDA have
issued enabling frameworks for regulatory sandboxes. As to date, four thematic cohorts of the regulatory
sandbox of the RBI, comprised retail payments, cross-border payments, MSME lending and prevention
and mitigation of financial frauds.

Credit information laws: The business of credit information corporations (“CICs”) are required to seek
registration from the RBI and are regulated through Credit Information Companies (Regulation) Act,
2005 (“CIC Act”) as well as rules, regulations and notifications issued there under (collectively, “CIC
Laws”).

Restriction on storage of card data and Tokenisation: As per the notifications issued by the RBI,
after September 30, 2022, no entity in the card transaction/payment chain, other than the card issuers
and/or card networks, shall store the Card-on-File (“CoF”) data, and any such data stored previously
shall be purged.

Unit- II

2.1 Payments:
Payments -Businesses can accept payments in different ways, which include cash, card, and cheque
payments. Moreover, advanced methods like digital fund transfers, mobile payments, and other online
payments are becoming popular by the day.

Today, customers expect speed, wider choice, higher security, and ease of use while making payments

1. NEFT (National Electronic Fund Transfer)

The National Electronic Fund Transfer or NEFT is the simplest and most liked form of money transfer
from one bank to bank.
To make any NEFT transaction, you just need two important pieces of information -- firstly, account
number and secondly, the IFSC Code of the destination account.
In NEFT, there is no cap on the amount of money (no limit) that can be transferred. However, individual
banks may set a limit.
Step 1: Go to Fund Transfer tab, and select 'Transfer to other bank' (NEFT)

Step 2: Select the recipient account and enter the relevant details

Step 3: Accept the (Terms and Conditions)

Step 4: Recheck the details, if all are correct and complete the process

2. RTGS (Real Time Gross Settlement

A Real Time Gross Settlement or RTGS is almost similar to NEFT but the minimum payment and how
it credits to the destination account differs.
If you want to transfer more than 2 then you can use this. There is no upper cap on the amount.
An RTGS money transfer happens on a real-time basis. The bank of the person to whom the money is
transferred gets 30 minutes to credit it to his/her account.
Steps to make RTGS funds transfer:
Step 1: Go to Fund Transfer tab, and select 'Transfer to other bank' (RTGS)
Step 2: Select the recipient account and enter the relevant details
Step 3: Accept the (Terms and Conditions)
Step 4: Recheck the details, if all are correct, then confirm and complete the process

3. IMPS (Immediate Payment Service)

Immediate Payment Service or IMPs an instant fund transfer service and it can be used anytime. IMPS
can be simply defined as NEFT+RTGS.In order to avoid fraud complaints, the cap on transaction limit
is set very low. For IMPS transfer, you just need to know the destination account holder's IMPS id
(MMID) and his/her mobile number.
Steps to make IMPS money transfer:
Step 1: Using your Customer ID and Password into Net Banking/Mobile Banking
Step 2: Go to Funds Transfer tab (Other Bank Account)
Step 3: Select Debit / Credit Account, mode of transfer as IMPS and beneficiary account
Step 4: Enter the amount to be transferred and click on Submit
Step 5: Click on the confirm button
Step 6: Recheck all the information and approve the transaction using OTP (one time password)
received on your registered mobile number
Step 7: And at last, confirm by clicking on the submit button.

Other than NEFT, RTGS and IMPS, you can also transfer your money through UPI and cheque.
1. UPI (Unified Payments Interface):
A Unified Payments Interface is a real-time payment system that allows transactions to be done through
any smart phone using VPA (Virtual Payment Address).
No bank account detail is needed for the money transfer through UPI. Only mobile number or name is
sufficient and the transactions can be done 24/7. UPI-enabled apps allow the transfers up to Rs 1 lakh.
2. Cheque:
You can transfer money from your one account to another account by cheque. You have to simply draw
a stating payee as your name along with the account number wherein you want to transfer the amount
along with your signature.
It's done immediately at a branch if the transfer is within your bank.
There is no limit if you want to transfer money from your a/c to another bank a/c, but if you want to
withdraw a certain amount, there are restrictions.

Different types of online payments:

We now have various online payment options available in India due to the implementation of Cashless
India. Some techniques have been in use for over ten years, while others have only lately gained
popularity.

1. Cards

As an alternative to cash payments, Indians frequently utilise debit/credit cards, prepaid cards, or
banking cards. In 1981, Andhra Bank introduced the country’s first credit card.

Cards are preferred for a variety of factors, including but not exclusive to mobility, convenience,
safety, and security. This is the only type of digital payment that is widely used for both online and
offline transactions. Numerous applications, like Cred, Square, etc., are released solely for managing
card transactions.
2. Unified Payments Interface (UPI)

A payment system called UPI combines many bank accounts into a single application to make it
simple to transfer money between any two parties. UPI is significantly more defined and standardised
across banks than NEFT, RTGS, and IMPS. You may start a bank transfer via UPI from any location
with only a few clicks.

The advantage of using UPI is that you can make payments directly from your bank account without
entering your card or bank information. In 2020, this method became one of the most widely used
digital payment methods, with more than 2 billion transactions recorded in October.

3. Mobile wallets

Mobile wallets are a type of wallet where you can carry cash in a digital format, as the name implies.
Customers frequently connect their bank accounts or credit cards to the wallet to enable safe online
transactions. Adding funds to a mobile wallet and then transferring funds using that amount is another
way to use wallets.

These days, numerous banks have introduced their wallets. Famous private companies have also made
their presence known in the mobile wallet market.

4. Online banking

Customers of a specific bank are given the option to perform transactions and engage in other financial
activities online through internet banking, sometimes referred to as e-banking or online banking, on
the bank’s website. To make or receive payments online and to access a bank’s website, which is
known as Internet Banking, you need a reliable internet connection.

The majority of Indian banks have now made their internet banking services available. In India, a
virtual banking option is available on every payment gateway. It has grown to be one of the most
widely used methods for making purchases online. Some of the most popular methods for doing
transactions via internet banking are NEFT, RTGS, or IMPS

Difference Between NEFT ,RTGS and IMPS

2.2 ABCD’s of Alternative Finance:
Four key inter related technologies have caused Alternative finance to flourish – namely the ABCDs of
FinTech.

A – Artificial Intelligence (AI)

some of the most common examples:

• Speech recognition: It is also known as automatic speech recognition (ASR), computer speech
recognition, or speech-to-text, and it is a capability which uses natural language processing
(NLP) to process human speech into a written format. Many mobile devices incorporate speech
recognition into their systems to conduct voice search—e.g. Siri—or provide more accessibility
around texting.
• Customer service: Online virtual agents are replacing human agents along the customer journey.
They answer frequently asked questions (FAQs) around topics, like shipping, or provide
personalized advice, cross-selling products or suggesting sizes for users, changing the way we
think about customer engagement across websites and social media platforms. Examples include
messaging bots on e-commerce sites with virtual agents, messaging apps, such as Slack and
Facebook Messenger, and tasks usually done by virtual assistants and voice assistants.
• Computer vision: This AI technology enables computers and systems to derive meaningful
information from digital images, videos and other visual inputs, and based on those inputs, it can
take action. This ability to provide recommendations distinguishes it from image recognition
tasks. Powered by convolutional neural networks, computer vision has applications within photo
tagging in social media, radiology imaging in healthcare, and self-driving cars within the
automotive industry.
 • Recommendation engines: Using past consumption behavior data, AI algorithms can help to
discover data trends that can be used to develop more effective cross-selling strategies. This is
used to make relevant add-on recommendations to customers during the checkout process for
online retailers.
• Automated stock trading: Designed to optimize stock portfolios, AI-driven high-frequency
trading platforms make thousands or even millions of trades per day without human intervention.

B – Block chain technology (DLT)

Benefits of blockchain:
Greater trust
With blockchain, as a member of a members-only network, you can rest assured that you are receiving
accurate and timely data, and that your confidential blockchain records will be shared only with
network members to whom you have specifically granted access.

Greater security
Consensus on data accuracy is required from all network members, and all validated transactions are
immutable because they are recorded permanently. No one, not even a system administrator, can
delete a transaction.

More efficiencies
With a distributed ledger that is shared among members of a network, time-wasting record
reconciliations are eliminated. And to speed transactions, a set of rules — called a smart contract —
can be stored on the blockchain and executed automatically.

C – Cloud Computing

cloud computing benefits helps do the following:

• Lower IT costs: Cloud lets you offload some or most of the costs and effort of purchasing,
installing, configuring, and managing your own on-premises infrastructure.

• Improve agility and time-to-value: With cloud, your organization can start using enterprise
applications in minutes, instead of waiting weeks or months for IT to respond to a request,
purchase and configure supporting hardware, and install software. Cloud also lets you
empower certain users—specifically developers and data scientists—to help themselves to
software and support infrastructure.
 • Scale more easily and cost-effectively: Cloud provides elasticity—instead of purchasing
excess capacity that sits unused during slow periods, you can scale capacity up and down in
response to spikes and dips in traffic. You can also take advantage of your cloud provider’s
global network to spread your applications closer to users around the world.

D – Data

This digitization allows for online capital marketplaces to be more easily created and operated where
gatherers can process and analyze the data for those who need the capital and then display the relevant
information on the new platforms for the potential providers of capital to make their own investment
decisions. At the same time, digital form filling and tracking of the online customer activity allows both
these online platforms as well as, virtual banks and e-brokerages to scale more quickly with less manual
labor and space resources.

E-wallet:

E-wallet is a type of electronic card which is used for transactions made online through a computer or
a smartphone. Its utility is same as a credit or debit card. An E-wallet needs to be linked with the
individual's bank account to make payments.

E-wallet is a type of pre-paid account in which a user can store his/her money for any future online
transaction. An E-wallet is protected with a password. With the help of an E-wallet, one can make
payments for groceries, online purchases, and flight tickets, among others.

E-wallet has mainly two components, software and information.

The software component stores personal information and provides security and encryption of the data.

The information component is a database of details provided by the user which includes their name,
shipping address, payment method, amount to be paid, credit or debit card details, etc.

For setting up an E-wallet account, the user needs to install the software on his/her device, and enter
the relevant information required.

After shopping online, the E-wallet automatically fills in the user’s information on the payment form.

To activate the E-wallet, the user needs to enter his password.

Once the online payment is made, the consumer is not required to fill the order form on any other
website as the information gets stored in the database and is updated automatically

Features of E-Wallet :

QR codes:

Quick response codes are matrix bar codes that store information. You use your device's camera and
the wallet's scanning system to initiate payment.

Near field communication (NFC):

NFC is a technology that allows two smart devices to connect and transfer information using
electromagnetic signals. It requires two devices to be within about an inch and a half (4 centimeters)
from each other to connect.

Magnetic secure transmission (MST):

It is the name for mobile payment technology in which devices such as smartphones emit a signal that
mimics the magnetic stripe on a traditional payment card.

Advantages and Disadvantages of Digital Wallets:

Advantages

Digital wallets do not require a bank account at a bank with a physical branch. Instead, you can place
your funds in an online-only bank—which gives unbanked and underbanked communities access to
financial services, therefore enabling broader financial inclusion.

Disadvantages

Security might become an issue if you use a digital wallet from a provider that hasn't been vetted or
doesn't have an established reputation. If your phone isn't password-protected, you risk giving
someone else access to your finances if you lose your phone. Additionally, there might be local
businesses you prefer to shop at that don't yet have a point of sale that accepts this technology.
2.3 Introduction to digital asset :
Digital assets are built atop block chain technology, which integrates a system of account with the unit
of account. This is to say that the crypto currency unit contains an immutable ledger that is distributed
across many different servers. These digital assets can behave as currencies or as stores of value, or have
other computational functions.

A Digital Asset Management platform can manage a large quantity of digital assets and formats :

1. Images (product or corporate photos, info graphics, illustrations, etc.)

2. Videos (advertising clips, promotional videos, filmed interviews, webinars, event footage, etc.)
3. Audio files (sounds, music, podcasts, audio interviews, sound signatures, radio ads, etc.)
4. Textual content (articles, white papers, case studies, press kits and releases, in-house magazines,
slide shows, PDF documents, etc.)
5. Brand identity content (logos, graphic charters, signatures, document templates, etc.)
6. Strengthening collaborative work

The use of a digital asset management solution has the advantage of strengthening collaborative work
within an organization by providing more flexibility and agility.

The processes of creating and exploiting digital assets usually involve many participants from different
backgrounds: writers, graphic designers, designers, document lists, marketers, etc. They need to work
together on a common project. They have to work together on a common project or at least ensure that
their actions do not overlap with those of others. In addition, the level of digital literacy within the
same team tends to vary greatly between individuals, which can be a major barrier to efficient
collaboration.

A Digital Asset Management platform provides solutions to these problems: the centralization of
assets, the pooling of data and the intuitiveness of the user interface are all assets that encourage
collaborative work.

Importance of Digital Assets

When you look at a list of the digital items that can be considered assets, it becomes clear that our
lives are more digitally-based than ever. For example, when we want to learn about something, we
turn to digitally hosted information because it is quicker and easier than driving to a library, hoping
they have the resources you need.

By streamlining the steps involved in managing digital assets, a Digital Asset Management platform
also helps to optimize business costs on several levels:

1. Saving time in searching for assets

2. Reuse of created or purchased media (for better profitability)
3. Optimization of asset storage (no duplication, no obsolete versions, etc.)
4. Optimal use and exploitation (benefits) of resources
 5. Use of a single solution that centralizes all assets (rather than a set of tools)
6. These reduced costs, in turn, improve the return on investment.

When you handle a large amount of digital assets, a digital asset management platform is all you need.
It brings together all the features and uses you need to make your content a true vehicle for your brand
identity.

2.3.1 Types of Digital Assets

There are many different types of digital assets. Here is a list of many of the familiar ones:

• Photos
• Documents
• Videos
• Books
• Audio/Music
• Animations
• Illustrations
• Manuscripts
• Emails and email accounts
• Logos
• Metadata
• Content
• Social media accounts
• Gaming accounts

2.3.2 Newer digital assetsare based on blockchain or similar technologies:

Non fungible tokens- only - online assets Some examples are in-game avatars, digital/ non-digital
collectibles, tickets, domain names,

Introduction to Cryptocurrencies, Non-Fungible Tokens:

Both cryptocurrencies and NFTs are based on blockchain or other distributed ledger technologies.
Oversimplified, blockchain is a manner of storage of data in a decentralised manner such that no one
person (or group) can exercise absolute control over the data. The term ‘blockchain' refers to the manner
in which new packets of data (called blocks) when added are linked to the last added block of data, thus
forming a chain of data blocks linked chronologically.

A key feature of blockchain technology is the manner in which data blocks are verified and added. This
occurs through a network of computers working in parallel, without any one computer regulating the
blockchain or exercising superior control over the management or storage of the data or the verification
processes. Data once added to a blockchain cannot be deleted, modified or tampered with, thus a block
chain forms an accurate and reliable chronologically arranged record of all data that has been added to
the block chain. As a result, even if there is any human error in the data being added, the added data
cannot be edited to rectify the mistake; only a new block may be added to acknowledge and address the
error.

One application of the block chain technology is cryptocurrencies where a finite set of ‘currency' units,
referred to as coins, are used as an electronic cash system. This may be linked to an underlying asset or
have some inherent value. Bit coin is one of the most popular cryptocurrencies, being the first crypto
currency introduced in January 2009 by its pseudonymous creator Satoshi Nakamoto. As on date, there
are over 10,000 cryptocurrencies that have been launched, hoping to mimic the popularity and value
appreciation of Bit coin.

NFTs are another application of block chain where tokens, which are similar to coins, can be bought
and sold in a digital form. Unlike cryptocurrencies where the coins are homogenous, NFTs are non-
fungible, i.e., non-interchangeable by nature such that each token is unique and has a value that is distinct
from other tokens. NFTs are linked to one or more underlying assets such as artwork or real estate,
which gives it its value.

2.4 Crypto currency - buying and selling through exchange

• Tokens-which can also be referred to as crypto tokens — are units of value that block chain-
based organizations or projects develop on top of existing block chain networks.
• Crypto Assets -Crypto assets are purely digital assets that use public ledgers over the internet to
prove ownership. They use cryptography, peer-to-peer networks and a distributed ledger
technology (DLT) – such as block chain – to create, verify and secure transactions. Bit coin,
ethereum
• Tokenized Assets- the tokenization of assets refers to the process of issuing a block chain token
(specifically, a security token) that digitally represents a real tradable asset
• Security Tokens -security tokens are financial instruments that represent ownership interest in
an asset– only they've been created digitally (tokenized) to unlock the power of the block chain.
IMPT - Overall Best Crypto STO Available Right Now.
• Meta Music Token - Earn a Share of Music Royalties.
• Aquarius Fund - High-Yield Investment Opportunities for Professional Investors.
• Block stream Mining - Gain Exposure to the Bit coin Mining Industry Passively
• Central Bank Digital Currencies- Central Bank Digital Currency (CBDC) is a new form of
money that exists only in digital form. Instead of printing money, the central bank issues widely
accessible digital coins so that digital transactions and transfers become simple.
Virtual Digital Assets:
While crypto currencies continue to not be recognized as legal tender, the Finance Bill proposes that
‘virtual digital assets' be recognized as a separate class of capital assets under the Income Tax Act, 1961,
distinct from other identified classes of capital assets, or as a generic capital asset. Irrespective of the
legality of the transaction, such classification would permit the taxation of the gains arising from the
sale or other transfer of virtual digital assets.

Hence, from April 1, 2023, any income arising from the transfer of virtual digital assets will attract tax
on the capital gains at the rate of 30%. Additionally, a withholding tax at the rate of 1% will be applicable
on the payment of sale consideration for virtual digital assets, should such consideration cumulatively
exceeds INR 10,000 (approx. USD 130) in any financial year.

As per the Finance Bill, the term ‘virtual digital assets' includes both cryptocurrencies and NFTs. The
criteria for identification of crypto currencies or similar applications as virtual digital assets has been
intentionally kept wide in scope. Besides the differences in their attributes cryptocurrencies ultimately
act as payment systems, where units are transferable and represent some value.

2.5 Block Chain :

Block chain is a shared, immutable ledger that facilitates the process of recording transactions and
tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible
(intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and
traded on a block chain network, reducing risk and cutting costs for all involved.

Business runs on information. The faster it’s received and the more accurate it is, the better. Block chain
is ideal for delivering that information because it provides immediate, shared and completely transparent
information stored on an immutable ledger that can be accessed only by permission network members.
A block chain network can track orders, payments, accounts, production and much more. And because
members share a single view of the truth, you can see all details of a transaction end to end, giving you
greater confidence, as well as new efficiencies and opportunities.

Key elements of a block chain

Distributed ledger technology

All network participants have access to the distributed ledger and its immutable record of transactions.
With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s
typical of traditional business networks.
Immutable records
No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a
transaction record includes an error, a new transaction must be added to reverse the error, and both
transactions are then visible.
Smart contracts
To speed transactions, a set of rules — called a smart contract — is stored on the block chain and
executed automatically. A smart contract can define conditions for corporate bond transfers; include
terms for travel insurance to be paid and much more.
2.6 Cyber security: - is the practice of defending computers, servers, mobile devices, electronic
systems, networks, and data from malicious attacks. It's also known as information technology security
or electronic information security. The term applies in a variety of contexts, from business to mobile
computing, and can be divided into a few common categories.

o Network security Network security is a set of technologies that protects the usability
and integrity of a company's infrastructure by preventing the entry or proliferation within
a network of a wide variety of potential threats. It is the practice of securing a computer
network from intruders, whether targeted attackers or opportunistic malware.

o Application security focuses on keeping software and devices free of threats. A

compromised application could provide access to the data its designed to protect.
Successful security begins in the design stage, well before a program or device is
deployed. EgFirewall,antivirus

o Information security protects the integrity and privacy of data, both in storage and in
transit.

o Operational security includes the processes and decisions for handling and protecting
data assets. The permissions users have when accessing a network and the procedures
that determine how and where data may be stored or shared all fall under this umbrella.

o Disaster recovery and business continuity define how an organization responds to a

cyber-security incident or any other event that causes the loss of operations or data.
Disaster recovery policies dictate how the organization restores its operations and
information to return to the same operating capacity as before the event. Business
continuity is the plan the organization falls back on while trying to operate without certain
resources.

o End-user education addresses the most unpredictable cyber-security factor: people.

Anyone can accidentally introduce a virus to an otherwise secure system by failing to
follow good security practices. Teaching users to delete suspicious email attachments,
not plug in unidentified USB drives, and various other important lessons is vital for the
security of any organization.

2.7 Types of cyber threats

The threats countered by cyber-security are three-fold:

1. Cybercrime includes single actors or groups targeting systems for financial gain or to cause
disruption.

2. Cyber-attack often involves politically motivated information gathering.

3. Cyber terrorism is intended to undermine electronic systems to cause panic or fear.

 Unit - 3
3.1 Financial innovation:

Financial innovation is the creation of new financial instruments, products, services, institutions, or
markets. The innovations and use of digital technologies improve economic opportunity and promote
financial inclusion.

Financial innovation - is the process of creating new financial products, services, or processes. Financial
innovation has come via advances in financial instruments, technology, and payment systems. Digital
technology has helped to transform the financial services industry, changing how we save, borrow,
invest, and pay for goods.

3.2 Different types of financial innovations discussed below:

• Process Innovations: Innovative financial business processes give clients better services and
boost the effectiveness of business operations. These innovations include new company
procedures that boost productivity and open up new markets, among others. The simplest
example is the online banking facility.
• Financial Institutional Innovations: The advancement of the financial system, which is a
prerequisite for economic growth, depends on innovation. Examples include the establishment
of a new organization providing innovative practices or services. However, creating a regulatory
framework that promotes innovation, globalization, and the growth of the financial sector while
maintaining a fair balance between private and social incentives is challenging.
• Product Innovations: It introduces financial innovation products or instruments such as weather
derivatives and family wealth accounts. Product innovations are released to better adapt to the
changing consumer demand or to increase efficiency.

3.3 Causes of Financial Innovations :

There are various causes of financial innovations, such as:

• Technological advancements and payment system innovations.

• Competition
• Financial globalization
• Market failures, financial insecurity, domino effects, potentially high systemic risks, etc., trigger
the need for innovation initiatives.

3.4 Digital Financial Services:

Digital Financial Services (DFS) include a broad range of financial services accessed and delivered
through digital channels, including payments, credit, savings, remittances and insurance. – Digital
channels refers to the internet, mobile phones, ATMs, POS terminals etc.
 Importance of DFS FinTech:

■ Increases financial inclusion

■ Increase efficiency of delivery

■ Improve quality of service

■ Revenue growth – Reaching new market segments – Offering new products and services enabled by
technology

■ Cost reduction to companies and customers – Operational cost by reducing branch costs – Reducing
transactional costs

Benefits of DFS :

1. Access to real-time information

2. Better decision-making
3. Freedom
4. Ease and efficiency
5. Flexibility
6. Transparency of information
7. Integration of financial management into other business operations
8. Mobile working
9. Equality
10. Environmental friendliness

3.5 DFS concept includes mobile financial services (MFS).

■ MFS is the use of a mobile phone to access financial services and execute financial transactions. –
Includes both transactional services and non-transactional services – MFS include M-Banking, M-
payments, M-money.

■ M-Money is a mobile based service facilitating electronic transfers and other transactional and non
transactional services using mobile networks

■ M-Banking is the use of a mobile phone to access banking services and execute financial transactions.
– Often used to refer only to customers with bank accounts

3.6 FinTech Funds :

The Fund will focus on companies that generate revenues from the application of technology in the
financial services industry sector and/or which aim to compete with traditional methods in the operation
and distribution of financial products and services.
Advantages of implementing FinTech solutions for a financial institution:

1. Zero barrier applications and faster approvals –

2. Higher efficiency -

3. Automated customer service –

4. Highly regulated and risk-averse

5. No compromise on security

3.7 Crowd funding

Meaning

Crowd funding is a way of raising money to finance projects and businesses. It enables fundraisers to
collect money from a large number of people via online platforms. Crowd funding is most often used
by startup companies or growing businesses as a way of accessing alternative funds.

Crowd funding is a mechanism through which funds are raised in order to finance projects, ventures,
expenses, products. The funds are raised from a large number of individual investors and donators.

3.7.1 Key Crowd funding Platform Features

1. Payment gateway that supports multiple currencies

2. Progress meter to easily track campaign progress

3. Secure mobile options to best reach your audience

4. Responsive design that can adopt to user devices

5. Social network sharing to expand your reach

3.7.2 Advantages
Eight advantages of crowd funding:

• it can be a fast way to raise finance with no upfront fees

• pitching a project or business through the online platform can be a valuable form of marketing
and result in media attention
• sharing your idea, you can often get feedback and expert guidance on how to improve it
 • it is a good way to test the public's reaction to your product/idea - if people are keen to invest it
is a good sign that the your idea could work well in the market
• investors can track your progress - this may help you to promote your brand through their
networks
• ideas that may not appeal to conventional investors can often get financed more easily
• your investors can often become your most loyal customers through the financing process
• it's an alternative finance option if you have struggled to get bank loans or traditional funding
Disadvantages
Six disadvantages of crowd funding:

• it will not necessarily be an easier process to go through compared to the more traditional ways
of raising finance - not all projects that apply to crowd funding platforms get onto them
• when you are on your chosen platform, you need to do a lot of work in building up interest before
the project launches - significant resources (money and/or time) may be required
• if you don't reach your funding target, any finance that has been pledged will usually be returned
to your investors and you will receive nothing
• failed projects risk damage to the reputation of your business and people who have pledged
money to you
• if you haven't protected your business idea with a patent or copyright, someone may see it on a
crowd funding site and steal your concept
• getting the rewards or returns wrong can mean giving away too much of the business to investors
3.7.3 There are different types of crowd funding:

Each type has different benefits for businesses and investors. You will need to consider which one is
right for your business, project or venture.

1. Reward crowd funding

2. Debt crowd funding
3. Equity crowd funding
4. Donation crowd funding

3.8 Peer To Peer :

P2P lending transactions involve borrowers and lenders both essentially acting as customers with an
intermediary known as a P2P lending "platform" that facilitates loans to borrowing customers and
investments from lending customers.

Peer-to-peer (P2P) lending enables individuals to obtain loans directly from other individuals, cutting
out the financial institution as the middleman.
The steps below describe the general P2P lending process:

1. A potential borrower interested in obtaining a loan completes an online application on the peer-
to-peer lending platform.
2. The platform assesses the application and determines the risk and credit rating of the applicant.
Then, the applicant is assigned with the appropriate interest rate.
3. When the application is approved, the applicant receives the available options from the investors
based on his credit rating and assigned interest rates.
4. The applicant can evaluate the suggested options and choose one of them.
5. The applicant is responsible for paying periodic (usually monthly) interest payments and
repaying the principal amount at maturity.

The company that maintains the online platform charges a fee for both borrowers and investors for the
provided services.

Advantages and disadvantages of peer-to-peer lending :

Peer-to-peer lending provides some significant advantages to both borrowers and lenders:

• Higher returns to the investors: P2P lending generally provides higher returns to the investors
relative to other types of investments.
• More accessible source of funding: For some borrowers, peer-to-peer lending is a more
accessible source of funding than conventional loans from financial institutions. This may be
caused by the low credit rating of the borrower or atypical purpose of the loan.
• Lower interest rates: P2P loans usually come with lower interest rates because of the greater
competition between lenders and lower origination fees.

Nevertheless, peer-to-peer lending comes with a few disadvantages:

• Credit risk: Peer-to-peer loans are exposed to high credit risks. Many borrowers who apply for
P2P loans possess low credit ratings that do not allow them to obtain a conventional loan from a
bank. Therefore, a lender should be aware of the default probability of his/her counterparty.
• No insurance/government protection: The government does not provide insurance or any form
of protection to the lenders in case of the borrower’s default.
• Legislation: Some jurisdictions do not allow peer-to-peer lending or require the companies that
provide such services to comply with investment regulations. Therefore, peer-to-peer lending
may not be available to some borrowers or lenders.

3.9 Market Place Lending :

 Marketplace lending is a type of lending that allows business owners to obtain loans directly from
investors, without going through traditional financial institutions.

Few key advantages of peer-to-peer lending and marketplace lending, including:

• Competitive interest rates for investors – peer-to-peer and marketplace loans usually offer
attractive rates of interest to balance the risk investors are taking.
• Quick and easy process – typically peer-to-peer lending companies and marketplace lenders
make it easier for borrowers to access finance and get their loans funded quickly.
• A flexible approach to borrowers – peer-to-peer platforms and marketplace lenders do not have
to work to the same criteria as banks. As a result, they are able to take a more holistic view of
the borrower, the project, and the security meaning they may be able to say in instances where
traditional financial institutions would say no.
 Unit-4
4.1 RegTech

(Regulatory Technology) is the application of emerging technology to improve the way

businesses manage regulatory compliance. Though relatively young, RegTech is maturing
rapidly. RegTech companies are now engaging machine learning, natural language
processing, block chain, AI, and other technologies in order to bring the power of digital
transformation to the world of regulatory compliance.

4.2 Characteristics of RegTech

• Some of the important characteristics of RegTech include agility, speed, integration, and
analytics.
• RegTech can quickly separate and organize cluttered and intertwined data sets through extract
and transfer load technologies.
• RegTech can also be used to generate reports quickly.
• It can also be used for integration purposes to get solutions running in a short amount of time.
Finally, RegTech uses analytic tools to mine big data sets and use them for different purposes.

4.3 Benefits of RegTech

For financial services, the benefits of RegTech are substantial:
• » Efficiency gains
• » Greater accuracy and comprehensiveness
• » Greater internal alignment.
• » Improved risk management

Three main challenges many firms face when undertaking new RegTech efforts:

1) Inconsistent regulation.
2) Cyber security.
3) Legacy systems.

4 .4 RegTech Categories
1. Regulatory Monitoring
2. Regulatory Obligations
3. Compliance Management
4. Execution of Compliance
4.5 Regulatory Sandbox :
Meaning:

The regulatory sandbox framework provides an environment where participants can demonstrate
practical applications of new technologies. It is a proof of concept (POC) conducted with the approval
of regulatory authorities.

Regulatory sandbox refers to live testing of new products or services in a controlled regulatory
environment. It acts as a "safe space" for business as the regulators may or may not permit certain
relaxations for the limited purpose of testing.
The sandbox allows the regulator, the innovators, the financial service providers and the customers to
conduct field tests to collect evidence on the benefits and risks of new financial innovations, while
carefully monitoring and containing their risks.

4.6 Benefits
1. regulatory changes or new regulations
2. Users of a sandbox can test the product’s viability without the need for a larger and more
expensive roll-out.
3. Fin techs provide solutions that can further financial inclusion in a significant way.

Regulatory Startups in India

1.The Payment and Settlement Systems Act, 2007

The Payments and Settlements Systems (PSS) Act, 2007 (PSS Act) regulates payments in India. A
“payment system” cannot be created or operated, in accordance with the PSS Act, without the RBI’s
prior consent. The PSS Act defines a “payment system” as “a system that permits payment to be made
from one person to another,” but it specifically excludes a stock exchange. Payment methods include
PPIs, money transfer services, smart card operating systems, and debit and credit card operating
systems. RBI authorisation is required before a payment system may start up or be put into operation.
As a result, compliances under this enactment are essential for FinTech companies to operate.

2.The Companies Act, 2013

FinTech businesses must register under the Companies Act 2013 and abide by all of the Act’s laws
and regulations, just like any other business in India. FinTech businesses like Paytm, Bharat pe, etc,
are incorporated and authorized under the Act.

3.The Consumer Protection Act, 2019

Companies in the FinTech industry are considered service providers for purposes of the Consumer
Protection Act. According to Section 2(47)(ix) of the Act, “disclosure of consumer’s personal
information supplied in confidence, unless required by law or in the public interest,” is an unfair trade
practises. The Information Technology (Reasonable Security Practices and Procedures and Sensitive
Personal Data or Information) Rules, 2011, which prohibit the disclosure of a consumer’s personal
information without the person’s prior authorization unless required by law, are comparable to this.
FinTech businesses must abide by this law since they handle sensitive personal data belonging to their
clients.

4.The Prevention of Money Laundering Act, 2002

The principal rules that set anti-money laundering standards and operational directions for firms that
offer financial services in the nation are the Prevention of Money Laundering Act 2002 (PMLA),
the Prevention of Money Laundering Rules 2005, and the KYC Master Directions. The
aforementioned laws require banking firms, financial institutions, and intermediaries to confirm the
identification of clients, preserve records, and provide information to the Financial Intelligence Unit –
India in a defined format (FIU-IND).

5.The Information Technology Act, 2000

As more and more user information, particularly behavioural and financial information about
individuals, is collected and stored by FinTech platforms, the value of protecting consumer privacy
and data has increased. India currently lacks a reliable data privacy mechanism. The Information
Technology Act of 2000 (IT Act) and the Rules on IT (Reasonable Security Practices and Procedures
and Sensitive Personal Data or Information) are the two main pieces of legislation regulating personal
data privacy.

The IT Act’s regulations must also be followed by FinTech businesses. In accordance with Section
43A, businesses are liable for damages if they fail to take reasonable security precautions to protect the
sensitive personal data of their customers. Section 72A establishes penalties for leaking info in breach
of a valid contract. Personal data about individuals is very important to FinTech firms. It is crucial to
adhere to the mandated data security laws in order to avoid legal difficulties.

6.The Reserve Bank of India Rules

The principal regulatory tools that apply to NBFCs are the Reserve Bank of India Act, 1934 and a
series of governing guidelines and circulars. Certain FinTechs are subject to RBI regulation either
directly through the issuance of NBFC licences to them or indirectly through the regulation of banks
and NBFCs connected to FinTech. The organisation must fulfil a number of standards in order to
receive licensure from the RBI. In India, there are several digital lenders who have received NBFC
approval.
The registration and operation of payment banks in India are governed by regulations that were
published by the Reserve Bank of India (RBI) in November 2014 and October 2016, respectively.
Among the rules governing payment banking institutions are the eligibility requirements for
registration, suitable practices, and other operational standards.

According to the Governor of the RBI’s remarks, the RBI has implemented surveillance technologies
known as SupTech for data collecting and analysis. Another illustration of supervisory tech is the risk-
based supervision of banks, which is heavily data-driven.

RegTech, also known as regulatory technology, has the potential to be useful in a number of areas,
including simplifying the regulatory reporting system, compliance and risk monitoring, safeguarding
consumer interests, and identifying financial crime. India’s RegTech industry is growing quickly in the
banking and insurance sectors.

7.The Insurance Act, 1938

Companies involved in insurance technology, or InsurTech, are collaborating with many stakeholders
and upending the insurance industry’s value chain. They have helped to speed up application
procedures, and automate the testing, and claim processes through their collaborations with insurance
firms. Some businesses also serve as online aggregators from time to time, allowing clients to examine
the breadth of coverage, the term, the premium, and other pertinent parameters before making a
choice. The Insurance Regulatory Development Authority of India (IRDA), the country’s top
insurance industry regulator, must grant these web aggregators clearance.

When several prominent FinTech businesses in India received direct insurance broker licences from
the IRDA to facilitate the distribution and sale of insurance products, this became a big flashpoint. A
few participants have also obtained an IRDA insurance corporate agent licence.

8.The Foreign Exchange Management Act (FEMA), 1999

According to the RBI’s regulations released under the FEMA, countless cross-border transaction
services have been created due to advancements in India’s FinTech industry. The Foreign Exchange
Management Act of 1999 (“FEMA”) and the rules and regulations issued thereunder control
transactions involving foreign currency. Accredited Dealer Category II Entities, such as usurers, are
allowed to offer foreign currency pre-paid cards in India to Indian citizens in accordance with the
FEMA, according to the RBI’s regulations released under the FEMA. The PPI (Prepaid Payment
Instruments) Master Directions also permit PPIs to be issued by qualified entities for international
transactions. Authorised dealer category I can provide semi-closed and open-system PPIs for FEMA-
compliant, FEMA-compliant, and payments that do not exceed ₹ 10,000 per transaction and ₹ 50,000
per month acceptable current account transactions (including all the procurement of goods and
services).
Correspondingly, as long as the PPIs are wholly KYC-compliant, reloadable, and granted in electronic
form, and the inward disbursement does not exceed ₹ 50,000 per transaction, authorised bank and non-
bank PPI issuers (designated as agents of an authorised overseas principal) are permitted to accept
inward remittances under the money transfer service scheme.
 Unit- 5
5.1 Data analytics

Data analytics helps finance teams gather the information needed to gain a clear view of key
performance indicators (KPIs). Examples include revenue generated, net income, payroll costs, etc. Data
analytics allows finance teams to scrutinize and comprehend vital metrics, and detect fraud in revenue
turnover.

Data in FinTech techniques are:

• Differential privacy,

• Federated analysis,

• Homomorphic encryption,

• Zero-knowledge proofs,

• Secure multiparty computation

5.2 Digital Identity :

Digital identity is essentially any personal data existing online that can be traced back to the real you.
Digital identity, also sometimes interchangeably referred to as digital identification or digital ID, is not
a new concept.

Characteristics :

• A digital ID must be personal and non-transferable. That means, only the individual to whom it
belongs has the right to access and use it.
• It is reusable, meaning once you are assigned a digital ID, you can use and reuse it whenever
required.
• It is convenient, so you can access and use it whenever you want without requiring any technical
expertise.
• A digital ID fulfills its intended purposes by allowing the execution of specific actions

Forms of Digital Identity:

1) Digital ID as credential

.2) Digital ID as user

3) Digital ID as character
4) Digital ID as reputation

5.3 Artificial Intelligence :

(AI) has a range of uses in government. It can be used to further public policy objectives (in areas such
as emergency services, health and welfare), as well as assist the public to interact with the government

Uses of AI in government :

1. Resource allocation –
2. Large datasets -.
3. Experts shortage
4. Predictable scenario –
5. Procedural -.
6. Diverse data -.

Challenges of AI and Machine Learning-

1. Computing Power
2. Trust Deficit
3. Limited Knowledge
4. Human-level
5. Data Privacy and Security
6. The Bias Problem
7. Data Scarcity

5.4 Data Processing Cycle

Data processing is defined as the re-ordering or re-structuring of data by people or machines to increase
its utility and add value for a specific function or purpose. Standard data processing is made up of three
basic steps: input, processing, and output. Together, these three steps make up the data processing cycle.
You can read more detail about the data processing cycle.

• Input:

• Processing:

• Output:
5.5 Metadata

Metadata is information that describes and explains data. It provides context with details such as the
source, type, owner, and relationships to other data sets, thus helping you understand the relevance of a
particular data set and guiding you on how to use it.
Metadata can be classified into 6 types:

1. Technical: This includes technical metadata such as row or column count, data type, schema,
etc.
2. Governance: This includes governance terms, data classification, ownership information, etc.
3. Operational: This includes information on the flow of data such as dependencies, code, and
runtime
4. Collaboration: This includes data-related comments, discussions, and issues
5. Quality: This includes quality metrics and measures, such as dataset status, freshness, tests run,
and their statuses
6. Usage: This includes information on how much a dataset is used, such as view count, popularity,
top users, and more

5.6 Differential Policy:

Differential privacy (DP) is a system for publicly sharing information about a dataset by describing the
patterns of groups within the dataset while withholding information about individuals in the dataset.

Steps in Differential Policy:

Steps:
1. After having calculated the privacy budget, we need to determine the sensitivity of the
function, which corresponds to how much a single individual can affect the output of the
function in the worst case. In that case, the sensitivity is one because adding or removing a
single patient from a data set, be it with or without this medical condition, can change the result
of the count by at maximum one.

2. Next, we need to choose a differentially private mechanism for adding noise to the output of
the function. In this case, we could use the Laplace mechanism.

3. Once we have chosen the Laplace mechanism, we can apply it to the function to add noise and
protect the privacy of individuals in the dataset. It would produce a noisy version of the count
of patients with the condition that is differentially private.
 4. Finally, we can release the noisy version of the count of patients with the condition, which will
not reveal any information about individual records in the dataset. We have applied differential
privacy and ensure the protection of the data thanks to differentially private mechanisms.

5.7 Data-driven organization.

• Reimaging the finance model by connecting finance and operations
• Empower decision making with data

Future Driven – Finance

1. Automate tasks with Intelligent Automation

2. Intelligent automation is the key to freeing up finance to focus on higher-value activities. It’s
about reimagining and modernizing every EPM process using automation, as well as AI and
machine learning technologies.
3. Finance spends an inordinate amount of time preparing and analyzing data to uncover issues,
trends, or anomalies—long before taking any action based on these insights. The more data
finance must consider, the more time and effort this process will take. Clearly, business value
comes from acting on the insights, not from analyzing and reporting on data.
4. Oracle delivers a key capability—we call it IPM Insights—to automate data analysis and
reduce the time spent from days to minutes. Intelligent algorithms analyze vast amounts of data
in the background to uncover anomalies, trends, and exceptions—allowing finance to focus on
collaborative actions that blend data insights with financial and operational intuition.
5. In our view, leveraging advanced technologies to help finance become data-driven in all
decision-making isn’t an option—it’s an imperative. In the articles to follow, we’ll discuss the
key requirements to become data-driven and provide more detail on how Oracle can help make
your vision a realty