SRO-FT seeks to be in touch with regulators to avoid business disruptions: FACE chief Saxena

A few measures by the Reserve Bank of India have disrupted multiple financial products and companies over the last couple of years.

These include a prepaid card resembling a credit card, and card payments for merchants without card terminals and merchant KYC. The Reserve Bank of India’s strict action on Paytm’s associate company also stoked fear among fintechs.

In fact, FACE also has multiple executives working with its members and looking at the business models of its members.

“The first element of enforcing is knowing what members are doing so we can contribute to their business by way of opening opportunities as well as addressing risks. For us the core of our work is a deep understanding of the market, seeing what members are doing, what kind of partnership they are having, within which regulatory framework they operate, what are the compliance requirements that they follow and potential risks," Saxena said.

She added that knowing practices and framing rules that promote responsible conduct, is fundamental to FACE's work. "It is essentially understanding different fintech business models and their intersection with the regulatory framework and ecosystem that may impact the integrity and customer protection, which is most critical for everyone,” Saxena added.

According to her, when fintechs need clarification regarding guidelines or regulations for the segment they operate in, SRO can use the dialogue channel with the RBI for clarifications on a regular and recurring basis, avoiding any potential conflict or violation of the existing regulations.

“This will bring more clarity and certainty about whether a new product complies with an existing regulation. So one doesn't waste investment, talent and technology around it only to see that product being struck down later,” Saxena said.

She feels that SRO-FT can also ask for specific clarification if required and if the solutions meet the regulatory requirement whenever fintechs feel that there is a lack of clarity in existing regulations.

Since late last year, the RBI has been engaging with fintech founders even outside of the SRO-FT as part of its confidence-building measures. The regulator and the government have built digital public infrastructure such as UPI and Account Aggregator ecosystem where fintechs can build products without worrying about regulation.

Multiple SROs are coming up, including for non-banking financial companies and payments. While the ambit of these SROs can intersect, each segment has its own issues and regulations and having multiple dialogue channels will help fintechs avoid the mistakes of the past.