For promoting digital banking at a fast pace, RBI-constituted Working Group on fintech and digital banking has recommended banks, regulatory authorities as well as the governments to collaborate with startups to be able to respond to the dynamics of the rapidly evolving fintech scenario.
The Working Group has also recommended tax rebates to merchants on adopting digital payments, and varying regulatory supervision depending upon the risk implications.
Headed by RBI Executive Director Sudarshan Sen, the Working Group included representatives from RBI, SEBI, IRDA, and PFRDA, from select financial entities regulated by these agencies, rating agencies such as CRISIL and fintech consultants / companies.
In the report, the Working Group has stated that banks / regulated entities may be encouraged to collaborate with fintech/startups to improve their customer experience and operational excellence. They may also consider undertaking fintech activity in areas such as payments, data analytics and risk management.
Insurance companies may collaborate with “Insurtech” entities or startups to provide better customer experience in a cost-effective manner.
While conceptualising, designing and implementing the regulatory framework, the group also interacted with some fintech startups operating in India as payment system provider, platform lender, blockchain/digital ledger provider, etc. and took on board their views and concerns, including impact on the broader financial market.
Amid growing significance of fintech innovations and their interactions with the financial sector as well as the financial sector entities, the Financial Stability and Development Council – Sub Committee (FSDC-SC) in its meeting held on April 26, 2016 had decided to set up a working group to look into and report on the granular aspects of fintech and its implications so as to review and reorient appropriately the regulatory framework.
Having submitted its report yesterday, the Working Group has also asked for further comments and suggestions from fintech entrepreneurs and experts, if any, on the report.
As per the report, currently, there are more than 12K fintech startups globally, witnessed over $19 Bn of investments. The global fintech software and services sector is expected to bloom as a $45 Bn opportunity by 2020, growing at a compounded annual growth rate of 7.1%.
The report has come at a time when the government-taken initiatives such as demonetisation, tax reforms and Digital India campaign have hugely impacted the fintech startups. Many of the fintech startups have registered multi-fold growth while the fintech startup ecosystem has registered unprecedented growth of 135% in the last two years.