Financial innovation

With United Payment Interface and now P2P lending, RBI has done well to drop its earlier conservative attitude towards innovation


The beauty of any new technology is that it allows laggards to leapfrog those who were ahead in the game. India saw this during the telecom revolution. Most Indians skipped the fixed-line stage to directly become mobile phone users. Is something similar about to happen in the financial sector?

The Reserve Bank of India’s new discussion paper on peer-to-peer lending should be seen in this context. It comes just a few days after the inauguration of the Unified Payment Interface, perhaps the best public payments infrastructure in the world. It has created a platform that could lead to a huge growth in cashless payments through mobile phones. The Reserve Bank of India has done well to drop its earlier conservative attitude towards innovation.

The financial system has more systemic implications than telecom. So the new has to be accompanied by regulation. But the direction of change is welcome in a country where too few people have active bank accounts.