Ce @ a as sil? FINANCIAL TECHNOLOGY Trad o es Concept Notes Role of Information Technology (IT) in Banking and FinanceContents 1 Evolution of Information Technology in the Banking Sector. od 1.1 Phase 1- 1980 to 1990 (Period of Mechanization)... a8 1.2 Phase 2 ~ 1990 to 2000 (Period of Automation) ...... aol 13. Phase 3 ~ 2000 to 2010 (Internet Era)... a5) 14 — Phase 42011 Onwards (The advent of mobile banking) . 6 2 The New Term - FinTech... anil 2.1 Definition of Fintech a 2.2 FinTech History and Evolution... a 2.3. Key Enabling Technologies used by Fintechs... 8 2.4 What are the advantages of FinTech? .. ae = 11 2.4.1 Advantages for Customers .. 2.4.2 Advantages for Merchants .. 2.4.3 Advantages for Banks... 13 2.5. Difference between Fintech and Traditional banking Sector... 13 2.6 Areas of Fintech...... 14 2.6.1 — Banking. 14 2.6.2 Investment and Savings ~ Asset Management. 2.6.3 Blockchain and Cryptocurrency 222 2.6.4 Digital Lending 23 2.6.5 Insurance... 25 266 Trading 2 = " 25, 2.6.7 Equity Crowdfunding.... 26 2.6.8 — Payment, Clearing and Settlement Systems...... 26 2.6.9 Payment Aggregators and Payment Gateways: 26 2.6.10 PPIs... 2.6.11 Consumer Protection anu: 2.6.12 Regulation and Supervision... 2.7 _ Pillars of FinTech... 2.8 — Attributes of a Successful Fintech Hub .. 2.9 Fintech Regulation ... 29 3 India and Fintech..... 3.1 Major Enablers of FinTech In India 30 3.1.1 Penetration of Internet and Smart Phone .....» 30 1[Pace [Link] QUERY HELLO@[Link] 81462072413.1.2 Favourable Demography..... 3.1.3 India Stack... 3.1.4 Data Sharing Framework... 3.1.5 Funding, Infrastructure and Regulatory Support..... 3.1.6 Rising Investor Interest....... 3.1.7 Institution Building... 3.2. Regulation of Fintech.... 3.2.1 Why Fintech Regulation is Necessary? 33 3.2.2. Regulatory Environment in India. 3.3. Regulatory Sandboxes (RS) ~ Innovative Approach to Regulation 3.3.1 Enabling Framework for Regulatory Sandbox by RBI 3.3.2 Enabling Framework for Regulatory Sandbox by SEBI and IRDAI 3.4 Risks Associated with FinTech.... 3.5 Areas of Concern for Future Development of Fintech in India. 3.6 Way Forward. Z . = se 43 1 Evolution of Information Technology in the Banking Sector The banking system Is like a central nerve to a nation’s economy as it caters to the financial needs of credit in all the domains of society. For creating an efficient banking system, which can respond adequately to the needs of a growing economy, technology has a key role to play. The growth and advancements in technology has led to a paradigm shift in the entire banking operations and systems. Today, you need go to the bank to withdraw cash, you can just use an ATM. Moreover, there is no need to withdraw cash as digital payments like UPI, IMPS has made it super easy to transactions through a tap on the phone. This did not happen in a day, rather it was a slow process. The evolution started with Reserve Bank of India forming-up a committee on computerization in banks headed by Dr. C. Rangarajan in 1983. The Committee submitted its report in 1984 and recommended the introduction of computerization at Branch, Regional, and Head Office levels of banks. Rest all his history now! The below diagram shows the evolution of banking system in India, highlighting some major developments. 21Psce [Link] QUERY? HELLO@[Link] / 814620peo oer Post 2011 - Mechanization rene) Internet tess Core Banking IMPS Solutions RTGS Mobile Banking ATMs NEFT Cheque Debit Cards Online Banking. ‘Truncation Electronic Fund Tele Banking ‘System Transfer E-Commerce Digital Payments Computerization modes like UPI, of banks PPIs, AEPS, USSD, BBPS, NETC etc. Biometrics 1.1 Phase 1- 1980 to 1990 (Period of Mechanization) Mechanization in Indian banks did indeed begin in the 1980s, and one significant technological advancement during that time was the introduction of Magnetic Ink Character Recognition (MICR) technology. MICR played a crucial role in automating and streamlining various banking processes. MICR technology involves the printing of characters using a special type of ink that contains magnetic particles. These characters are typically printed on the bottom of cheques or other banking documents. The magnetic ink makes it possible to read the characters using specialized MICR readers or scanners. MICR enabled faster and more accurate processing of cheques and other documents by automating the reading and sorting of information. MICR readers could quickly extract important data, such as the bank's identification number, account number, and cheque number, which significantly improved the ef of processing large volumes of transactions. MICR is a nine-digit code. (MICK Code 695002032 / | \ City Code Bank Code Branch Code 1.2 Phase 2- 1990 to 2000 (Period of Automation) During this phase, several technological advancements were introduced, leading to the automation of various banking processes. Some key developments that occurred during this period: 1. Core Banking Solutions (CBS): It refers to a centralized banking system that enables banks to provide a wide range of banking services across multiple branches and channels from a single integrated www. [Link] ERY? HELLO@EDUTAP. COLINplatform, CBS allows for real-time transaction processing, centralized customer data management, and seamless connectivity between various branches and delivery channels, CORE BANKING SYSTEM Electronic Funds Transfer (EFT): Electronic Funds Transfer systems gained prominence during this period, enabling electronic transfer of funds between banks. EFT facilitated efficient and secure transactions, reducing the reliance on phy: instruments cheque. Automated Teller Machines (ATMs): The proliferation of ATMs accelerated during this phase, providing customers with convenient access to cash withdrawals, balance inquiries, and other basic banking services round the clock, An Automated Teller Machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller. Anyone with a credit card or debit card can access ATMs. Data Warehousing and Data Mining: Banks began investing in data warehousing and data mining technologies to effectively manage and analyse customer data. These systems helped banks gain insights into customer behaviour, improve targeted marketing, and enhance risk management practices. What is Data Warehousing and Data Mining? Data Warehousing - Data warehousing in banking refers to the process of collecting, storing, and organizing large volumes of structured and unstructured data from various sources within a bank's operations. It involves the creation of a centralized repository, known as a data warehouse, where data from multiple systems and databases are consolidated, integrated, and made available for analysis. and reporting purposes. Data Mining - Data mining in banking refers to the process of extracting valuable insights and patterns from large volumes of structured and unstructured data within the banking industry. It involves utilizing advanced analytics techniques and algorithms to discover hidden patterns, correlations, andrelationships within the data, with the goal of improving decision-making, risk management, customer relationship management, and operational efficiency. To sum, Data warehousing is the process of collecting, organizing, and storing large volumes of structured and unstructured data for analysis. Data mining is the process of extracting valuable insights and patterns from the stored data. 5. Computerisation of banks - Computerisation of banks refers to the process of integrating computer systems and technology into various banking operations and services. It involves automating tasks such as account management, transaction processing, data storage, and customer service using computers and related technologies. 1.3 Phase 3 - 2000 to 2010 (Internet Era) Phase 3 of the Indian banking sector, spanning from 2000 to 2010, is often referred to as the "Internet Era" due to the significant impact of internet-based technologies on banking operations, During this period, several developments took place, transforming the banking landscape in India. Some of the key initiatives are discussed below — 1. Online Banking: Online banking emerged as a prominent channel, allowing customers to access their accounts, make transactions, pay bills, and avail various banking services online. It offered convenience, 24/7 accessibility, and self-service options to customers. lo, arent 2. Tele Banking - Tele banking refers to a banking service that allows customers to access various banking services and obtain information through telephone communication. This service typically involves interactive voice response (IVA) systems or customer service representatives who assist customers over the phone. 3. Real-Time Gross Settlement (RTGS) — RTGS is a payment system that enables individuals and businesses to make large-value, instantaneous fund transfers. In RTGS, transactions are settled individually and in real-time, without any netting or bundling of payments. S|Page [Link] QUERY? HELLO@[Link] / 81462072414, National Electronic Funds Transfer (NEFT) - NEFT is the most commonly used electronic payment method for transferring money from any bank branch to another bank in India. It operates in half hourly batches. 5. Immediate Payment Service (IMPS) - It is an instant interbank electronic funds transfer system available in India, IMPS allows individuals to make real-time, 24/7, and secure fund transfers between different banks using mobile phones, internet banking, ATMs, or branch channels, 1.4 Phase 4— 2011 Onwards (The advent of mobile banking) Phase 4 of the Indian banking sector, starting from 2011 onwards, is characterized by the widespread adoption and advancements of mobile banking. This phase witnessed a significant shift towards mobile- centric banking services, driven by the proliferation of smartphones and the availability of mobile internet connectivity. Some of the key initiatives are discussed below — 1, Biometric Authentication: Mobile banking also witnessed the integration of biometric authentication, such as fingerprint and facial recognition, for enhanced security and convenient access to banking services. 2. Mobile Banking - Mobile banking refers to the provision of banking services through mobile devices such as smartphones and tablets. It enables customers to access a wide range of banking services and perform various transactions using mobile applications or mobile-friendly websites provided by banks or financial institutions. 3. Cheque Truncation System (CTS) - CTSis a technology-driven process in which the physical movement of cheques is eliminated, and instead, high-quality images and associated data are transmitted for clearing and settlement. CTS enhances efficiency, reduces processing time and costs, and enables faster cheque clearing by capturing and processing cheque images electronically. 4, Multiple Digital Payment Modes - Phase 4 of the Indian banking sector, from 2011 onwards, witnessed a proliferation of multiple digital payment modes, transforming the way transactions were conducted. Mobile wallets like Paytm, PhonePe, and Google Pay gained popularity, enabling convenient and secure payments. Unified Payments Interface (UPI) revolutionized person-to-person and person-to-merchant transactions. QR code payments allowed users to scan and pay directly from their bank accounts. Aadhaar Enabled Payment System (AEPS) facilitated biometric-based transactions. Debit and credit card usage surged, supported by POS terminals and online payment gateways. The availability of these diverse digital payment modes empowered users with convenient, contactless, and efficient payment options, driving the adoption of a cashless economy. These payment modes have been discussed in the chapter ‘Development of Digital Payments in india’.This completes our discussion evolution of IT in Banking, but | would like to draw your attention on the one thing that can really make us understand the role Information and Technology in the banking sector, then without doubt it has to be FinTech. FinTech is the buzz word these days. 2 The New Term - FinTech Financial technology (Fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. Atits core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones. 2.1 Definition of Fintech Fintech, the word, is a combination of " Technology".Broadly, the term —_ “financial technology" can apply to any innovation in how people transact business, from the invention of igital money to double-entry bookkeeping. However, there is no universally agreed upon definition for fintech. For simple understanding, it is generally described as: ani * Thus, we can say that the term Fintech (Financial Technology) refers to software and other modern technologies used by businesses that provide automated and FINANCIAL TECHNOLOGY improved financial services + Fintech now describes a variety of financial activities, such as money transfers, depositing a check with your smartphone, bypassing a bank branch to apply for credit, raising money for a business start- up, or managing your investments, generally without the assistance of a person. What is a Fintech Company? Fintech companies integrate technologies (like Al, blockchain and data science) into traditional financial sectors to make them safer, faster and more efficient. ‘+ Fintech is one of the fastest-growing tech sectors, with companies innovating in almost every area of finance; from payments and loans to credit scoring and stock trading. ‘© Many companies uses technology as a catalyst to offer financial services to the end users more efficiently, © Normally such companies are start — ups created to disrupt well established financial systems. Example of Fintech Company In India: Paytm, Policy Bazaar etc. 2.2 FinTech History and Evolution Although the phrase fintech was only added to the Merriam-Webster dictionary in 2018, the concept dates back decades. Earlier, any development in technology was not said to be part of FinTech because this term was not coined at that time. But in true sense, even those developments were somehow part of FinTech itself. oe WWWLEDUTAP,COIN QUERY? HELLO@[Link]So, whatever we discussed in the evolution of IT in the banking sector in the earlier section can be attributed to FinTech However, the turning point for fintech in its modern form was the Global Financial Crisis of 2008, as after the crisis FinTech entrepreneurs realised that banking services should be transparent, facilitative and economical. Branches, Tele-Banking -—-Net-Banking~—--Mobile-Banking - &)-()-@)- “ Open Banking Evolution of Banking Technology 2.3. Key Enabling Technologies used by Fintechs. Advances in technology allow for innovation in the ways businesses and individuals perform financial activities. The development of financial technology—commonly referred to as fintech— is the subject of great interest for the public and policymakers. The underlying, cross-cutting technologies that enable much of fintech includes: 1. Artificial Intelligence Artificial intelligence is an emerging technology that facilitates intelligence and human capabilities of sense, comprehend and act with the use of machines. - It includes technologies like machine learning, deep learning, pattern recognition, big data, neural networks, self-algorithms etc. ~ Recently it has become widely popular and gained prominence due to its multifaceted application ranging from healthcare to military devices. Examples of Use of Artificial Intelligence 1. Credit Card Fraud Detection System: Al can help to detect abnormal payment patterns in credit card fraud detection systems. With the use of Al, it is now possible to monitor behavioural anomalies and prevent security @lPage [Link] QUERY? HELLO@[Link] /threats with much more precision. With this technology, it is now easier to recognise activities by bots and hackers 2. Using face ID for unlocking our Financial Apps is now part of our daily lives. It uses face recognition through which a specific face is recognised 2. Big Data The term Big Data has been in use since the late 1990s and refers to the vast amount of data being generated by industry, governments, individuals, and electronic devices. - Big Data includes data generated from traditional sources—such as stock exchanges, companies, and governments—as well as non-tra ional data types, also known as alternative data, arising from the use of electronic devices, social media, sensor networks, and company exhaust. Characteristics of BIG DAT) The term Big Data typically refers to datasets having the following characteristics: ‘* Volume: The amount of date collected in files, records, and tables is very large, representing many millions, or even billions, of data points. * Velocity: The speed with which the data are communicated is extremely great. Real-time or near- real-time data have become the norm in many areas. ‘© Variety: The data are collected from many different sources and in a variety of formats, including structured data (e.g., SQL tables or CSV files), semi-structured data (e.g., HTML code), and unstructured data (e.g., video messages). ‘* Sources of Big Data for the Fintechs are: - Financial markets (e.g., equity, fixed income, futures, options, and other derivatives), - Businesses (e.g., corporate financials, commercial transactions, and credit card purchases), - Governments (e.g,, trade, economic, employment, and payroll data), - Individuals (e.g., credit card purchases, product reviews, internet search logs and social media posts} Examples of Use of Big Data: Big Data is all the data and information that comes from users’ phones, tablets, laptops, PC and other electronic devices. However, in a raw form, this data has no value. This is where data analytics come into play, and in FinTech, the information extracted from the Big Data can be used to foresee customer actions and preferences, create bank policies and develop strategies for growth. 3. Application Programming Interface (API An API is a set of programming code that enables data transmission between one software product and another. APIs comprise a set of rules and specifications that software programmes use to communicate with each other. Over the last few years, APIs have become particularly significant to banks and fintech bodies. APIs provide better means to share data, integrate with systems, and personalise services, making financial services quick and efficient. Example: When you pay money through PayTM from you bank account, lot of communication takes places between Paytm and your Bank account such as given below. alll this happens through APIs gipoce WWW [Link] QUERY? HELLO@EDUTAP. COIN / sise207241Sending user details to the Bank Verifying the password with the bank Sending the amount to be debited from the bank account A 2. 3, 4. Confirming to the bank that amount has been transferred and hence transaction is complete Biometrics is the measurement and statistical analysis of people's unique physical and behavioural characteristics. The technology is mainly used for identification and access control or for identifying individuals. Biometric technology is turning out Sed to be the “X factor” for FinTech [Saal Leake] invention. Advancement of the technology is creating new | Dynamic Internet Banking, branch banking, document Signature Processing, workflow automation opportunities for innovators to streamline the customer Facial Branch Banking, fraud recognition, access control experience. j Finger Prints ATM, POS, ePayment, branch banking, * There's long been an inverse relationship between security and J Voice Telephone Banking, branch banking, password/PIN convenience what conilten reset, high-isk transactions, Mobile banking granting consumers accessO,thEIEG] trig Branch banking, ATM, internet banking, access personal accounts, from social control media to financial. - _Itis due to biometric technology; a seamless customer authentication flow is finally within reach. Security and convenience are no longer mutually exclusive. * Over the years, physical signatures have been replaced by modern biometrics and have further evolved due to the advent of Artificial Intelligence (Al). 5. Distributed Ledger Technology (DLT) Distributed ledger technology (DLT) is a digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time. Blockchain is one of the most popular example of DLT * Unlike traditional databases, distributed ledgers have no central data store or administration functionality. The set of information is stored across various systems. For example, the name of the customer might be in one system whereas his password might be located in another system at a different location * Distributed-ledger technology (DLT) enables safer, faster and cheaper transactions in an ever- increasing number of sectors. © DLT’s is being increasingly used in storing digital currencies. © The most important potential advantages of DLT are listed below: 1. Decentralization and Disintermediation: DLT enables ct transfers of digital value or tokens between two counterparties and decentralized record-keeping, removing the need for an intermediary or central authority who controls the ledger. 10|Paze [Link] QUERY? HELLO@[Link] / 8146207241- This can translate into lower costs, better scalability and faster time to market. 2. Reduced Cyber Crime: Since data is stored in a decentralized manner, it would be difficult for the attacker to engage in any phishing attacks by targeting one system. Multiple systems would have to be targeted which makes the attacks more difficult Distributed ledger technology Apart from these above key technologies, there are some other technologies which have also contributed to the advancement of IT or Fintech 2.4 What are the advantages of FinTech? The following are some of the major advantages of fintech or financial technology for our economic sectors. This can be broadly divided into 3 categories. eget ee * Anytime Banking ——_* High Liquidity * Increased * Low Transaction Convenience cost * Speedy * Reduction in Risk Approvals associated with * One-Stop Cash Handling Solution nancial Inclusion * Increased Security * Direct benefit Transfer 2.4.1. Advantages for Customers FinTech has provided following advantages to the customers - 11[Page WWW. [Link] QUERY? HELLO @[Link] * Reduced Human Intervention © High Productivity * Low Costs and High Profitability * Less Errors Better Customer Service and Retention * Better Risk and Credit Control * Insuretech 81462072411. Anytime Banking: Using RTGS, NEFT and IMPS you can transfer funds at any time — 24*7*365, Using ATMs, you can withdraw cash any time without waiting for banks to open, 2. Increased Convenience: Customers can do transactions like transfer of money, paying for shopping, paying their bills and many other things while sitting in their homes. People can pay quickly using ‘Fast Tags’ and pay all bills from single window using ‘Bharat Bill Payment System’. 3. Speedy Approvals: Fintech can increase the accessibility and speed up the approval for credit rate. In certain situations, the application process and time to receive the capital is within 24 hours. 4. One-Stop Solution: Apart from normal banking products, Indian banks started selling third party products such as mutual funds and insurance to their clients as well. This single window selling saved the customers time and enabled the bank to enrich the relationship. 5. Increased Financial Inclusion: With Technologies like UPI Lite (works without internet) and USSD (Works without smart phones), even people in the remote areas of country with low or no internet. connectivity, people not having smart phones are able to enjoy the banking facilities. 6. Increased Security: Financial institutions are expecting to provide customers with the most advanced and high-end monetary services. To ensure that more people are confident in using financial services, it is important to use the latest security techniques. Biometric data, tokenization, and data encryption are some of the latest security solutions used by businesses in this field. 7. Direct benefit Transfer: Earlier cash payments were subject to “leakage” (payments that do not reach the recipient in full) and “ghost” (fake) recipients, particularly in the context of social security benefits by government transfers. Now, benefits are directly transferred to target beneficiary (direct benefit transfer) account through technology. 2.4.2, Advantages for Merchants FinTech has provided following advantages to the Merchants 1. Immediate Settlement Resulting in High Liquidity: Assured immediate settlement and payment to the various transactions made by the traders. This results in high liquidity for the traders, which is very important for them 2. Low Transaction Cost: Praviding various services to the businessmen at par with the international standards with low transaction cost. 3. Reduction in Risks Associated with Cash Handling: Avoid all the cost and risk problems involved in handling cash, which are very high in business transactions. 12|Page [Link] HELLO@[Link] / 8124.3. Advantages for Banks FinTech has provided following advantages to the banks or other financial institutions 1. Reduced Human Intervention: Reduces customer visits to the branch and thereby human intervention. 2. High Productivity: The productivity of human resources has increased since there is very less footfalls of customers as compared to the past. Technology also helps them do their tasks in a fast manner. 3. Low Cost to Banks and High Profitability: With online banking, there is the need for less human resources, less expenses on physical space etc. Low Costs results in high profitability 4, Less Errors: The clearing of cheques, passbook entries, inter-branch and inter-bank reconciliation and such other functions can now be carried out quickly, correctly and legibly with modern technology. 5. Better Customer Service and Retention: Since the bank has an online trail of transactions of customers - what they are spending and where they are spending, it helps banks better understand their customers and sell them the relevant products. To guide individuals on their finances, many of the latest systems are dependent on robot-advice. These robots can analyse a lot of data with respect to your income, risk appetite etc, and can give very customized advice to the investor in real-time basis. 6. Better Risk and Credit Control: Since Banks now have access to online trail of Transactions done by the customer. Enhanced Data Warehousing and Data Mining software helps banks better understand their customer profile and have better control over decisions like how much loan to give? When to red flag certain transactions (high amount transactions) happening in their account 7. Insuretech: The term insuretech refers to the application of technology to the insurance model, which allows companies to provide tailored insurance services and data security. Further, insuretech helps streamline the insurance process through online claims filing and policy management. 2.5 _ Difference between Fintech and Traditional banking Sector In today's rapidly evolving financial landscape, the emergence of Fintech has revolutionized the way banking services are delivered. This section explores the key differences between Fintech and the traditional banking sector, highlighting their distinct characteristics, benefits, and impact on the industry. Fintech Companies Traditional Banking industry They majorly focus on managing customer | Additionally, they majorly focus on the experiences. management of risk. 43|Page [Link] QUERY? HELLO@[Link] / 314They incline towards mobile functionality, data analysis, ease of accessibility, cloud computing, and personalisation. Further, they incline towards supply credit, economic growth, trust, security, and capitalisation. ‘Area of premises is solely based on customer satisfaction and good user experience. They strive towards integrating good patterns to make sure customers have a seamless transaction. They main to provide 24*7 services to all areas of the world including remote areas where banks fail to provide services. Banks have been trying to ease the financial transactions for customers in remote areas but have somehow been less successful in attaining it, They have higher penetrations due to mobile connectivity The physical distribution of banks is a major issue to resolve. They are consumer oriented. Further, they are process oriented. They heavily depend on the technology. Moreover, they are very traditional in their approach 2.6 Areas of Fintech Li rowd Fintech activities Enabling technologies Policy (a enablers Let’s cover all the main activities now 2.6.1 Banking Capitabraisng Arset nagemen Deposit andlending Payments, cearng, sertlement Cryptoasets oer securiy The technology boom in developed and developing countries has slowly moved from Internet banking to Mobile banking and is slowly now a taking a new direction toward digital banking. Fintech in the banking WwW [Link] RY? HELLO@[Link] / 814620724and financial sector normally offer their services in the form of products, applications, business processes and business models. In the banking sector, Fintech has led to lot of developments which are discussed in the upcoming part of this document. [Link] FinTech for New Type of Banking These days, FinTech is promoting the rise of Neobanks, Open Banking and Hashtag banking. 1. Neobanks are essentially banks without any physical branch locations, serving customers with checking, Savings, payment services and loans on a completely mobile and digital infrastructure. Some examples of Neobanks are Chime, Simple and Varo. 2. Open Banking - Banks and non-bank financial institutions use application programming interfaces (APIs), to provide third-party financial service providers with open access to consumer banking, transactional, and other financial data from banks and non-bank financial organisations (APIs). Consumers, financial institutions, and third-party service providers will be able to connect their accounts and data across institutions, making it easier for them to do business. Open banking is also referred to as "open bank data”. Before open banking QA . A: - BE After open banking celomer Customer a API Consumer ‘Application ‘An example of open banking being used in India is the Account Aggregator (AA) framework implemented by the Reserve Bank of India (RBI). Under this framework, authorized Account Aggregator entities act as intermediaries between banks, financial institutions, and customers to securely aggregate and share customer data with their consent. 3. Hashtag banking - A Hashtag is a word or phrase which is always preceded by a hash sign (#). Indian banks have started using the hashtag to provide services such as fund transfer, balance inquiry, prepaid mobile recharges etc, to their customers. To participate in Hashtag Banking, the customer has to follow his Bank on Twitter. Customers can send messages to the Bank, which are passed on to the Bank, to act on the hashtags sent by the customer. Moreover, as a result of FinTech rising in India, Reserve Bank of India has put out Establishment of Digital Banking Units (DBUs)”Digital Banking Units (DBUs) As a part of efforts to accelerate and widen the reach of digital banking services, the concept of “Digital Banking Units” (DBUs) is being introduced by the Reserve Bank. Guidelines for opening of Digital Banking Units (DBUs), let's cover them in the Q/A format ‘Question - Who can open DBU? ‘Answer - All Domestic Scheduled Commercial Banks (excluding Regional Rural Banks, Payments Banks and Local Area Banks). Question - Are there any General Permission required to open Digital Banking Units (DBUs)? ‘Answer - Scheduled Commercial Banks (other than RRBs, PBs and LABs) with past digital banking experience are permitted to open DBUsin Tier 1 to Tier 6 centres, unless otherwise specifically restricted, without having the need to take permission from Reserve Bank of India in each case. Question — What are the services which can be offered by DBU? Answer — DBUs can offer wide digital services, but RBI has Minimum Products and Services to be offered by each DBUs, they are — ‘A. Liability Products and services: (i) Account Opening (ii) Digital Kit for customers: Mobile Banking, Internet Banking, Debit Card, Credit card and mass transit system cards; (iii) Digital Kit for Merchants: UPI QR code, BHIM Aadhaar, POS, etc. B. Asset Products and services: (i) Making applications for and onboarding of customer for identified retail, MSME or schematic loans, (ii) Identified Government sponsored schemes which are covered under the National Portal C. Digital Services: Services like Cash withdrawal and Cash Deposit, updating KYC / other personal details, tc., Account Opening Kiosk, Kiosk with e-KYC/ Video KYC and Digital onboarding of customers for schemes such as Atal Pension Yojana (APY); Insurance onboarding for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMUJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY). ‘The above three activities are bare minimum, beside this DBUs, should offer hands-on customer education on safe digital banking products and practices for inducting customers to self-service digital banking services When it comes to banking, FinTech has not only changed the way we do banking, rather FinTech has also led to the overall development of some banking products too. One such banking product is Automated Teller Machine (ATM), now let’s understand how FinTech has contributed to the growth of ATMs in India. 16|P ape [Link] QUERY? HELLO@[Link] /[Link]. FinTech used for development of ATMs FinTech is utilized in the development of ATMs to enable advanced functionalities such as cardless transactions, mobile banking integration, biometric authentication, real-time transaction monitoring, and personalized user experiences. These innovations enhance convenience, security, and efficiency in the ig the world of ATMs ATM banking ecosystem. Now. Let’s have some more discussion regar ATM Models used in India - A. Online: When an ATM is connected to a bank's database and provides online access to the customers’ accounts, it is said to be ‘online.’ Normally, there is a daily withdrawal limit set by the bank for each account. The ATM switch monitors this, B. Offline: When an ATM is not connected to a bank's database, it is stated to be offline. In this mode, withdrawals are permitted up to a pre-fixed limit only, irrespective of the balance available in customers! accounts. C. Networked: When ATMs are connected to an ATM network, they are said to be ‘networked’. The advantage of networked ATMs is that cardholders can use their ATM cards at any of the networked ATMs. This, in effect, permits ‘anywhere anytime’ banking. The majority of the ATMs in India are networked through National Financial Switch (NFS) operated by NPCI. Backbone of the ATMs — National Financial Switch (NFS) NFS is a network that connects various automated teller machine (ATM) networks across India. The NFS enables interoperability between different banks' ATMs, allowing customers to access their accounts and perform transactions on ATMs of participating banks. It provides a seamless and secure platform for customers to withdraw cash, check account balances, transfer funds, and conduct other banking activities at ATMs outside their home bank's network, The NFS network ensures convenient access to banking services for customers, irrespective of their bank, promoting greater ATM usage and enhancing the overall banking experience, NFS watch developed and deployed by the IDRBT, in the year 2004 later on it was transferred to the NPCI in the year 2009, So currently NPC! looks after NES. These days many types of ATM are used, some of the prominent one are — ‘A. White Label ATMS (WLA) - WLAs are ATMs owned and operated by non-bank entities, authorized by the Reserve Bank of India (RBI) to provide basic banking services. These entities, typically non-banking financial companies (NBFCs), set up and manage the ATMs under their brand name. WLAs enable ns such as cash withdrawal, balance inquiry, and fund customers to perform basic ATM fun transfers. WLAs, are completely handled Independently by the NBFCs. The License authorised to install and operate WLAS is given under the Payment & Settlement Systems Act, 2007 by the Reserve Bank of India.