The banking regulator Reserve Bank of India (RBI) recently released a set of guidelines for digital lenders in order to protect the consumers’ interest. Those guidelines were welcomed by the consumers and fintech players alike. In an interview with MintGenie, S Anand, CEO & co-founder of PaySprint, says that these guidelines are expected to bring transparency and control.
At the same time, he says, fintech players will receive RBI’s recognition for their contribution to the lending ecosystem. About overall regulatory framework, he said the regulations are necessitated by the emergence of innovation.
About India's potential in the fintech space, he asserted that the country’s fintech adoption rate is 87 percent against global average of 64 percent. And this will witness massive growth in the time to come. He underlines the fact that there should be a heightened awareness about fintech's use of consumers' data. And the misuse of this data can be avoided by due diligence and by ensuring that the developers of applications are mindful of the risks and challenges so that they can be mitigated effectively.
Recently, RBI released a set of guidelines for digital lenders in a bid to protect the interest of consumers. What impact do you think these guidelines will have on consumers and fintech firms?
The RBI-issued set of guidelines for digital lenders tackles two crucial areas of concern, transparency and control. It counters malpractices such as privacy breaches, mis-selling & excessive interest rates. This improves the borrowing experience and instils fairness & boosts transparency in the entire digital lending ecosystem. A natural outcome of the same is increased faith from consumers in the digital credit system. Consumers gain clear insights & critical information, making them feel more secure about the process thereby increasing their risk appetite. This shall lead to more consumers taking up digital loans given that they will now better understand everything the loan entails, advancing the cause of financial inclusivity for all.
As far as Fintechs are concerned, this set of guidelines is largely received as a move in the right direction. Fintech players finally receive recognition from the RBI for their role in India’s lending ecosystem.
The guidelines increase regulatory pressure and push them to work in adherence with the strong regulatory framework that’s being put in place. There shall be no more exploitation of the ambiguous regulations of the past, leaving no room for the malpractices seen earlier. This gives incumbents & investors required clarity to plan for the future.
What do you think about the overall regulatory framework for fintech firms in India. Do you think these firms have a robust set of rules and regulations regulating them, or is there a need to overhaul them?
In India, the FinTech regulatory landscape is very fragmented, and there is no unified set of legislation or norms that regulate all FinTech products. Due to the absence of a consistent collection of FinTech legislation, this landscape is challenging to navigate.
Ambiguous legislation, consumer mistrust, and a small customer base all pose challenges for the Fintech sector, particularly in comparison to traditional financial institutions. Regulation is necessitated by the emergence of innovation. An appropriate balance must be struck between encouraging emerging technology developments and the requirement to manage them appropriately.
What do you think about the future of India’s fintech sector in general, and its recent growth? As early as in August, 2022; UPI transactions hit a new high of 657 crore. Do you think this growth in the fintech space will continue to accelerate?
India is one among the fastest and therefore, one of the most important growing FinTech markets within the world. India's fintech adoption rate is at 87 percent as against the global average of 64 percent. FinTech as an industry has been rapidly garnering followers over the past few years. We believe it will see humongous growth in the future, catering to the digital requirements of the people. Rising new startups, use of smartphones, internet facility, social media influence, technology and digitalization are major factors that will help usher in the expected growth.
The milestone reached by UPI transactions is monumental & sets a strong precedent for the same. The numbers tell us by 2025, India's fintech market is estimated to reach US$ 150 billion.
The digital payments system in India has evolved the most among 25 researched countries with India’s Immediate Payment Service (IMPS) being the only system at level five in the Faster Payments Innovation Index (FPII).Compared to the world's developed nations, 40% of the world's total digital transactions happen in India.
There are a number of concerns about fintech firms misusing consumers’ data. How do you think these concerns can be addressed?
While there is no reprieve for the malice shown by FinTechs knowingly misusing consumers’ data, a key element in addressing said concerns would be raising awareness. Large-scale socialization should be done to provide information on the Fintech online loan platform that is rife, as well as provide information on how to deal with the problem, if the FinTech business commits a violation in the form of misuse of personal data.
More preventive legal protection is needed so that it can prevent the Fintech organizers from leading to a criminal act. Consumers need to be well educated about what & why they’re sharing this information with FinTech firms.
Due diligence must be done in order to curb lapses on their end. Ability to recognise the legitimacy of a firm’s services will go a long way in mitigating misuse. Likewise, FinTech firms staying constantly vigilant of their cybersecurity threats is the need of the hour. Developers of applications need to be mindful of the risks and challenges to be able to mitigate them effectively with appropriate security measures in place.
In June, RBI issued a circular preventing non-bank wallets and prepaid cards from offering credit lines on fintech platforms. This circular, when seen in the backdrop of RBI’s overall regulations, was a proactive step to protect the interest of consumers. Do you think this could have an adverse impact on fintech innovation in India?
The RBI-issued circular in June, preventing non-bank wallets and prepaid cards from offering credit lines on FinTech platforms was received with a degree of speculation by FinTechs. Along with the latest guidelines, the circular serves the credible purpose of protecting consumers’ interests but casts some uncertainty on the scope of innovation & potential business models going forward.
However, the said impact may not be so adverse. We believe this presents a wonderful opportunity for FinTechs to work hand-in-hand with regulators to develop new solutions that serve the best interest of all. Emerging & Future technologies, changing cultural trends & a favourable regulatory landscape shall ensure the boundary-breaking growth of this industry. FinTech firms, in compliance with the RBI, will continue to power the Financial Inclusion Revolution in India.