Embedded Finance Set To Revolutionise Banking Industry: R Gandhi
Embedded finance is set to revolutionise the banking industry, but it will not replace traditional banking and financial services, said R Gandhi, Former Deputy Governor of the Reserve Bank of India (RBI) on Friday.
During his keynote address at the second national summit on neo-banks organised by Assocham, 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, he underlined the importance of coordination and cooperation among non-banks and financial institutions.
Gandhi expressed confidence in embedded finance's capacity to broaden the spectrum of financial services and suit clients' increasing needs.
He 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," he mentioned.
As per the former deputy governor, these non-banking businesses have used technology to disrupt the financial sector and provide specialist services that supplement bank offerings.
While appreciating fintech startups' tremendous potential, 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," he stated.
In terms of legislation, Gandhi highlighted India's regulatory strategy, which prioritises extensive control of all financial services companies.
He also stressed the need for risk management in the financial sector, as well as the need for rules to protect customers' interests and preserve the financial system's stability.
