The digital revolution in finance has seen unconventional growth in India, making it the fastest-growing sector globally. According to India Business and Trade, the industry is growing with a CAGR of 22%, and the fintech market is projected to reach a valuation of $150 billion by 2025. This burgeoning sector is transforming financial services for millions across the nation. Yet, with rapid growth comes pressing challenges—regulatory compliance, cybersecurity, data privacy, and consumer protection. These challenges have sparked debates on whether India’s fintech sector should establish a self-regulatory body (SRB), mirroring similar models in more mature markets.
According to the Fintech Times report, 74% of global consumers sought stronger data privacy and governance laws. An SRB could address these concerns by setting robust data protection standards, giving users greater confidence in engaging with fintech services. The SRB could also expedite customer dispute resolution, as traditional financial regulatory bodies often face procedural delays due to high caseloads and limited resources.
If we look at empirical studies, we see that self-regulation bodies have been game-changers. For instance, although a government body, the United Kingdom’s Financial Conduct Authority (FCA) incorporates self-regulatory principles within the fintech industry to strike a balance between innovation and accountability. This model has resulted in higher consumer trust and stronger operational standards. FCA mentioned on its website it doubled the number of firm authorisation cancellations in 2023 to 1,261 and exercised its authority to intervene with 34 firms that raised serious concerns in 2022.
In India, regulatory bodies like RBI and SEBI are involved in the practices of Fintech startups. For instance, in May 2024, RBI rolled out the Financial Repository to centralise the fintech companies’ essential data. This platform acts as a central database for all fintech companies operating in India, providing them with the tools and resources they need to operate smoothly and grow within the regulatory framework. Moreover, regulators use data to study new-age trends and formulate policies around them.
However, their mandates cover only specific areas, leading to regulatory fragmentation and potential blind spots. A dedicated SRB could unify and streamline oversight, creating standardised best practices and frameworks, especially in data security, digital lending, and fraud prevention. It would serve as a bridge between fintech and government regulatory agencies, fostering innovation while ensuring compliance. With cooperation from existing regulatory bodies and buy-in from industry stakeholders, it could set the standards that will support fintech’s growth while safeguarding consumer interests.
