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Is technology an ‘agathokakological’ (composed of both good and evil) companion?
The RBI has raised this question in the context of increased levels of hacking threats and distributed denial of service attacks, which have the potential for causing significant disruptions in the services of financial technology (FinTech) ventures apart from risks related to sensitive customer information and cyber frauds.
The RBI said: “‘Denial of service’ in information technology parlance, is something that sounds scary. While the current cyber defence mechanisms appear to be robust as they have been withstanding innumerable cyber-attacks, a multi-sigma event of a failure of such a mechanism in an increasingly networked global financial system is something all the stakeholders need to guard against.”
In this regard, the RBI said the onerous task of efficient monitoring and management of the attendant information technology systems and data security risks are important to enhancing the net benefits of disruptive innovations.
In its Financial Stability Report (FSR), the RBI said solutions for addressing cyber threats get compounded given their cross-border reach pervading different legal jurisdictions.
The report noted that a lack of effort to voluntarily share information on cyber attacks makes it difficult to tackle their recurrence. This has assumed greater significance with the secular growth of FinTech over the last couple of years. Led by start-ups, FinTechs are basically technology-enabled financial solutions which bring about digital innovative disruptions not only in the development of applications and products but also in business models of the banking and financial services sector, the RBI said.
“There is no gainsaying that FinTechs have brought in amazing customer experience ranging from ‘smart contracts’ to simple ‘shake for balance’ function on a bank’s app besides providing faster and easier delivery channels,” the RBI said.
The ‘shake for balance’ app, first introduced by Swedbank, one of the major retail banks in Sweden, enables customers to know the balances in their bank accounts by shaking their mobile phones.
The FSR underscored that financial market regulators have to deal with new forms of ‘insider trading’ — strictly going by the definition of the term — as digitisation of data is providing a recipe for digital criminals.
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