Poised for exponential growth and scale in the years to come, it becomes imperative for the industry to prioritize sustainable profitability through value creation strategies, unit economics and governance.
It is at this intersection of projected growth and growing concerns over governance amid political pressures from the Indian government and a growing consensus on mitigating rising cybersecurity and fraud risks that The Economic Times (ET) is set to host a deep dive into the fintech sector at the third edition of the ET Soonicorns Summit 2024, a pioneering tech start-up initiative of The Economic Times that returns to Bengaluru on September 20.
Amidst a series of carefully curated conversations, an esteemed list of speakers including Akash Sinha, Co-Founder & CEO, Cashfree Payments; Lizzie Chapman, Co-Founder, SwiffyLabs; Hardika Shah, Founder & CEO, Kinara Capital; and Dhirendra Mahyavanshi, Co-Founder, Turtlemint will take the stage to deliberate on the panel discussion titled, “Fintech: How to Balance Regulatory Lens and Growth?”
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Should OARs strike a balance between innovation and prudent regulation?
There is no funding winter when it comes to fintechs in India.
“The sector has received investments of approximately 6 billion dollars “In the last two years alone,” Reserve Bank of India (RBI) Governor Shaktikanta Das said.
Speaking at the Global Fintech Fest, Das added, “Publicly available information indicates that the number of fintechs founded in India stands at around 11,000.”
Das stressed the need for greater collaboration between policymakers, regulators and innovators, making it clear to industry leaders that strict adherence to RBI guidelines would be crucial. The surge in fraudulent attacks, mule accounts and fake traders has prompted industry regulators to keep a close eye on how fintechs, while advancing financial inclusion, are also opening the door for fraudsters in the regulated ecosystem.
Agencies like the Indian Cyber Crime Coordination Centre (I4C), along with other agencies of the Ministry of Home Affairs, are actively working with regulators to address these challenges.
Das also recommended the existence of self-regulatory bodies (SROs) that would be best placed to navigate the tightrope of innovation and prudent regulation for the fintech sector. “SROs, comprising industry players with a good understanding of the unique challenges and opportunities, would be able to provide appropriate suggestions to regulators on regulations that are both practical and effective,” Das said.
Among the three applications from industry associations received by the RBI for self-regulatory status, the central bank has decided to recognise the Fintech Association for Consumer Empowerment as an SRO.
Das also highlighted the growing capabilities of artificial intelligence (AI) and machine learning (ML) and their potential role in regulatory compliance, as “algorithmic trading” is set to redefine the financial landscape.
Also read: Prime Minister Modi’s Vision for Indian Fintech
Prime Minister Narendra Modi hailed the achievements of the fintech sector, which has positively impacted people’s lives through products like the Open Network for Digital Commerce (ONDC) and UPI.
Modi was speaking at the Global FinTech Festival in Mumbai last week when he announced the dawn of the era of Indian local products with global applications.
He reiterated that India’s fintech system would help improve the standard of living of the entire world. “The best is yet to come,” he said.
“I have confidence in our fintech ecosystem which will deliver quality life to Indians,” Modi said.
At the same time, the Prime Minister also stressed that regulators in the financial technology sector must take significant steps to combat cyber fraud and increase digital literacy.
“The government is taking all measures at the policy level to help the fintech sector and has also abolished the angel tax,” he said. Modi highlighted the recent moves, including the removal of the angel tax and the proposed creation of a Rs 1 lakh crore fund, as part of the Indian government’s commitment to support the fintech sector at the policy level. Experts particularly hail the abolition of the angel tax across all categories of investors, as a historic reform aimed at further strengthening the Indian startup ecosystem.
At the beginning of his speech on the fintech sector, Modi had said: “There was a time when the world was surprised by our cultural diversity. Today, they are surprised by the diversity of our fintech.”
The ‘middle phase’ of Indian fintech
According to the joint report by BCG and Z47, over the past four years, the number of minicorns (valuation of at least USD 1 million but less than USD 1 billion) in the country has increased 3.5 times, while the number of unicorns and soonicorns (startups that are growing rapidly and have the potential to become a “unicorn” valued at USD 1 billion) has tripled.
The report noted that by 2023, the country’s fintech market reached a revenue of $25 billion, marking a year-on-year growth of 56%, which is in stark contrast to the global fintech growth rate of just 13% during the same period.
However, the report also adds that despite generating over $100 billion in value over the last decade, Indian fintechs are still considered to be in the “middle” phase of their development, especially compared to traditional players that have created over $600 billion in value over 30-50 years.
The next frontiers of fintech expansion in the country are expected to come from tier-2 cities.
To learn more about the ET Soonicorns Summit, visit the website.
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(This article is generated and published by the ET Spotlight team. You can contact them at etspotlight@timesinternet.in)