THE GREAT INDIAN FINTECH GAME

​Parampara. Pratistha. Anushasan.
Yes, we know that’s coming straight out of a Big B movie. However, we’re not here to talk about that. While the above three words were the motto of a certain cult classic film, there’s a brand new motto grabbing eyeballs in India.

The Indian Fintech industry is playing a calculated game of tic-tac-toe. Both the government and private players are striving hard to juggle between the following:

Innovation. Regulation. Experience.

The game is not between the public and private players but is rather between balancing the ropes between regulating the Indian Fintech space while boosting innovation and enhancing the end consumer’s experience.

What is the bottom line, you ask? That’s exactly what we’re going to talk about in this article. So stay on, and keep reading!

Aspect 1: The Regulation

While the Indian Fintech industry is growing by leaps and bounds everyday, the Indian government, specially the Reserve Bank of India (RBI) is doing all it can to place some regulations on the way things are processed.

The reasons for this are many:
● Authorising only legitimate stakeholders to enter the market.
● Enhanced sense of security for the customers.
● Prevention of cyber fraud and online financial crimes.
● Maintaining trust and credibility – two factors that rank high in the Indian ethics
dictionary.

Mind you, these regulations are not generally imposed on situations where the risk quotient and security concerns are low. Only when the customers are required to perform a transaction that involves divulging bank account details, and other sensitive information, do the regulations come into play.

Let us take the example of the Payment Aggregators and Payment Gateway (PAPG) guidelines of the RBI. These guidelines have a key focus on ensuring security of customer data. In a nutshell, some of the PAPG regulations are as follows:
● The Payment Aggregators are to be managed by individuals with a high level of experience and integrity.
● Any intermediary who bridges the gap between the customer and the seller must have a net worth of INR 15 Crores.
● It is prohibited to store the card data by either the intermediaries or merchants in any database or server.

While the regulations appear to be passed keeping in mind the best interests of the masses, a closer look at them sheds light on some issues that might go unnoticed.

Aspect 2: The Clash Between Regulations and Innovation

The regulatory laws prevent the collection of confidential data – in which they are doing fantastically well.

However, as mentioned above, some intermediaries are required to move away from the nodal accounts to a maximum of two escrows, having a net worth of a minimum of INR 15 crores.

This regulation creates an entry barrier for PAs or Online Payment Gateways with revolutionary ideas.

There might be firms equipped with the brains to come up with game-changing technological innovation in the fintech space. However, they might not satisfy the monetary barrier set by the RBI.

In such cases, innovations at the very grass-root, the lower rungs of the industry might go unnoticed.

With the rise of several fintech startups, the Indian market has become one of the world’s largest players in the field of Finance, perhaps second best only to China. A record that can be broken soon, if innovations are supporting and encouraged.

While creating a threshold is reasonable from the government’s side, there are certain steps that can be taken so that progress for the sake of progress is not prohibited:
● Providing support to early-stage innovative companies so that they can generate a revenue of INR 15 Crores.
● Arranging for incubators in tier-2 and tier-3 cities of India so that every rung of the economy has support from the government to give shape to their ideas.
● Allowing early stage companies to collaborate with well-known and trustworthy venture capitalists to raise the required funds.
● Striking a balance between the private and public sector. Innovations are the pathway to great user experience.

Aspect 3: The know-hows of Experience

In the end, it all boils down to one thing:
A wholesome, seamless user experience. Users look forward to innovative solutions and of course, to save money and keep their money safe.

In such a case, it is crucial to make sure that every stakeholder from every rung of the economy has access to these innovations and is educated about these regulations. Often, it so happens that only a segment of the population is equipped with the power to make informed choices.

To improve consumerism in the Indian Fintech space and to enhance User Experience, the following can be done:
● Increase Digital literacy.
● Commoditize digital payments in all parts of the economy.
● Equip the population to make informed choices.
● Provide support for innovation.

The Path Ahead:
India is doing exceedingly well for a developing country with some groundbreaking discoveries to make wealth management simpler. It won’t be long before we turn into the ultimate Fintech superpower of the world, given that all the players in the market play the tic-tac-toe of innovation, regulation, and experience ethically and strategically.