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What is “Finternet” now?
What is “Finternet” now?

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“Finternet” is multiple financial ecosystems interconnected with each other – much like the internet. It would lower barriers between different financial services and systems, drastically reducing the complex clearing and messaging chains and other frictions that hinder today’s. financial system. Finternet would be built on unified ledgers which will bring multiple financial markets such as tokenized assets, shares, bonds, real estate, on a single programmable platform. This has the capability to enable individuals and businesses to transfer any financial asset they like, in any amount, at any time, using any device, to anyone else, anywhere in the world. Financial transactions would be cheap, secure, and near-instantaneous.

What is the need of Finternet?

Financial asset transactions such as real estate and bonds are still taking days to settle. The absence of interoperability among siloed proprietary databases often delays the speed of transactions, particularly among cross border payments. Legit payments are suffering because of proliferation in compliances to deter illicit activity such as those related to anti- money laundering, terror funding etc.

Government transfer to banks is taking longer than expected for Individuals that prompts them to take short term loans often at high interest rates. External verification system and auditing mechanisms and back-office costs are additional costs of financial systems. The cost of cross-border remittances is high as well.

Credit period is itself a huge cost among companies across borders. Sometimes, immense hidden costs engage in terms of potentially worthwhile transactions and products that never materialize.

Multiple shortcomings and their impacts along with certain drivers are unveiling a transformative shift in the ecosystem of financial systems.

Some drivers: 

1. The landscape of economic activity is expanding at a remarkable pace fueled by digital interventions. These interventions are leading to multiple layers of innovation which are proliferating to unlock markets around the world.

2. Active participation of regulatory activities in bringing out open finance, open banking, tokenization shows an optimistic intent to harness the potential of financial innovations.

3. The expansion of internet access among all demographics and universal adoption of smartphones has cleared paths enables every digital application. The advances in cryptic technology, decreasing compute cost and artificial intelligence are set to bring a revolution in financial systems.

 

 

 


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Madhumay
Deputy Manager - Research

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