REGULATING FINTECH FINANCING: DIGITAL BANKS

AND FINTECH PLATFORMS

SUBMITTED BY:
PRANCHAL RATHI
INSTITUTE OF LAW, NIRMA UNIVERSITY
 REGULATING FINTECH FINANCING: DIGITAL BANKS AND FINTECH
PLATFORMS

ABSTRACT

The purpose of the research is to draw attention to how important financial technology
(FinTech) regulation is for risk management and preserving the stability and balance of the
FinTech ecosystem, especially in light of the industry's explosive expansion in lending.
Disruptive technologies, mainly internet-based mobile apps, are driving this expansion.
These innovations increase accessibility to lending but also raise credit risks, particularly
those associated with non-performing loans (NPLs). Growing non-performing loans (NPLs)
are a serious worry since they have the ability to upend the FinTech industry and pose
systemic hazards. By enacting regulations and oversight mechanisms, financial technology
(FinTech) legislation plays a critical role in reducing these risks. Complementary measures
like big data analytics, automation, robots, and FinTech consumer protection agencies all
assist this function. In order to strengthen the FinTech ecosystem, new components must be
included, such as independent credit insurance companies and consumer advocacy
organizations designed specifically to address the particular difficulties faced by the sector.
The paper addresses operational, credit, liquidity, and pandemic concerns as well as other
basic hazards associated with FinTech financing.

Keywords: FinTech Ecosystem, NPL’s, operational, liquidity

REVIEW OF LITERATURE

 CHUGH, BENI, FINANCIAL REGULATION OF CONSUMER-FACING FINTECH IN

INDIA: STATUS QUO AND EMERGING CONCERNS (SEPTEMBER 19, 2019)1

The identification and categorization of fourteen different consumer-facing fintech activities

that are common in India is the first step in this paper's extensive investigation of fintech
1
Dvara Research Working Paper Series No. WP-2019-01
regulation within the nation. These actions serve as the cornerstone of a typology that
provides an organized summary of fintech customer involvement. The analysis that follows
explores the regulatory environment that surrounds each of these activities and contrasts and
compares the level of financial control that each one receives. This comparative study is
reduced to a basic index, which offers a ranking of the regulatory scrutiny that each fintech
activity faces. By means of this procedure, the article formulates a conceptual model of the
regulatory framework that oversees fintech activities directed towards consumers in India,
thereby offering a thorough overview of the present condition of financial regulation within
the fintech industry. In addition, the paper presents a discussion of possible recalibration
tactics for the financial regulatory toolbox, with the goal of tackling new risks and promoting
the ongoing development and innovation potential of fintech. In the end, the paper hopes to
spark conversations on the crucial task of developing future fintech legislation in India by
outlining the current legal environment.

 MARTA BARROSO, JUAN LABORDA. DIGITAL TRANSFORMATION AND THE

EMERGENCE OF THE FINTECH SECTOR : SYSTEMATIC LITERATURE REVIEW ,

DIGITAL BUSINESS, VOLUME 2, ISSUE 2,2022,100028,ISSN 2666-9544 2

In-depth analysis of emerging technologies' effects on financial and investment activities is

provided in this study, which raises the possibility of a change in the balance of power in
favor of technologically advanced firms relative to more established financial institutions. In
this context, it focuses on three crucial areas: cooperation, regulation, and difficulties. The
study conducts a thorough analysis of each of these topics by a methodical assessment of the
literature, gaining knowledge from previous investigations and research. Utilizing VOS
Viewer software facilitates the arrangement of keywords according to co-citation and
clustering methodologies, offering a methodical perspective of the conversation surrounding
these subjects.

 VINAY KANDPAL* AND RAJAT MEHROTRA. FINANCIAL INCLUSION: THE ROLE OF

FINTECH AND DIGITAL FINANCIAL SERVICES IN INDIA3

2
https://doi.org/10.1016/j.digbus.2022.100028
3
Indian Journal of Economics & Business, Vol. 19, No.1 (2019) : 85-93
Global adoption of the cashless transaction system is accelerating due to developments in the
banking industry. In the current environment, this change is not just a trend—rather, it is
essential. Even while India has achieved great progress in financial inclusion—especially in
terms of expanding bank account accessibility—using formal financial services is still
difficult. The goal of government programmes like cashless transactions and demonetization
is to encourage innovation and draw new participants to the financial sector. Regulation
changes highlight the government's commitment to supporting a healthy banking and
financial industry. However, in order to put strong control mechanisms in place, authorities
and banks must work together to address issues like cyber security concerns. The
government's actions have also made financial goods more accessible to non-banking
communities; payment companies are at the forefront of mobile-based solutions. In particular
in rural regions, this coordinated effort—backed by digital companies—is essential to
guaranteeing universal financial literacy and efficient income investment.

 BRIJ RAJ & VARUN UPADHYAY. ROLE OF FINTECH IN ACCELERATING FINANCIAL

INCLUSION IN INDIA 4

This article provides a thorough study of the FinTech industry's critical role in advancing
financial inclusion as well as the continuing technological transformation in India's financial
sector. It explores regulatory initiatives designed to promote FinTech innovation, such as the
Regulatory Sandbox framework. Using insights from top FinTech companies and industry
professionals, the paper suggests ways to use creative FinTech solutions to speed up financial
inclusion. It highlights the value of data security and client protection while stressing
cooperation between banks and FinTech companies. The study also covers how RegTech and
SupTech may be used to manage risks and improve operational effectiveness. The article
ends by arguing in favor of a strong regulatory framework that will both maintain FinTech's
current development trajectory and guarantee that it will continue to advance financial
inclusion in India.
 MARLENE AMSTAD. REGULATING FINTECH: OBJECTIVES, PRINCIPLES, AND
PRACTICES5
4
Raj, Brij and Upadhyay, Varun, Role of FinTech in Accelerating Financial Inclusion in India (2020). Paper
presented at the 3rd International Conference on Economics and Finance organised by the Nepal Rastra Bank at
Kathmandu, Nepal during February 28-29, 2020, Available at
SSRN: https://ssrn.com/abstract=3591018 or http://dx.doi.org/10.2139/ssrn.3591018
5
Amstad, M. 2019. Regulating Fintech: Objectives, Principles, and Practices. ADBI Working Paper 1016.
Tokyo: Asian Development Bank Institute. Available: https://www.adb.org/publications/regulating-fintech-
It summarizes the current discussion on fintech regulation, outlining important topics and
points of view. It starts out by outlining the three main goals of financial regulation,
especially in light of current developments in fintech: protecting investor interests,
maintaining market integrity, and preserving financial stability. The study also looks at three
guiding concepts that regulators frequently use: proportionality, technology neutrality, and
legal clarity. In conclusion, three approaches to fintech regulation are presented: "new
functionality, new rules" or "coding," which suggests creating specific regulations for new
fintech functionalities; "same risk, same rules" or "duck typing," which applies existing rules
to similar risks regardless of technology; and "wait-and-see," where regulators observe
developments before acting.

 ASHISH SAXENA , RENU JAIN , ANJALI MANDA. FINTECH IN INDIA: CURRENT

STATUS , TRENDS AND PROSPECTS6

This article emphasizes how fintech has had an immense impact on the financial industry,
particularly in light of India's quick digitization. The statement underscores the significance
of fintech in transforming financial transactions, investments, and product accessibility by
providing more secure and effective digital substitutes for conventional banking services. The
abstract highlights India's leading role in the global fintech scene, highlighting its rapidly
increasing acceptance rate and revolutionary impact on financial behaviors and practices. The
study looks at India's adoption of fintech and the benefits and problems this technological
advancement has brought forth. The abstract, taken as a whole, lays the groundwork for a
research that explores the intricacies of fintech adoption in India and its consequences for the
financial industry as well as the financial experiences and habits of the general public.

OBJECTIVES

Regulating fintech financing, particularly digital banks and fintech platforms, involves a
multifaceted approach aimed at achieving several key objectives. Firstly, regulators focus on
licensing and registration processes, setting clear criteria and defining permissible activities
under each license category. This ensures that only qualified entities enter the market and

objectives-principles-practices
6
Jain, Renu & Saxena, Ashish & Mandal, Anjali. (2022). Fintech in India:Current status, Trends and Prospects.
Journal of Business Management and Information Systems. 9. 10.48001/jbmis.2022.0902004.
operate within specified boundaries. Secondly, stringent prudential regulations are put in
place to ensure the financial stability of digital banks and fintech platforms. This includes
requirements for capital adequacy, liquidity management, and risk mitigation strategies to
prevent excessive risk-taking and maintain solvency.

Consumer protection is another critical aspect, with regulators mandating transparent

disclosure of terms, fees, and risks associated with fintech products. Dispute resolution
mechanisms and consumer redress procedures are also established to address grievances
effectively and protect consumer interests. Data privacy and security receive significant
attention, with regulators enforcing strict standards to safeguard consumer data from breaches
and unauthorized access. Regular security audits and assessments are required to ensure
compliance with cyber security best practices.

HYPOTHESIS

"Hypothesis: Implementing a balanced regulatory framework for fintech financing, focusing

on digital banks and fintech platforms, leads to increased financial inclusion, innovation, and
consumer protection while mitigating systemic risks and maintaining financial stability."
According to this hypothesis, regulators can establish effective regulatory measures that
promote responsible innovation, increase access to financial services, safeguard consumers,
and lessen the likelihood of financial crises or disruptions. These measures include licencing
requirements, prudential regulations, consumer protection mechanisms, and cross-border
cooperation. Empirical research could be used to test this hypothesis by examining how
regulatory actions affect important metrics like the resilience of the financial system,
customer satisfaction and trust levels, innovation metrics (like the number of new fintech
products and services), and financial inclusion rates.

RESEARCH QUESTIONS

1. How do different regulatory approaches impact the entry and operation of digital banks
and fintech platforms in the market?
2. What are the key regulatory challenges faced by digital banks and fintech platforms in
ensuring compliance with AML/KYC requirements?

3. How do regulatory sandboxes and innovation hubs contribute to fostering responsible

innovation in fintech financing?

4. What is the impact of prudential regulations, such as capital adequacy requirements and
risk management guidelines, on the financial stability of digital banks and fintech platforms?

5. How do consumer protection regulations, including transparency requirements and

dispute resolution mechanisms, influence consumer trust and adoption of fintech services?

6. What role does cross-border regulatory cooperation play in addressing regulatory

arbitrage and promoting international standards for fintech financing?

METHODOLOGY

- A thorough strategy that combines qualitative and quantitative research methodologies

is used to explore the regulation of fintech funding, namely digital banks and fintech
platforms. Doing a comprehensive literature study that includes scholarly articles,
government publications, industry publications, and case studies is the first step. The
purpose of this study is to give readers a basic grasp of the topic by identifying important
regulatory frameworks, trends, difficulties, and best practices in fintech regulation
worldwide.

- In terms of quantitative analysis, data collecting entails compiling pertinent information

from market indicators, financial institutions, regulatory bodies, and fintech businesses.
This quantitative data includes measures of financial inclusion, consumer acceptance
rates, digital banking activity, market size for fintech, and regulatory compliance
information. The links between regulatory factors, market dynamics, and financial
consequences may subsequently be examined using statistical analytic techniques
including regression analysis, correlation research, and trend analysis.

- Comparative analysis, which involves contrasting regulatory frameworks and practices

across several countries, is a crucial component of the process. The regulatory parallels
 and divergences, possible regulatory arbitrage concerns, and best practices are all
identified by this comparative research.

- Ethical considerations are paramount throughout the research process, ensuring

adherence to ethical standards such as data privacy protection, informed consent,
confidentiality, and transparency. Validating research findings through peer review,
expert validation, and stakeholder consultations enhances the study's credibility and
reliability. Ultimately, the research findings are disseminated through comprehensive
reports, scholarly articles, policy briefs, and presentations to inform policy dialogue,
regulatory decision-making, and industry practices in regulating fintech financing and
digital banking sectors.

TENTATIVE CHAPTERIZATION

1. Introduction

2. Literature Review

3. Methodology

4. Regulatory Landscape for Fintech Financing

5. Evolution and Challenges

6. Consumer Protection and Market Conduct

7. Prudential Regulations and Financial Stability

8. Innovation and Regulatory Sandboxes

9. Cross-Border Regulatory Cooperation

10. Impact Assessment and Long-term Effects

11. Conclusion and Recommendations

INTRODUCTION
As India's economy moves closer to sustainable development, it is more important than ever
to make sure that each social stratum is represented in the financial sector. The lack of
knowledge and financial literacy among rural communities, which results in restricted access
to formal credit facilities, is a major obstacle impeding this development. This discrepancy
hinders the nation's overall economic development in addition to impeding individual
economic progress. The banking industry has implemented technical advancements like
credit and debit cards, online banking, and automated teller machines (ATMs) to overcome
these obstacles. Even though metropolitan regions have benefited from these developments, a
sizable section of the rural population is still uninformed of and unable to access official
banking channels.

Fintech, a word that has gained popularity since the beginning of 2015, offers a possible
remedy for this problem. Fintech is not just about technology, despite popular belief to the
contrary; it's about combining technical innovations with financial services. Due to the fast
improvements in technology and the increased desire for better financial services, fintech has
become essential. The integration of technology and financial services has resulted in the
creation of several platforms and applications, making financial goods like business loans and
online personal loans more accessible. Therefore, fintech presents a chance to close the gap
between technology innovation and financial inclusion, providing a means of achieving more
accessible and inclusive financial services for all societal groups, including those living in
rural regions.

 REGULATORY LANDSCAPE FOR FINTECH FINANCING

The government implemented several new regulation amendments in 2023, such as:

- Framework for Regulatory Sandbox: To encourage innovation in the securities

industry, the Securities and Exchange Board of India (SEBI) unveiled a framework for
regulatory sandbox in 2020. Under the guidance of SEBI, this framework enables fintech
businesses to test innovative goods and services in a monitored setting.
- The 2021 Draft Bill on Crypto currency and the Regulation of Official Digital
Currency: This bill would outlaw all private crypto currencies in India and establish the
foundation for the Reserve Bank of India (RBI) to produce an official digital currency. ‘

- The Digital Personal Data Protection Bill, 2022 would provide a framework for
safeguarding personal information, particularly that which is gathered by fintech
businesses.

- Guidelines for Digital Advances: The Reserve Bank of India (RBI) released rules on
digital lending in 2022 in an effort to shield customers from activities that include
predatory lending. These regulations mandate that digital lenders adhere to a number of
standards, including upfront disclosure of all fees and charges, provision of sufficient
client protection measures, and fair and open debt collection procedures7.

- 2022 Revised Master Directions on Credit Card and Debit Card Issuance and
Conduct: The RBI released updated master directions in 2022 on the issuance and
conduct of credit and debit cards. These guidelines seek to improve consumer safety and
encourage ethical behavior8.

 REGULATORY SANDBOX

With an emphasis on advancing financial inclusion, the Reserve Bank of India (RBI) has
shown initiative in modifying its regulatory and supervisory framework to the changing
FinTech scene. Initiatives like the "Enabling Framework for Regulatory Sandbox," which
was unveiled on August 13, 2019, are clear examples of this strategy. With potential
regulatory relaxations during the testing phase, the regulatory sandbox idea enables the live
testing of innovative FinTech goods or services in a regulated regulatory environment ((Das,
S.2019)9.

The RBI reaffirmed its commitment to supporting FinTech innovation on November 4, 2019,
7
EY Global FinTech Adoption Index 2019, Available at https://www.ey.com/en_gl/eyglobal-fintech-adoption-
index, accessed on January 09, 2020
8
Report of the High-Level Committee on Deepening of Digital Payments, available at
https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CDDP03062019634B0EEF3F71
44C3B65360B280E420AC.PDF
9
Report of the High Level Committee on Deepening of Digital Payments, May 2019 (Chairman: Shri. Nandan
Nilekani)
when it announced the first cohort of the Regulatory Sandbox will open. 'Retail Payments,'
the subject selected for this cohort, is a deliberate choice meant to stimulate innovation in the
digital payments industry. The RBI aims to answer the needs of the neglected and unnerved
portions of the public by promoting innovation and growth in this field, ultimately achieving
the goals of financial inclusion10.

The subject of 'Retail Payments' for the inaugural cohort is anticipated to yield favorable
outcomes for the digital payments industry. It is expected to foster innovation and result in
the development of new payment services that meet the various demands of customers,
especially those who don't have easy access to conventional banking services. All things
considered, the RBI's FinTech initiatives, such as the Regulatory Sandbox, show a balanced
strategy that promotes innovation while guaranteeing legal compliance and consumer
safety11.

EVOLUTION OF FINTECH IN INDIA

Fintech's first wave, known as Fintech 1.0 (starting in 1950s), saw major changes in India as
nationalization of British Raj institutions following independence created the groundwork for
a financial industry that was more tightly regulated. The foundation for greater financial
stability and inclusivity was laid during this time. With the introduction of internet banking
and ATM services, Fintech 2.0 (1980–2000) marked the next stage of the progression. These
digital advances were first introduced by banks like ICICI and HSBC, who also introduced
cash-withdrawing ATMs and rudimentary internet services. Furthermore, the Central Bank of
India issued the nation's first credit card in 1980, which was a historic moment that
influenced customer attitudes about electronic payments12.

From 2000 forward, Fintech 3.0 witnessed more changes to the environment driven by global
events such as the global financial crisis and technology improvements. During this time,
cutting-edge digital payment systems like Apple Pay and Google Wallet were introduced,

10
Press Release by RBI dated August 13, 2019 on ‘Enabling Framework for Regulatory Sandbox’.
11
Press Release by RBI dated November 4, 2019 on ‘Opening of first cohort under the Regulatory Sandbox’.
12
Arner D, Barberis J, Buckley R (2016) 150 years of Fintech: an evolutionary analysis. Jassa (3):22. Retrieved
from https://www.researchgate.net/publication/313364787_150_Years_of_FinTech_An_Evolutionary_Analysis.
Accessed 17 Jan 2020
while finance behemoths like PayPal rose to prominence. Fintech adoption was further
accelerated by the 2016 demonetization campaign, which emphasized the need of cashless
and digital transactions.

With more than 2000 fintech companies and a flourishing fintech ecosystem, India has seen
remarkable expansion in recent years. Fintech innovations have changed the financial
industry by attracting tech-savvy clients and forcing traditional banks to rethink their
approaches. Examples of these innovations include crowd funding platforms, mobile
payments, robo-advisors, and online lenders. The introduction of digital banking services and
neo banks into the Indian market has been made easier by the acceptance of Open Banking
and Banking as a Service (BaaS) models, guaranteeing a dynamic and competitive financial
environment powered by fintech technologies13.

 OPPORTUNITIES AND LIMITATIONS FOR FINTECH GROWTH

The Reserve Bank of India's (RBI) flexible regulatory framework and pro-startup policies has
benefited digital finance startups operating in India. They do, nevertheless, face certain
challenges in the Indian industry, like gaining the trust of more conservative customers and
comprehending their budgetary choices. There are several obstacles to overcome, including
influencing financial behavior and marketing to these demands as well as building a strong
regulatory framework that can keep up with the quick speed at which technology is
developing.
Fintech companies, on the other hand, frequently lack the existing infrastructure and client
base that traditional banks and financial institutions have. They may take advantage of this
foundational work to implement digital solutions that enhance customer satisfaction by
increasing service efficiency, fostering solid financial relationships, and expanding access to
financial services. The conventional banking industry has been modernizing due to the
disruptive potential of fintech businesses, which has resulted in cost savings and an increase
in the number of banks. Some financial organizations have responded proactively to these
opportunities and problems14.

13
Jain, Renu & Saxena, Ashish & Mandal, Anjali. (2022). Fintech in India:Current status, Trends and Prospects.
Journal of Business Management and Information Systems. 9. 10.48001/jbmis.2022.0902004.
14
8Opportunities and Challenges of FinTech (Shri. Shaktikanta Das, Governor, Reserve Bank of India, Keynote
Address delivered at the NITI Aayog’s FinTech Conclave on March 25, 2019.
To expedite digital transactions, banks such as Axis and HDFC have launched mobile
applications, and Federal Bank has formed alliances for cutting-edge banking solutions.
International firms that are indicating the attraction and development potential of the fintech
sector in India are Barclays and Goldman Sachs.

Technology innovation's development possibilities may not always point to a zero-sum

competition between fintech companies and established banks. Rather, they represent chances
for cooperation and cohabitation, where conventional finance is modernized by fintech's
innovation and existing institutions adjust to digital changes. This changing environment
emphasizes how crucial it is to adapt, innovate, and form strategic alliances in order to
prosper in India's changing financial industry15.

CONSUMER PROTECTION AND MARKET CONDUCT

Concerns about consumer protection and market conduct are critical areas of attention when
it comes to fintech financing regulation, especially with regard to digital banks and fintech
platforms. By guaranteeing equitable treatment, accountability, and openness in financial
transactions, consumer protection laws seek to defend the interests of financial consumers.
Contrarily, market conduct laws control how financial institutions and fintech companies
behave in the marketplace in order to preserve market integrity, encourage fair competition,
and stop market abuse. Regulatory frameworks pertaining to digital banks and fintech
platforms must take into account certain crucial elements concerning consumer protection
and ethical behavior. These include:

- Transparency and Disclosure: Fintech companies should be required by regulations to

give customers clear and thorough information about their fees, terms, and conditions, as
well as about their goods and services. This guarantees that customers are aware of the
dangers and make well-informed selections.

- Data Security and Privacy: Strict data protection procedures are necessary given the rise
in the usage of digital platforms for financial transactions. Strong data privacy and

15
Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and challenges.
Business Horizons, 61(1), 35–46. https://doi.org/10.1016/j.bushor.2017.09.003
 security requirements should be mandated by regulations to guard against abuse or
unauthorized access to sensitive financial data belonging to customers.

- Fair Lending Practices: To avoid discriminatory practices and provide equitable access
to credit for all qualified borrowers, fintech lenders, especially digital banks, should abide
by fair lending principles. This covers ethical lending methods, non-discriminatory
interest rates, and openness in lending criteria.

- Complaint Handling and Dispute Resolution: Effective complaint handling procedures

and quick dispute resolution procedures between customers and fintech companies should
be part of regulatory frameworks. This encourages confidence in fintech and digital
financial services.

Clear market behavior norms, including prohibitions on insider trading, fraud, and other
unethical activities, should be included in regulations for fintech companies. These guidelines
support honest competition and the integrity of the market. All things considered, sensible
regulation of fintech funding is necessary, especially in the areas of digital banking and
fintech platforms, as it safeguards the interests of customers while encouraging competition
and innovation in the financial industry. To guarantee a secure, equitable, and open financial
environment for all stakeholders, regulatory bodies are essential in formulating and
implementing these rules.

NEED FOR GREATER COLLABORATION BETWEEN BANKS AND FINTECHS

The potential for strategic and operational collaboration between banks and other financial
institutions and FinTech startups is expanding, and this might prove to be a significant benefit
in the long run. The Reserve Bank of India, which sees FinTech companies as essential to
advancing efforts to promote financial inclusion, has pushed banks to collaborate with them
in recognition of this potential. The PwC 2019 Global Fintech Survey emphasizes the
significance of this partnership, pointing out that financial institutions cannot afford to ignore
FinTechs given the speed at which technology is advancing. Banks can increase their
competitive advantage; launch new goods and services more quickly, cut expenses, improve
operational effectiveness, increase client retention, and bring in more money by collaborating
with them16.

Strong regulatory and supervisory frameworks are necessary to guarantee the FinTech
industry's orderly development, consumer protection, and stakeholder interests. Formalizing
the informal economy is also being greatly aided by the introduction of the Goods and
Services Tax (GST), a major tax reform in India. As businesses, particularly private
corporations and micro-enterprises, establish a larger digital presence, this move is opening
up new options. Banks and other financial organizations are becoming more interested in
these businesses, which lessens their dependency on unofficial financing sources.
Furthermore, it is anticipated that the switch from collateral-based to cash flow-based lending
will reduce the cost of credit for micro and small businesses, hence expanding their access to
funding17.

CHALLENGES

- Data Privacy: Safeguarding sensitive information, such social security numbers, credit
card numbers, investment data, and income statements, is a major problem for the
financial technology (Fintech) sector. Data breaches are always possible when this
information is accessed through mobile devices and internet-based services. To avoid
fraud and phishing attempts, it is imperative to protect this data. Thanks to technological
developments, it is now feasible to remotely access vital IT infrastructure, which enables
more complex data comparisons with financial sources. What is still concerning, though,
is the absence of physical inspections on crucial hardware and endpoints that are used to
transmit data18.

- Regulatory Challenges: As a result of the strict rules governing compliance and

regulations, starting a Fintech business has become more difficult. Getting government
permissions is difficult, mostly because of worries about fraud and breaches in data
16
8Opportunities and Challenges of FinTech (Shri. Shaktikanta Das, Governor, Reserve Bank of India, Keynote
Address delivered at the NITI Aayog’s FinTech Conclave on March 25, 2019.
17
Microfinance as the next wave of Financial Inclusion, Address by Shri. M. K. Jain, Deputy Governor, Reserve
Bank of India at the SIDBI National Microfinance Congress 2019 at Mumbai on November 26, 2019
18
Sharma, I. (2022, August 22). Fintech challenges and opportunities - tatvasoft blog. TatvaSoft. Retrieved 28
DOI: https://doi.org/10.48001/jbmis.2022.0902004.48001/veethika.2021.07.01.006 August 28, 2022, from
https://www.tatvasoft.com/outsourcing/2022/01/fintech -challenges-and-
opportunities.html#:~:text=1.- ,Opportunities%20For%20Fintech%20Companies,and %20are%20benefitting
%20from%20this.
 security. In addition to making compliance challenging, these regulatory obstacles
prevent Fintech companies from accessing the Indian market. Compliance laws provide a
strict framework to discourage fraud, but they can also provide serious obstacles for
newly established financial companies as they demand that they adhere to a number of
requirements before they can begin operations19.

- Customer-Centric Approach: Since money can be complicated for the typical

individual, it is imperative to simplify financial services. The development of fintech has
facilitated the simpler integration of financial services into people's lives, improving their
standard of living. Ongoing efforts are being made to further streamline the user interface,
nevertheless. Fintech platforms have increased accessibility and transparency by
streamlining procedures such as creating bank accounts and upfront charge disclosure.
Financial language has been simplified by platforms such as Robin hood, which has
improved consumer comprehension.

- Business Model Adaptation: To be competitive, fintech organizations need to constantly

modify and enhance their revenue and business models. During difficult economic times,
this may entail reallocating resources, modifying revenue and spending plans, and putting
cost-cutting measures into place. Particularly for Fintech companies that handle higher
transaction volumes and specialize in contactless payments, business models alter as
income sources and relationships shift20.

- Financial Literacy: The low level of adult financial literacy in India is a major difficulty,
since many individuals are not aware of financial ideas and how they are used in real-
world situations. Due to a fear of losing money, people who lack literacy make bad
financial decisions and are reluctant to invest. Fintech has the power to completely
change how people manage their money, but in order to do so, it is imperative that the
issue of low financial literacy be addressed. Some people may find it easier to navigate
through the deluge of alternatives when Fintech services are effectively personalized 21.
19
Fintech in India - a global growth story - KPMG. (n.d.). Retrieved August 29, 2022, from
https://assets.kpmg/content/dam/kpmg/pdf/2016/06/Fin Tech-new.pdf
20
FinTech for Inclusion: Challenges and Opportunities, Roundtable discussion organized by Business Today in
collaboration with PwC, BT Print Edition: December 16, 2018. Available online at
https://www.businesstoday.in/magazine/the-hub/fintech-for-inclusion-challenges-andopportunities/story/
294454.html, accessed on January 09, 2020
21
Financing MSMEs: Banks & FinTechs - Competition, Collaboration or Competitive Collaboration? (Address
by Shri S. S. Mundra, Deputy Governor, Reserve Bank of India at the NAMCABS Seminar organized by
 CONCLUSION

The exponential expansion of FinTech may be ascribed to technological breakthroughs,

developing cultural norms, and legislative frameworks that are favorable. The fintech sector
indicates that future developments in technology will drive the market's trajectory and change
the way financial goods and services are produced, distributed, and used in the years to come.
Governments, associations, and organizations are working to close this gap, but FinTech in
India still has a long way to go. Even if there are difficulties, proactive measures are being
established to indicate a constructive direction for resolving these problems. The purpose of
this study is to illustrate the future trajectory of fintech and its potential for growth in India.
As they say, "Identifying a problem is half the solution." Identifying the obstacles is the first
step towards finding solutions.

REFERENCES

College of Agricultural Banking at Mumbai on February 20, 2017)

 Arner, D. (2016). FinTech: Evolution and regulation. Режимдоступу: http://law.
unimelb. edu. au/__data/assets/pdf_file/0011/1978256/D-ArnerFinTech-Evolution-
Melbourne-June-2016. pdf.

 Basuroy, T. (2022, July 27). India: Mobile phone internet users 2040. Statista. Retrieved
August 27, 2022, from https://www.statista.com/statistics/558610/number-ofmobile-
internet-user-in-india/

 Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions,
and challenges. Business Horizons, 61(1), 35–46.
https://doi.org/10.1016/j.bushor.2017.09.003

 Muthukannan, P., Tan, B., Gozman, D., & Johnson, L. (2020). The emergence of a
fintech ecosystem: A case study of the Vizag Fintech Valley in India. Information &
Management, 57(8), 103385. https://doi.org/10.1016/j.im.2020.103385

 Hu, A. S., C. A. Parlour, and U. Rajan. 2018. Cryptocurrencies: Stylized Facts on a New
Investible Instrument. Available at SSRN: https://ssrn.com/ abstract=3182113.

 Statista. (n.d.). Topic: Fintech in India. Statista. Retrieved August 29, 2022, from
https://www.statista.com/topics/5666/fintech-inindia/#dossierKeyfigures Times, E. (2022,
January 10).

 India's fintech market size at $31 billion in 2021, third largest in World: Report - et bfsi.
ETBFSI.com. Retrieved August 29, 2022, from
https://bfsi.economictimes.indiatimes.com/news/fintech /indias-fintech-market-size-at-31-
billion-in-2021-thirdlargest-in-world-report/88794336

 Zachariadis, M., &Ozcan, P. (2016). The API economy and Digital Transformation in
financial services: The case of open banking. SSRN Electronic Journal.
https://doi.org/10.2139/ssrn.2975199

 RBI (2014a), “Report on comprehensive financial services for small businesses and low-
income households” (Chairman: Dr. N. Mor).

 RBI (2014b), “Report of the Technical Committee on Mobile Banking” (Chairman: Mr. B
Sambamurthy).
 Planning Commission (2009), “Report on Financial Sector Reforms” (Chairman: Dr.
Raghuram G. Rajan).