MUMBAI: Stating that new technologies being deployed in the financial sector should remain a means to an end, Reserve Bank deputy governor Rohit Jain has said the starting point has to be the purpose that a technology is intended to serve or achieve and not merely ite newsness.
Addressing the seventh global fintech summit here Wednesday, the junior most deputy governor said; “if the purpose of a technology deployment has endured, then that purpose should also be our reference point when evaluating new technologies which can make financial services faster, cheaper and more accessible.“
But the more important question is whether they solve a genuine financial problem better, who benefits from that improvement, and what new costs or risks may arise in the process?” he said, as there is no guarantee that the gains of lower costs and removing friction, will not necessarily reach everyone.Noting that technologies have made cost of financing much lower, widened the access, and strengthened the risk management, thus making finance more responsive, he said yet the technologies also raise important questions about resilience, accountability, and the choices we make as these technologies scale.
These issues bring three imperatives of finance to the fore: purpose, prudence, and policy, he said, adding; “while purpose tells us what is worth pursuing, prudence asks what we must protect as innovation scales and policy provides us with the framework within which both can advance together."
Stating that the purpose of a technology is that it is a means, not an end, he said; “a solution, however well-intentioned or technologically impressive, has little value if it does not address the problem that actually needs solving."
When scale changes the nature of risks, prudence has to lead you as there are concerns as emerging technologies become more deeply embedded in finance--speed, concentration and opacity. While none of these risks is entirely new, technology can amplify them and allow their effects to travel through the financial system in ways that are faster, wider and sometimes harder to detect, Jain said, adding prudence is not about resisting innovation but about ensuring that innovation remains resilient as it scales up.
“In policy one has to to find the right balance and policy needs both conviction and humility. Conviction is required about the outcomes that matter, including fairness, accountability, resilience, customer protection and financial stability. Humility is equally necessary about our ability to predict how a new technology will evolve or where its most valuable applications will eventually emerge,” Jain said. Concluding this, he said, “amid all our discussions about algorithms, tokens, platforms, cloud infrastructure and quantum computing, let us not forget that there is always someone at the other end of the technology.“
There is a saver entrusting an institution with hard-earned money, a borrower seeking an opportunity, a merchant awaiting a payment, or a family depending on the financial system when it matters most. That is ultimately where our responsibility lies.”While most customers will never know which model made a recommendation, which cloud hosted it or which technology enabled a transaction, they will,surely experience the outcome, which ultimately depends not on how sophisticated the technology it is, but on whether it works for them fairly, reliably and safely.
“Therefore the objective of any technology should not merely be to make finance faster or smarter, but to ensure that technological progress makes finance more useful, resilient and responsive to those it serves,” he concluded.