Revolutionizing Fintech Governance: The Digital Era of Regtech Solutions in India

Sandeep Agrawal TL Regtech Cofounder 1 scaled

Sandeep Agrawal TL Regtech Cofounder 1

The FinTech industry, a disruptive force with the potential to revolutionize financial services, is experiencing rapid growth in India. With a market size expected to reach US$ 150 billion by 2025, the Indian FinTech ecosystem is the third-largest globally. Over 3,000 FinTechs registered with the DPIIT are leveraging the highest FinTech adoption rate (87%) in the world, providing banking solutions to the underbanked and unbanked populations. Digital lending has already become a US$ 270 billion market in 2022.

However, recent years have seen challenges such as financial misbehavior and irregularities that tarnish the industry’s potential. The Reserve Bank of India (RBI) reported a 34% year-on-year increase in frauds involving cards and online banking in 2021–2022. Instances of fraudulent UPI transactions, e-wallet thefts, KYC leaks, and lending app fraud have eroded trust in the sector. To address these issues, regulators including the RBI, Ministry of Finance, IRDAI, and SEBI have implemented various regulations.

Every FinTech company operating in India must register with the RBI, following the RBI Act, 1934, and related rules. The regulatory landscape is dynamic, with 5,986 regulatory updates in FY 22-23 alone, making it challenging for compliance officers to stay informed. Recent regulatory initiatives, such as guidelines on digital lending and card-on-file tokenization norms, aim to enhance data privacy and cybersecurity.

The introduction of the Digital Personal Data Protection Act, 2023, adds another layer of scrutiny for FinTechs dealing with sensitive financial data. The draft framework for a Self Regulatory Organisation (SRO) represents a step towards creating statutory guardrails for customer protection, industry development, and grievance redressal.

Compliance in India is closely tied to paperwork, with a substantial portion still in physical form. Recent actions by the RBI, including major business restrictions on Paytm Payments Bank from March 1, 2024, emphasize the need for transitioning to digital compliance management. Digital compliance software, leveraging regulatory technology, offers paperless repositories, dynamic workflows, automated alerts, timely reports, and statutory updates to facilitate efficient compliance.

Automation has become integral to compliance processes, reducing costs and improving accuracy. Significant strides have been made in automating compliance document generation for various regulators, streamlining labor laws, SEBI requirements, MCA laws, and more. FinTechs, as the driving force behind the digital economy, are adapting to an evolving regulatory framework by turning to technology and digital solutions for efficient business and compliance management.

In this transformative era, RegTech solutions play a crucial role in enhancing the efficiency, efficacy, and effectiveness of compliance programs. By eliminating manual errors and delays, these solutions provide senior management with complete control, visibility, and accountability over their compliance status, ensuring a seamless integration of technology into the FinTech governance landscape in India.

This article has been contributed by Mr. Sandeep Agrawal, Director and Co-founder at Teamlease Regtech. It’s India’s leading Regulatory Technology (RegTech) solutions company, transforming compliance management for 1500+ employers in India. As a founder director, Sandeep spearheads the company’s operations, products team, human resource and finance function.

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