Falling to bits

In the last few months, I have come to read some interesting reads on Bitcoin and Ethereum. On one side, you are seeing more investments in fintech startups in India, both in terms of wallets, p2p lending and financial technology firms, while on the other front, both bitcoin and other financial innovations seem to be facing challenges, whether it be from a security perspective or from adoption in emerging marketings.

While I have spoken about this in the past, I keep wondering whether this leapfrogging of regular financial systems to pure play digital approaches can return to bite us in the long term. While banks and new age companies speak glowingly about new technology(be it blockchains or mobile wallets), few seem to want to acknowledge the fundamental issues in emerging markets. Equally importantly, a lack of regulations opens up customers to exploitation.

Firstly, i foresee poor liquidity for bitcoin and other virtual currencies in India. Even if we were to have server farms churning out bitcoins, it’s not going to drive a proper exchange , which allows people to perform transactions without fear of facing delays in payment/ withdrawal.

Secondly, how do we ensure this is not exploited by hawala networks/ criminal networks and politicians who might consider this a great way to whitewash money collected through illegitimate means?

While the RBI has brought in regulations for mobile wallets and p2p lending companies, I wonder if these regulations are aimed more at helping established institutions to catch up with startups, then helping customers. Rather than focusing on educating customers about the benefits and pitfalls of fin tech, the RBI and the GoI seems to be focused on helping banks and financial institutions reach parity.

We have seen PayTM extend loans to individuals and tie up with retail and offline institutions. Insurance companies are looking at pay as you want policies, modeled on the sachet approach of FMCG companies. While these incremental steps are useful, there is yet limited focus on extending financial access to rural and semi urban regions. Maybe instead of focusing on the urban middle class, it may make sense for some of these fintech companies to understand how the other half of India banks.

Remittances, household purchases and savings need to be the focus on new age fintech startups. Be they in cryptocurrency/ lending / payments, the key is to understand how we can tap into these and provide a secure yet intuitive setup. For example, WeChat enables Chinese p2p lending while providing a secure infrastructure to enable transparency and ease of access for liquidity. Maybe India should consider something similar using WhatsApp (but without Facebook forcing their version of free internet on people).

It’s come out that rural folks consider access to Internet using data packs as importance as certain neccessities. Maybe it’s time India enshrines this right to Internet as a fundamental right, ensuring that it becomes the base of an efficient and transparent digital currency initiative.