Can’t Have A System Where Everyone Is A Cowboy: TV Mohandas Pai On Fintech Regulations

The country cannot have a fintech system where everyone is a cowboy, Aarin Capital Chairman TV Mohandas Pai said on the regulations for the sector during his keynote address on the opening day of Inc42’s Fintech Summit 2022.

“We have to play by the rules. We cannot have a fintech system where everybody is a cowboy and does what they want. We must be realistic,” Pai said in response to a question about over-regulations faced by fintech startups.

He also urged fintech founders and stakeholders to engage and work with the regulators.

“I advise everyone to work with them…In the BNPL (buy now pay later) space, they (regulators) can barge in and say that you can’t do this anymore. Then what happens to you? You are already exposed, right? So, better start working with them because you can’t escape them in this country or any country for that matter,” Pai added.

He also said that regulators across the globe are conservative and behind the curve, and asked founders to reach out to regulators to help construct the building blocks of regulations pertaining to their specific domain.

In the same breath, he also noted that regulators have consumers’ interests in mind. “They only want to ensure there is no mis-selling of any financial product. Fintech firms cannot run the government.”

It must be noted that the Reserve Bank of India (RBI) is now looking at regulating the fintech sector. The central bank recently said that non-bank prepaid payment instrument (PPI) issuers cannot load the PPIs with credit lines. Besides, it is also likely to come out with guidelines for digital lending and BNPL players.

However, Pai said that fintech continues to remain a sector of high interest for investors in the country. “India is the perfect market for fintech and acceleration of fintech,” he said.

According to an Inc42 report, the country’s total addressable fintech opportunity is estimated to soar to $1.3 Tn by 2025. The growth will likely be led by evolving lendingtech products such as BNPL as well as other segments such as insurtech and digital payments.

While Pai remains bullish on the Indian fintech startups, the ecosystem seems to be affected by the funding winter. According to the data analysed by Inc42, the funding raised by Indian fintech startups fell 45% to $1.77 Bn in the first quarter of 2022 from $3.2 Bn in the fourth quarter of 2021. The average ticket size also fell 40% to $24.5 Mn during March 2022 quarter from $40.5 Mn in December 2021 quarter.

However, funding nearly tripled to $1.77 Bn in January-March 2022 from $692 Mn in the year-ago quarter.