With so much happening in Fintech regulators have a challenge at hand.
We have in recent past seen many regulatory actions in India and am sure there are many taking place globally too.
Highlighting some as below: -
- Curbs on UPI driven lending innovations like Bullet, Lazypay etc. as regulators felt they are more like Overdrafts rather than payments.
- Regulators asking Mutual Fund Registrars (RTA's) to build a centralized backend solution by Dec 2021. - This will resolve operational Synergy between players, cut costs, improve servicing and move towards faster redemption / settlement.
- Capping Market share of UPI a player to 33% - This is to reduce systemic risk of overdependence on dominant player/s.
- Curbs on many lending apps who created debt traps for people and used unscrupulous methods for collections.
- Capital Requirement for Payment Aggregators - This is to manage the credit risk which can arise in case a large merchant fails and no such requirements existed earlier.
- and many more.............
These actions are definitely warranted and that is not my point.
I wish to raise some key aspects like cost of regulations, their timing (Both too early or too late are issues), speed and could they have been addressed through mechanisms like: -
a. Self Regulatory Bodies (SRO's) and an institutionalized mechanism for regular Industry - Regulator interactions, reporting and more powers to SRO's.
b. Faster, transparent and IP protecting Product approvals process with product features, risks identified and how they are mitigated. Some of it can be through Regulatory Sandbox.
These exists in some form, and regulators have been at forefront of innovation in many areas, but are our systems adequate to fully support speed, innovation, growth and risks? I have covered many more aspects in my book 3F: Future Fintech Framework, as regulations
are core to fintech and these are very much needed for Growth and Innovation.
Would be great to hear your thoughts and insights. Happy Reading.