Sabitha Vuppala, Collabera Digital’s BFSI Practice Head, Shares Insights on Fintech Innovations Driving Financial Inclusion and Regulatory Compliance

CXOToday has engaged in an exclusive interview with Sabitha Vuppala, Global Head of BFSI Practice, Collabera Digital

1. How is the fintech industry leveraging digital technologies to enhance financial inclusion and accessibility for underserved populations?

Since around 2014, the Indian government has launched its ambitious Digital India and  Financial Inclusion initiatives, including Aadhar for digital identity, digital banking licenses,  and real-time payments infrastructure like NPCI’s UPI, yielding remarkable results. • Over 78% of adults now have basic digital banking or wallet accounts. • UPI transactions hit a record 100 billion annually in 2023.

• Government’s Direct Benefit Transfer reached over 1167 crore beneficiaries, totalling 34 lakh crores.

FinTechs have played a key role with innovative models, fostering partnerships (with Telcos,  traditional banks, and Government) and adopting digital & emerging technologies for enhanced  cost-effective reach and more tailored financial services.

• Digital Banking and Wallets Fintech innovations like mobile wallets and digital accounts have democratized access to financial services, particularly in remote areas. With over 200 crore Aadhaar-based authentications monthly, Aadhaar has revolutionized digital  identity verification. Additionally, secure banking and payment transactions are facilitated by technologies like USSD and two-factor authentication.
• Microfinance and Microcredit: Digital lending platforms empower rural residents, small businesses, and underserved segments, offering competitive rates and flexible eligibility. Agency banking models, like NBFIs, utilize Aadhaar cards and shop images for instant  KYC and risk assessment, enabling same-day loans.
• Artificial Intelligence and Tailored Financial Products/Offerings: Harnessing extensive datasets, fintech platforms discern user and small business behavior, crafting bespoke products like micro-loans and micro-insurance. These innovations cater precisely to the  needs of underserved populations, fostering financial inclusion and empowerment.
• User-Friendly interfaces, and Open Banking ecosystems: Fintech applications prioritize user-friendly interfaces, ensuring accessibility for individuals with diverse digital skills. This approach makes financial services available to those who may have found  traditional banking systems intimidating.

2. What regulatory challenges does the fintech sector face in terms of compliance and data privacy, and how are companies navigating these complexities?

Fintech companies navigate regulatory compliance to balance innovation with financial  stability, integrity, security, and consumer privacy. They must adapt to evolving regulatory  requirements to mitigate risks effectively.

1. Data Protection and Privacy Regulations: Fintech companies handling customer data must comply with data protection and privacy regulations. For instance, in India, the Personal Data Protection Bill, 2023, once enacted, will establish comprehensive personal digital data protection requirements.
2. Anti-Money Laundering (AML) and Know Your Customer (KYC) Regulations: Fintech firms offering financial services are obligated to implement AML and KYC procedures to prevent illicit activities, adhering to guidelines issued by central banks.
3. Cross-Border Regulatory Compliance: Fintech companies providing services across borders must comply with regulations in multiple jurisdictions. Examples include the Gramm-Leach-Bliley Act (GLBA) in the USA and the European Union’s General Data  Protection Regulation (GDPR).
4. Start-up Regulations: Fintech startups may benefit from regulatory relaxations under government startup initiatives, like the Startup India program, while still adhering to relevant sector-specific regulations.
5. Consumer Protection Regulations: Fintech companies offering financial products and services must adhere to consumer protection regulations, ensuring fair treatment, transparent pricing, and effective grievance redressal mechanisms.
6. Cybersecurity Risks: Cybersecurity regulatory compliance involves adhering to laws, regulations, and standards to protect sensitive information, systems, and networks from cyber threats.

To navigate regulatory challenges, fintech companies invest in robust compliance programs,  hiring legal experts, and developing clear internal policies. They engage with regulators for  clarification, participate in industry consultations, and advocate for supportive reforms.  Leveraging technology is crucial for keeping pace with evolving regulations and minimizing data  privacy and security risks.

They also employ a variety of tools and strategies to navigate regulatory challenges and ensure  compliance.

RegTech platforms harness AI, ML, and NLP to automate compliance tasks and monitor  regulatory changes in real-time. Compliance management software offers features such as  tracking, change management, and reporting capabilities. KYC and AML solutions assist in  verifying customer identities and monitoring transactions for suspicious activities. Transaction  monitoring systems detect and prevent financial crimes by analyzing transactional data.  Regulatory reporting tools automate data collection and submission of regulatory reports.  Cybersecurity solutions protect sensitive data and networks from cyber threats. Fintech firms

prioritize data security through encryption and access controls while actively participating in  regulatory sandboxes to evaluate innovative products under supervision.

3. What are the emerging trends in fintech engineering, such as AI-driven decision-making systems and real-time data analytics, and how are these trends reshaping the industry’s competitive landscape?

Generative AI-driven decision-making systems:

At Collabera Digital, we consistently harness the potential of our Gen AI Labs by collaborating  with key players in the banking and insurance fintech sectors. Through our GenAI labs, we  cultivate an environment of innovation, supported by accelerators, tools, and strategic  partnerships. This enables us to spearhead advancements, enhance productivity, and elevate  customer service standards by leveraging the disruptive capabilities of AI within the fintech  landscape.

As an outcome, our clients can make more nuanced decisions around loan disbursements &  eligibility, fraud detection, next best actions – including investment recommendations. A few  examples of our AI use cases are as below:

1. Near real-time credit scoring & loan application decision making tool. Fintech companies gain a competitive edge by leveraging alternative data sources, such as invoices, bill payment history, and behavioural profiling, to analyze loan applications beyond  traditional credit scores and financial data. This allows for same-day loan approvals,  personalized solutions, and lower risk. Traditional banks are pressured to invest heavily  in AI capabilities to keep pace with these advancements.
2. AI-based customer support. This involves implementing highly personalized and intelligent chatbots to replace menu-based ones and enhance customer service. Our developed multi-lingual chatbots leverage a powerful combination of Machine Learning  (ML) and Large Language Models (LLM) to facilitate more natural, faster and effective conversations, and supplement contact center agents.

Alongside AI technologies – both traditional and Generative, there is rising adoption of Open  Banking and Financial platforms, facilitated by APIs, microservices architectures, and 360  degree customer views. Advanced CRM tools and enterprise-wide hyper-personalized GPT bots  are enhancing customer service efficiency. Moreover, emerging technologies like Internet of  Things (IoT), Digital Currencies, and evolving blockchain use cases are paving the path for  innovative, differentiated, and cost-effective solutions in Payments, Investments, Lending, and  Insurance.

4. How are traditional financial institutions adapting to the disruptive innovations brought forth by fintech companies, and what strategies are they employing to stay competitive in this evolving landscape?

Digital Transformation: Traditional banks are embracing digital transformation initiatives,  which involve modernizing legacy systems, integrating cloud computing, and deploying digital  channels like mobile banking apps and online platforms. These efforts aim to align with evolving  customer preferences and expectations in the digital era.

Partnerships & Acquisitions: Financial Institutions (FIs) are acquiring fintech startups for  innovative tech and talent and forming strategic partnerships to introduce new financial  products and services without in-house development. These moves help FIs stay competitive  and agile in the evolving fintech landscape.

Focus on Customer Experience: FIs are focusing on enhancing mobile banking experiences by  prioritizing user-friendly apps equipped with features such as mobile payments, P2P transfers,  and budgeting tools, mirroring the convenience and personalization offered by fintech apps.  Additionally, they are revamping customer service models to deliver faster and more efficient  support across various channels, including online chat and social media, catering to the  expectations of tech-savvy customers who seek immediate responses. These efforts signify FIs’  commitment to meeting evolving customer preferences and delivering seamless digital  experiences in the competitive financial landscape.

Focus on Existing Strengths: FIs rely on their trusted reputation, brand recognition to instil customer confidence, especially among those hesitant about fintech newcomers. Additionally,  they emphasize their robust security measures, regulatory compliance and expertise setting  them apart from some fintech startups. The larger balance sheets, branch networks and  historical customer base, bolster their standing as reliable and secure financial service  providers, especially for larger corporates, niche and high network customer segments.

5. Could you elaborate on Collabera Digital’s experience in implementing cutting edge engineering solutions within the fintech sector, particularly in enhancing security and scalability of financial platforms?

Collabera Digital has been spearheading the implementation of cutting-edge engineering  solutions, elevating the security and scalability of financial platforms. Below is list of few of our  initiatives/ engagements:

• Reengineering of Payment App for a Leading Mobile Payments Services Firm

o Enhanced payment experience by improving scalability, legacy modernization,  microservices enhancement & enabling easy addition of new functions and  features.

o Improved service reliability from 93% to >98%, with a 15% increase in customer  base in 1 year, and development of multiple payment and lifestyle apps.

• Built one of the largest multi-channel Payment Platforms for a leading fintech o Developed Omni Payment Platform (OPP) as an Online and Mobile App with features like Pay bills, Add Money, Buy Load and Pay now via Debit Card, Credit Card, Multiple Wallets

o Enhanced security features to protect sensitive information.

• Dashboard for multi-purpose Super App for big conglomerate for Tracking Payments o End-to-end architecture for the app development & setup configurable solutions for easy maintenance and code changes, enabled layered user access with multiple conditional access

o Introduced new payment options, ease of tracking payments for merchants and  code optimization.

• Developing Community Platform for Women Entrepreneurs for a leading e-commerce company

o Implementation of a user-friendly platform adopting Microservice, Text  classification AI/ML, Chatbots, GIT architecture and PHP Lumen frameworks o 15% increase in user base, 25% increase in user retention, 50% increase in  application loading time.

6. How does Collabera Digital approach collaboration with fintech clients to tailor engineering solutions that meet their specific needs and align with industry standards and best practices?

Deep Collaboration and Co-Creation: Collabera Digital prioritizes collaborative partnerships  and co-creation, actively engaging with fintech clients to comprehend their unique challenges  and objectives. We facilitate discovery sessions, ongoing thought leadership, and showcase  innovations from our Engineering Studios and GenAI Labs – where ‘creative minds’ meet  ‘generative algorithms’.

We have initiated pilot programs with clients, that have evolved into long-term partnerships.  These include projects such as Wallets & Super-apps, Mobile Apps for Small Medium  Enterprises (SMEs), Monetization of APIs, Generative AI-based use cases for customer  engagement, process automation, and code optimization, among others.

Talent & Technology Expertise: We position ourselves at the intersection of talent and  technology, boasting industry-leading credentials in talent and training. Our engagement and  delivery models offer the highest levels of flexibility, tailored specifically to meet the unique  requirements and business-IT context of our fintech and banking clients. For several strategic  transformation engagements, we advise our clients on technology tools, fintech platform  architectures, Agile delivery methodologies.

Domain Knowledge: Through our profound understanding of client business objectives and  deep domain expertise in the BFSI sector, we anticipate industry trends and stay abreast of the  latest regulations. This allows us to proactively propose tailored solutions to meet our clients’  needs.

For instance, we collaborated with a leading mobile wallet application with millions of active  users and sellers across a specific region to integrate a mini application from a digital bank  within their platform. This enabled the wallet customers to open savings accounts with the  digital bank, via their wallet app, through a seamless eKYC process. This initiative led to an  exponential increase in number of savings accounts opened for the digital bank, and providing  innovative offerings for Wallet customers.

Drawing upon our digital engineering expertise, we successfully developed and executed the  technical aspects of this integration. Our deep tech expertise and understanding of underlying  technology employed by both entities, ensured a smooth integration process, while  significantly contributing to the financial inclusion efforts in the APAC region.