FinTech Sector and Growth
31st Oct, 2023
The Reserve Bank of India’s (RBI) proposed framework for a Self-Regulatory Organisation (SRO) for the fintech sector is expected to come up in a year.
- Fintech" is a term that combines "financial" and "technology".
- It refers to companies and technologies that leverage digital innovations to provide financial services in a more efficient, accessible, and innovative manner.
- Fintech encompasses a wide range of services, including digital payments, peer-to-peer lending, robo-advisors, blockchain technology, and more.
- These technologies are made to go beyond traditional financial systems and offer new solutions to consumers and businesses.
What is an SRO?
- An SRO is a non-governmental organization that sets and enforces rules and standards relating to the conduct of entities in the industry (members) with the aim of protecting the customer and promoting ethics, equality, and professionalism.
- SROs typically collaborate with all stakeholders in framing rules and regulations.
- Their self-regulatory processes are administered through impartial mechanisms such that members operate in a disciplined environment and accept penal actions by the SRO.
- SRO is expected to address concerns beyond the narrow self-interests of the industry, such as to protect workers, customers, or other participants in the ecosystem.
What are the functions of an SRO?
- The recognized SRO will serve as a two-way communication channel between its members and the RBI.
- It will work towards establishing minimum benchmarks and standards and help instill professional and healthy market behavior among its members.
- SROs will impart training to the staff of its members and others and will conduct awareness programs.
- It will establish a uniform grievance redressal and dispute management framework across its members.
RBI's Expectations from Fintech Players:
- Industry Best Practices and Compliance: Fintech firms are urged to develop and adopt industry best practices, aligning with local laws. This includes establishing robust privacy and data protection norms.
- Avoiding Mis-Selling and Ensuring Ethical Business Practices: Fintech entities should set standards to prevent mis-selling and uphold ethical conduct in their operations.
- Transparency in Pricing: It is expected that fintech companies maintain transparency in pricing, ensuring that customers have a clear understanding of the costs involved in their services.
Why fintech industry is important?
- Financial Inclusion: Through digital platforms and mobile apps, fintech companies have made it easier for people to access banking, payments, lending, and investment services.
- Innovation and Disruption: Fintech companies are known for their innovative approaches to financial services. They leverage technology to create new products, services, and business models.
- Efficiency and Cost Reduction: Fintech companies often use automation, artificial intelligence, and blockchain technology to streamline operations.
- Improved Customer Experience: Fintech companies place a strong emphasis on user experience and design.
- Innovative Payment Solutions: They revolutionized the way we make payments. This includes the development of digital wallets, peer-to-peer payment platforms, and cryptocurrency.
- Access to Capital for Small Businesses: Fintech platforms, such as peer-to-peer lending and crowdfunding, have provided alternative sources of funding for small businesses and startups.
- Data-Driven Insights and Personalization: Fintech companies often leverage big data and advanced analytics to provide customers with personalized financial advice and insights.