Fintech Firms Should Innovate But Follow Rules Too!

  • The information technology-driven initiatives in the last few years have seen tremendous innovations, inventions, and earth-shattering developments that have completely altered the way the modern-day world operates. No field is left untouched by the technology front that keeps churning out one innovation after another dynamically and perpetually. No one is complaining though as the world community would not like to be left behind in immersing itself in the mind-blowing technological prowess that is proving to be a great boon. Riding piggyback on the innovation in the financial sector are many innovative-driven entrepreneurs contributing in a big way to leave behind an indelible mark.

PC – Surabhi

  • Nonetheless, the regulators who are expected to keep an eye on the happenings are always on the lookout for any breach of rules and regulations that might prove to be detrimental to the country’s financial health. As you are aware, the RBI recently initiated action against Paytm Payments Bank for failing to adhere to established financial norms. This move of the RBI not only created a great storm in the high-flying fintech market but also made it clear how fragile the ecosystem could be if the regulators turned a blind eye to non-compliance. As if on cue, some fintech firms’ argument that the RBI action against Paytm bank hurts innovation is not only facile but also wrong since the country’s robust regulatory system cannot be taken for granted.
  • Further, the RBI recently gave more information on its regulatory action against Paytm Payments Bank. It said the root cause of action was the bank’s non-compliance with regulatory norms. The action came only after bilateral talks between the bank and RBI didn’t produce results. Digital technology has disrupted the financial sector in a big way. It’s introduced a whole new way of doing business and even traditional banks have been forced to adapt. But one aspect that hasn’t changed, and rightly so, is the need for disruptors to operate within boundaries set by regulators. Some fintech firms asking RBI to reconsider its action as it could have a chilling effect on innovation and investment in a fast-growing area is rather misplaced and tantamount to baseless argument.

PC – Priyanka Payal

  • On the contrary, a Wild West environment could undermine investment. RBI’s action was on account of non-compliance. If there’s no deterrent, why should any firm want to follow rules? Indeed, fintech’s fast expansion owes everything to innovation. Lobbying to change a regulator’s decision would make sense if it chokes innovation. That, however, isn’t the case here. Asking for regulatory forbearance using innovation as a defence is at best misplaced. Nothing prevents fintech firms from innovating in the future. Let’s not mix issues here. Mind you, GOI across political formations has provided fintech a big boost through Aadhaar allowing digital verification of data to meet KYC needs. Thus, fintech firms should innovate, and play by rules. Simple.

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Krishna MV
Krishna is a Post Graduate with specialization in English Literature and Human Resource Management, respectively. Having served the Indian Air Force with distinction for 16 years, Armed Forces background definitely played a very major role in shaping as to who & what he is right now. Presently, he is employed as The Administrator of a well known educational institute in Bangalore. He is passionate about sharing thoughts by writing articles on the current affairs / topics with insightful dissection and offering counter / alternate views thrown in for good measure. Also, passionate about Cricket, Music – especially vintage Kannada & Hindi film songs, reading – non-fictional & Self-Help Books, and of course, fitness without compromising on the culinary pleasures.