{"id":39713,"date":"2024-02-20T07:35:42","date_gmt":"2024-02-20T02:05:42","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=39713"},"modified":"2025-04-24T18:43:01","modified_gmt":"2025-04-24T13:13:01","slug":"fintech-players","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/fintech-players\/","title":{"rendered":"Parliamentary Committee on local fintech players"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in news?<\/li>\n<li>What is National Payments Corporation of India (NPCI)?<\/li>\n<li>What is UPI?<\/li>\n<li>News Summary: Parliamentary Committee on local fintech players<\/li>\n<li>What does the report infer about the existing ecosystem?<\/li>\n<li>What are the concerns about fraud?<\/li>\n<li>Way forward<\/li>\n<\/ul>\n<h2>Why in news?<\/h2>\n<ul>\n<li>In its recent report, the Standing Committee on Communications and Information Technology expressed worries about foreign-owned fintech apps having too much control in India.<\/li>\n<li>The committee suggested that Indian-owned apps should be encouraged more.<\/li>\n<li>It pointed out that while the Unified Payments Interface (UPI) made up a large portion (73.5%) of all digital payments in terms of volume in the fiscal year 2022-23.<\/li>\n<li>However, its share of the total payment value was much smaller, at only 6.67%.<\/li>\n<\/ul>\n<h2>National Payments Corporation of India (NPCI)<\/h2>\n<ul>\n<li>NPCI is an umbrella organisation for operating retail payments and settlement systems in India.<\/li>\n<li>It is an initiative of RBI and Indian Banks\u2019 Association (IBA) under the provisions of the <u>Payment and Settlement Systems Act, 2007<\/u>.<\/li>\n<li>The objective of NPCI is to create a robust Payment &amp; Settlement Infrastructure in India.\n<ul>\n<li>For this, NPCI was incorporated as a \u201cNot for Profit\u201d Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>UPI<\/h2>\n<ul>\n<li>It was launched by NPCI.<\/li>\n<li>UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing &amp; merchant payments into one hood.<\/li>\n<li>It also caters to the \u201cPeer to Peer\u201d collect request which can be scheduled and paid as per requirement and convenience.<\/li>\n<\/ul>\n<h2>News Summary: Parliamentary Committee on local fintech players<\/h2>\n<h2>What does the report infer about the existing ecosystem?<\/h2>\n<ul>\n<li>Regulation of Digital Payment Apps\n<ul>\n<li>The Committee underscored the importance of regulating digital payment apps due to their increasing usage in India.<\/li>\n<li>It highlighted that regulating local apps, compared to foreign ones, would be more practical for entities like the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI).<\/li>\n<\/ul>\n<\/li>\n<li>Domination of Foreign-Owned Fintech Apps\n<ul>\n<li>The Committee noted the dominance of fintech apps owned by foreign entities, such as PhonePe backed by Walmart and Google Pay, in the Indian fintech sector.<\/li>\n<li>PhonePe holds the largest market share in terms of transaction volume, followed by Google Pay.<\/li>\n<li>As per the statistics were recorded between October and November 2023:\n<ul>\n<li>PhonePe accounted for 46.91% of the market share.<\/li>\n<li>Google Pay held 36.39% of the market share.<\/li>\n<li>In comparison, NPCI&#8217;s BHIM UPI only had a 0.22% market share in volume terms.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Usage Statistics\n<ul>\n<li>NPCI&#8217;s data from December last year revealed:\n<ul>\n<li>Customers initiated a total of 5,642.66 million transactions using PhonePe.<\/li>\n<li>Another 4,375 million transactions were made using Google Pay.<\/li>\n<li>Only about 24.30 million transactions were made using BHIM.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Committee\u2019s recommendation supported NPCI&#8217;s Transaction Volume Cap\n<ul>\n<li>In November 2020, the NPCI implemented a 30% volume cap on transactions conducted through the Unified Payments Interface (UPI).<\/li>\n<li>This regulation aimed to limit the number of transactions initiated by third-party apps like PhonePe and Amazon Pay, ensuring a balanced usage of the interface.\n<ul>\n<li>Originally, apps exceeding the prescribed cap were given a two-year period to comply with the directive, scheduled to conclude by December 31, 2022.<\/li>\n<li>However, citing the need for further expansion and equilibrium in the UPI ecosystem, the compliance deadline was extended to December 31, 2024, in December 2022.<\/li>\n<\/ul>\n<\/li>\n<li>The committee supported this regulation in its report.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>What are the concerns about fraud?<\/h2>\n<ul>\n<li>Fintech Companies and Money Laundering Concerns\n<ul>\n<li>The Committee highlighted that fintech companies were being exploited by scamsters for money laundering purposes.<\/li>\n<li>An example cited was the Abu Dhabi-based app called Pyppl, which was reportedly administered by Chinese investment scamsters.<\/li>\n<li>This situation posed challenges for Indian law enforcement agencies in tracking the flow of illicit funds gathered through scams on the platform.<\/li>\n<\/ul>\n<\/li>\n<li>Fraud Trends and Ratio\n<ul>\n<li>Despite an increase in the volume of transactions over the past five years, the ratio of fraudulent transactions to total transactions has remained relatively low.<\/li>\n<li>The fraud to sales ratio, representing the proportion of fraudulent transactions to total transactions in a financial year, hovered around 0.0015%.<\/li>\n<li>As of September 2023, in the ongoing financial year, this figure slightly increased to 0.0016%.<\/li>\n<\/ul>\n<\/li>\n<li>Impact on UPI Users\n<ul>\n<li>The percentage of UPI users affected by frauds stood at 0.0189%.<\/li>\n<li>Despite concerns about fintech platforms being used for illegal activities, the overall impact on users remained relatively low compared to the total volume of transactions.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Way forward<\/h2>\n<ul>\n<li>Advantages of Local and Foreign Fintech Players\n<ul>\n<li>Local fintech companies possess a natural advantage in comprehending the intricacies of the customer base, various ecosystem participants, and the digital public infrastructure within the Indian market.<\/li>\n<li>They are also well-versed in navigating the broader market infrastructure.<\/li>\n<li>Conversely, foreign fintech firms excel in leveraging new technologies, employing innovative techniques, and capitalizing on global connectivity.<\/li>\n<li>Hence, there is the necessity of fostering a balanced mix of local and foreign fintech players to effectively serve the Indian ecosystem.<\/li>\n<li>This balance would be crucial across diverse sectors such as payments, lending, wealth management, and insurance.<\/li>\n<\/ul>\n<\/li>\n<li>Regulatory Emphasis on Accountability and Compliance\n<ul>\n<li>Analysts acknowledged the regulator&#8217;s emphasis on the criticality of accountability and compliance with local laws.<\/li>\n<li>They underscored the importance of adherence to regulatory frameworks to ensure the integrity and stability of the fintech sector within the Indian market.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1)\u00a0What is fintech?<\/h3>\n<p>The word \u201cfintech\u201d is simply a combination of the words \u201cfinancial\u201d and \u201ctechnology\u201d. It describes the use of technology to deliver financial services and products to consumers.<\/p>\n<h3>Q2) What is money laundering?<\/h3>\n<p>Money laundering is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. It is an illegal exercise that converts black money into white money.<\/p>\n<hr \/>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Industry\/what-did-the-parliamentary-committee-recommend-with-respect-to-local-fintech-players-explained\/article67864664.ece#:~:text=The%20story%20so%20far%3A%20In,that%20local%20players%20be%20promoted.\" target=\"_blank\" rel=\"nofollow noopener\"><u>What did the Parliamentary Committee recommend with respect to local fintech players? | Explained<\/u><\/a><u> | <\/u><a href=\"https:\/\/www.npci.org.in\/what-we-do\/upi\/product-overview\" target=\"_blank\" rel=\"nofollow noopener\"><u>NPCI<\/u><\/a><u> | <\/u><a href=\"https:\/\/economictimes.indiatimes.com\/tech\/technology\/parliamentary-panel-flags-dominance-of-foreign-owned-upi-apps-urges-promotion-of-local-fintechs\/articleshow\/107531946.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\"><u>The Economic Times<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Parliamentary Committee on local fintech players<\/p>\n","protected":false},"author":5,"featured_media":39714,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-39713","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/39713","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=39713"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/39713\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/39714"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=39713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=39713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=39713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}