Don’t Look At Regulators As Your Enemy: Siddarth Pai’s Advice To Fintech Founders

Amid the mounting regulatory issues in the fintech ecosystem, Siddarth Pai, founding partner of 3one4 Capital, advised founders in the sector to not treat regulatory entities as their enemies. 

Speaking during a session at the Startup Mahakumbh, Pai said fintech startups need to be more cognisant of the relationships they have with the regulators and their consumers. 

He opined that a large number of issues that startups in the ecosystem are dealing with don’t arise solely from regulatory challenges but their voluntary ignorance to certain guardrails.

Breaking down financial transactions into a three partiate equation, Pai assessed that it is the duty of entrepreneurs to ensure a balance in the importance that they give to both the regulators and their customers. 

“The regulator has the most thankless job in the entire system because anything that goes well in the ecosystem is because of the industry but when something goes wrong, it is perceived to be the regulator’s fault. To be a mature entrepreneur you need to understand the social compact that you operate in. The ecosystem has three parties. If you optimise for a transaction only between two, the third one will eventually catch up and it will eventually end up hobbling your business,” Pai said.

While acknowledging Pai’s advise to pay heed to regulators, Groww’s cofounder Harsh Jain said that aspiring entrepreneurs can take the liberty to challenge these regulations when they overlap with the interest of their customer interest. 

“You need to understand your consumers the best because that is something that your investors or regulators can do. Regulators are there to regulate and VCs are there to find you and help you build your venture. Hence, your key focus should always be on how you can solve a problem with a long-term solution,” he added.

The comments come at a time when many notable companies in the fintech ecosystem are dealing with regulatory challenges. For instance, the Reserve Bank of India (RBI) has barred Paytm Payments Bank Ltd (PPBL) from taking any deposits or credit transactions, or top-ups in any of its customer accounts for “persistent non-compliances and continued material supervisory concerns”

The regulator also recently increased its scrutiny of peer-to-peer (P2P) lending platforms after it was flagged that they breached norms, including KYC guidelines.

However, fintech startups were a key discussion point at the Startup Mahakumbh. The event, hosted by industry bodies ASSOCHAM, Nasscom, Bootstrap Foundation, TiE, and IVCA, had a dedicated pavilion for fintech startups.