Compliance Guidelines for FinTechs

Compliance Guidelines for FinTechs
In the evolving FinTech landscape, compliance is not just a requirement; it's a strategic imperative.

The Call for RegulateKaro amid Paytm crisis in the Fintech Space has spurred a renewed focus on compliance within the dynamic Indian FinTech ecosystem. Here’s a comprehensive listicle on the compliance measures FinTechs should follow to thrive in this regulatory landscape.

1. Register with Regulatory Authorities

  • RBI Compliance: In accordance with the RBI Act, every FinTech operating in India must register with the Reserve Bank of India based on the type of financial services offered. This may involve obtaining NBFC licenses or adhering to regulations through affiliated banks and NBFCs.
  • Payment and Settlement Systems Act: Prior authorization from RBI is mandatory before launching any payment system in India.

2. Stay Informed in a Dynamic Regulatory Landscape

  • The Indian regulatory framework is dynamic, with 69,233 compliances spread across 1,536 acts and rules. In FY 22-23 alone, there were 5,986 regulatory updates, emphasizing the need for continuous monitoring and adaptability.

3. Adapt to Recent Regulatory Changes

  • Digital Lending Guidelines: Keep abreast of guidelines regulating digital lending to combat digital loan fraud and enhance data privacy for borrowers.
  • Card-on-File (CoF) Tokenization Norms: Understand and implement the recent norms to replace sensitive payment credentials with unique tokens, minimizing the risk of cyber fraud.
  • Digital Personal Data Protection Act, 2023 (DPDP Act): Adhere to obligations laid down by the DPDP Act when dealing with sensitive financial data and Personal Identifiable Information (PII) to ensure user data safety and security.

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4. Embrace Self-Regulation

  • The draft framework for a Self-Regulatory Organisation (SRO) indicates a shift towards industry-led standards and best practices. FinTechs must actively contribute to shaping these standards, showcasing trust in the sector.

5. Address Paperwork Challenges through Digital Compliance Management

  • Compliance Documentation: Transition to digital compliance management to streamline paperwork, reduce manual errors, and ensure timely adherence to regulations.
  • Digital Compliance Software: Leverage regulatory technology for paperless repositories, dynamic workflows, automated alerts, timely reports, and statutory updates to facilitate compliance.

6. Mitigate Risks through Automation

  • Cost of Compliance: Introduce automation to significantly reduce the cost of compliance and minimize the risks associated with poor compliance.
  • RegTech Solutions: Invest in RegTech solutions to improve efficiency, efficacy, and effectiveness of compliance programs, offering control, visibility, and accountability over compliance status.

7. Strive for Good Corporate Governance

  • Responsibility and Governance: Recognize the importance of good corporate governance and responsible behavior. Embrace technology to meet the demands of business and compliance management.

In the evolving FinTech landscape, compliance is not just a requirement; it’s a strategic imperative. By proactively embracing and adapting to regulatory changes, leveraging technology, and prioritizing good corporate governance, FinTechs can navigate the compliance landscape successfully and contribute to the continued growth of the industry.

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Sandeep Agrawal

Director and Co-founder TemleaseRegtech

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Sandeep Agrawal

Director and Co-founder TemleaseRegtech

July 2024

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