If entrepreneurs hope that the regulator will never come calling, then either because the space or the product they deal in isn't relevant enough, or because they live in a fool's paradise, said Sameer Nigam, co-founder and chief executive of PhonePe.
While addressing the Moneycontrol Startup Conclave on August 9, Nigam was asked about the regulatory guidelines and instructions that tripped over quite a few startups in the last couple of years.
"If you are living in a fool's paradise, then you will hope that the regulator will never come into your sector. If that is what you think is going to happen to you, it means your sector is never relevant enough. You are talking about people's money. If nobody is regulating what you do, nobody cares about what you do," he said.
Nigam, whose businesses are now regulated by multiple bodies, including the Reserve Bank of India (RBI), markets regulator Sebi, and insurance regulator IRDAI, added that if a founder chooses to be in a financial services business, they should assume that either there is regulation already in place for the business or will soon follow as they grow.
PhonePe's primary business of UPI payments is not regulated directly by banking watchdog RBI. The National Payments Council of India (NPCI) runs the Unified Payments Interface (UPI) but many of the features and products that bring innovations to how UPI works are often required RBI ratification.
From prepaid instruments being used for a credit card-like product to P2P lending and the RBI’s action on Paytm Payments Bank have rattled the fintech sphere. However, the regulator is engaged in active consultations with the fintech firms since early this year.
"The only thing remaining in payments that are not regulated today after all these years, I think is the UPI TPAP. That's about the only one that's not regularly regulated. In the last couple of years, everything's got regulated," Nigam said, adding that he won't be surprised, given the growing importance of UPI.
More than 80 percent of digital transactions in the country happen through the UPI platform. The NPCI is the quasi-regulator for UPI formulating rules after consulting banks and UPI apps along with payments regulator RBI.
PhonePe has around 48 percent market share in UPI payments, while Google Pay controls 37 percent, virtually making the payments a duopoly, which the NPCI has struggled to challenge.
According to Nigam, while some of the regulatory actions might seem like happening in quick succession, several issues had to be formalised by the regulator.
He also praised the regulator for bringing innovations at a speed arguably only reached by China and hailed the move to allow delegated payments through UPI. “India will very soon be the first market where you are saying by regulation, I am allowing you to delegate your payment activity to somebody else. It is phenomenal,” Nigam said.
He added that the regulator is not getting enough credit for innovating multiple path-breaking solutions while ensuring that the market and customers are protected.
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