“I assure fintech that we are here to support innovation,” Das said at the Global Fintech Festival in Mumbai. “We (RBI) will be two steps ahead if you are one step ahead with innovation.”
Innovations must be responsible and useful for consumers, the governor stressed, even though they are “highly valued”. Fair practices and strong governance go a long way in preserving fintech business models.
Das’s remarks are based on RBI’s recent guidelines on digital lending. According to guidelines issued by the RBI on August 10, all loan disbursements and repayments made through digital lending applications must be made directly between the bank accounts of the borrower and the regulated company without the need for an LSP, third party or any pass-through or pool accounts.
According to certain industry insiders and fintech entrepreneurs, this can hinder innovation in the market.
On September 20, Das argued that the ingenuity of fintech allowed the nation, the economy and financial markets to function normally throughout the pandemic. The governor noted that the government and authorities have established an enabling ecosystem to support the fintech industry, adding that this ecosystem has evolved and is ready to take a big leap.
According to Das, the next ten years of finance will be dominated by two main themes: sustainable development and technological development that improves the life of the average person. He assures that granting credit in cooperation with traditional lenders, especially in rural and urban areas, is one of the most revolutionary roles of fintech.
The Governor stated that while the RBI will continue to advance technology, it will also improve customer protection, cyber security, resilience and manage financial stability. According to him, it is equally important to pay sufficient attention to fintech’s administrative and behavioral issues.
Das warned of the dangers of BigTech in the fintech industry. He explained that the innovation had ushered in a period when a few companies, or fintech’s so-called BigTech, were able to utilize huge amounts of customer data.
Das cautioned that while this development is very positive, it also raises questions about concentration, risks and potential spillovers if their involvement in the financial system increases.
Currently, PhonePe, backed by Walmart, accounts for 46% of all monthly UPI transactions, followed by Google Pay (38%) and Paytm Payments Bank (13%).
On June 17, Das stated that the entry of large fintech companies into the financial sector could lead to systemic concerns, especially over-indebtedness. As per RBI’s Vision 2025, the regulator will release a discussion paper on the need for proper regulation of such fintech companies, given their increasingly dominant position in the payments ecosystem.