Fintech SROs to promote responsible innovation, protect consumer interest, says fintech industry

Fintech industry reaction to SRO

The proposed Self-Regulatory Organisations (SROs) for the fintech sector will provide a bridge to promote responsible innovation while adhering to all the regulations, said industry experts.

"This will be a crucial step in protecting consumer interest and mitigating risk for the overall industry which in turn will enhance digital trust in the ecosystem," said Ankit Ratan, Co-founder & CEO at Signzy, a fintech platform.

The Reserve Bank of India (RBI) on January 15 in its draft norms said SROs for the fintech sector should be independent of influence, development-oriented, and legitimate arbiters of disputes.

"The prospect of fintech SROs is a hugely important conversation for fintechs, allowing them regulatory embrace through an SRO. For the constantly evolving fintech landscape, SRO framework gives latitude to function in sync with regulatory objectives and priorities," said Sugandh Saxena, CEO of Fintech Association for Consumer Empowerment (FACE), a self-regulatory industry body of fintech lenders in India.

What RBI says

SROs for the fintech sector should also be true representatives of the sector, encourage members to adherence to regulatory priorities, and be repositories of information. According to the norms, SROs for the fintech sector are expected to operate objectively, with credibility and responsibility under the oversight of the regulator.

The central bank has invited comments or feedback from stakeholders and members of the public on the draft framework by the end of February.

"After discussing it with our members we will send our feedback to the RBI soon. Since we have time till the end of February," said Saxena.

Ashish Goyal, Cofounder & CFO, of Fibe, a fintech platform, said the formation of an SRO will open up possibilities of greater collaboration among industry stakeholders as well as with the regulatory body, leading to a more transparent and secure ecosystem for consumers.

"Given the dynamic nature of the fintech industry, the formation of an SRO and adherence to industry standards will not only lead to responsible innovation but also safeguard the interest of consumers," he added.

On the eligibility and membership front, The RBI draft norms said the applicant should be set up as a not-for-profit company and should have sufficient net worth and demonstrate the capability of establishing the necessary infrastructure to fulfill the responsibilities of Fintech Self Regulatory Organisation (SRO-FT) effectively, and consistently.

On September 6, 2023, RBI Governor Shaktikanta Das urged fintechs to establish SROs over the next year.

"I would like to use this opportunity to urge and encourage the FinTechs to establish a Self-Regulatory Organisation themselves," Das said in a speech, at Global Fintech Fest 2023.

"The SRO-FT is anticipated to function impartially, with credibility and responsibility under the supervision of the regulator. Its primary goal is to contribute to the healthy and sustainable growth of the FinTech sector, while also charting a smooth path to phased regulatory compliance when necessary, "said Madhusudan Ekambaram, Co-founder and CEO, of KreditBee, Bengaluru based fintech company.