Tag: fintech

DFS, Home Ministry hold workshop to bridge gap between fintechs and law enforcers, tackle financial fraud

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a concerted effort to bolster cybersecurity measures and combat financial fraud, the Department of Financial Services (DFS), Ministry of Finance, and the Indian Cyber Crime Coordination Centre (I4C), Ministry of Home Affairs, orchestrated a half-day workshop in New Delhi on Tuesday, April 30.

The event, chaired by DFS Secretary Vivek Joshi, aimed to foster collaboration between Law Enforcement Agencies (LEAs) and stakeholders in the Startup and Fintech ecosystem.

The workshop, which saw participation from over 60 Fintech companies, four Fintech Associations, 23 State Police Departments, and various governmental bodies including the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED), highlighted the critical need for synergy between government bodies, regulators, and private enterprises to fully leverage the potential of India’s burgeoning Fintech sector.

Joshi emphasised the pivotal role of Startups and Fintechs in India’s economic growth trajectory, stressing the importance of cohesive efforts in harnessing their innovative potential.

He urged for a unified approach towards addressing challenges such as cybersecurity and digital financial frauds, highlighting the necessity for proactive measures to build trust and confidence within the ecosystem.

Key discussions during the workshop revolved around strategies to mitigate cyber threats, including the role of technology in enhancing accessibility to financial services, combating money mule networks, and real-time monitoring of data breaches.

Additionally, the workshop delved into the establishment of mechanisms for account freezing/unfreezing to expedite the recovery of defrauded funds and ensuring data privacy.

Following points were deliberated during the proceedings of the workshop:

• Role of technology in providing accessibility to financial services
• Strategy to control the money mules
• Appointment of key contact point or nodal officer by the Fintech companies to liaise with the LEAs
• Real-time monitoring of data infringement by both the Fintech companies and LEAs
• Geotagging of digital transactions to track the money trails
• Creation of suspicious registry of BCs and fraudsters involved in the financial frauds
• Conducting regular audits of digital KYC for fostering trust and accountability
• Establishing a mechanism for freezing and unfreezing of accounts for faster recovery of defrauded money
• Devising a mechanism to ensure data privacy and prevention of data theft
• Modernisation of digital infrastructure by leveraging technologies like IPv6, API integration etc.

Insights shared by LEAs from Gujarat, Haryana, and Uttarakhand shed light on emerging trends in cybercrime and financial frauds, providing valuable inputs for devising comprehensive preventive measures. The event concluded with a panel discussion featuring LEAs, focusing on collaborative strategies for prevention and mitigation of cyber threats.

The workshop served as a platform for dialogue and knowledge exchange, bringing together stakeholders from across sectors to collectively address the evolving challenges posed by cyber threats and financial frauds. It highlighted the imperative for sustained cooperation and innovation to safeguard India’s digital financial landscape.

Among the attendees were representatives from key governmental bodies including the Ministry of Electronics and Information Technology (MeitY), Reserve Bank of India (RBI), and National Payments Corporation of India (NPCI), underscoring the collective commitment towards bolstering cybersecurity and ensuring the integrity of India’s financial ecosystem.

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From bill payments to investment solutions — here’s what to expect from Aditya Birla’s ABCD fintech app

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Aditya Birla Capital, a non-banking financial company, launched a new fintech app, ABCD, on Tuesday, April 16. The company has also announced the launch of an omnichannel ABCD D2C platform to scale up its digital transformation journey.

With a vision to acquire 30 million customers within the next three years, KM Birla, Chairman of Aditya Birla Group, stressed the app’s role in leveraging India’s robust digital infrastructure.

Speaking at the launch event, Birla emphasised the nation’s strides in establishing a transformative digital ecosystem, evident in the growth of transactions via the Unified Payments Interface (UPI).

“ABCD is not just an app. It’s a testament to our commitment to meet all the financial needs of our customers seamlessly and engagingly,” said Birla.

The platform, developed in 12 months, is poised to revolutionise the financial services landscape by offering a diverse range of products and services tailored to meet individual preferences, the company said in a statement.

Vishakha Mulye, CEO of Aditya Birla Capital, highlighted the app’s role in augmenting digital services.

“We aspire to become one of the top three players in each segment of our core businesses,” said Mulye.

Backed by scalable infrastructure, user-friendly and intuitive interface, and robust functionalities, the platform will offer a simple and differentiated experience across all touch points including mobile app, website, branches, and virtual engagement channel, Aditya Birla Capital said.

Guided by a Maximum Viable Product approach, the ABCD D2C platform will offer a portfolio of 22 products and services, including facilities of a payment platform such as UPI, bill payment, and online recharges, with financial services like loans, insurance, and investments along with comprehensive personal finance tracking such as ‘My Track’, among others.

The platform will also feature ABCD’s own stack of products such as Portfolio Consolidator, Spend Analyzer, and Digital Health Assessment among others, and payment solutions.

The ABCD app will have features like multi-account payment, multi-mode receipt, and spend analysis tools, the NBFC stated.

This platform is housed under Aditya Birla Capital Digital Limited, a wholly-owned subsidiary of Aditya Birla Capital Limited.

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Digital lending booms — disbursement volume rises 12%, value jumps 46% in Q3

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Fintech Association for Consumer Empowerment (FACE) on Wednesday (March 20) unveiled the ninth edition of its quarterly report, FACETS, offering a comprehensive analysis of disbursement trends in the third quarter of the fiscal year 2023-24 (FY24).

According to the report, the disbursement volume and value experienced year-on-year growth of 12% and 46%, respectively, during Q3 FY 23-24. This amounted to 2.5 crore loans totalling ₹33,922 crore.

Drawing insights from data provided by 37 FACE member companies, the report shed light on the evolving landscape of digital lending and provided a deeper understanding of women’s participation in the sector.

One of the notable findings of the report is the average ticket size for loans disbursed in Q3 of FY23-24, which stood at ₹11,945. Further, the report delved into the assets under management (AUM) of the member companies, revealing a total AUM of ₹41,220 crore as of December 2024.

Two-thirds of the portfolio is on-balance sheet, with firms owning NBFCs accounting for 76% of the on-balance AUM and 24% off-balance.

The report also introduced insights into the profitability of FACE member companies, with 80% reported to be profitable based on data from 28 members. Addressing gender inclusion, the report highlighted that 12% of loans disbursed in FY 23-24 were directed towards women.

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India Ratings forecasts margin pressure for NBFCs in FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India Ratings and Research expects net interest margins (NIMs) of non-banking finance companies (NBFCs) to be under pressure at least during the first half of FY25. It has a neutral outlook on the sector considering factors such as ongoing growth, stable asset quality, and adequate capital buffers.

Speaking to CNBC-TV18 to Pankaj Naik, Director at India Ratings & Research said, “Post the increase in the risk weights (by the RBI), obviously, the funding cost increased for NBFCs from banks, and banks had already taken a good amount of exposure on the NBFCs sector per se. So we had factored that in. We did the articulate that we will see some margin compression, which we saw in FY24. We believe the rates are going to be alleviated even for FY25.”

Read Here | NBFCs should come out of their own shadows: RBI Deputy Governor

He attributed this compression in margins not only to the increased funding costs but also to the rising leverage within the sector. As leverage grows, the equity contribution towards growth decreases, further impacting margins.

Naik pointed out that the Reserve Bank of India (RBI) is closely monitoring developments in the fintech space, indicating potential regulatory actions or interventions in the future.

Highlighting regulatory developments, Naik noted the Reserve Bank of India’s (RBI) scrutiny of the fintech space. While fintech’s assets under management (AUMs) are relatively small compared to the overall sector, their interconnectedness with banks and NBFCs elevates risks.

Consequently, fintech growth in FY25 is expected to be moderate due to regulatory scrutiny and cautious funding partners.

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RBI held more than 200 meetings with fintechs over last 6 months

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) held more than 200 meetings with various fintechs over the course of the last six months, CNBC-TV18 has learnt. This assumes significance in the wake of the action on Paytm Payments Bank, which sparked a wave of passionate responses from the startup ecosystem, ranging from concerns about regulatory support to the burden of compliance issues on fintechs.

CNBC-TV18 has learnt that through various in-person meetings, conferences, events and other outreach, the RBI held 202 meetings in total with fintechs in the last six months, including six to seven meetings at the deputy governor and governor level.

“RBI has been open to any discussion and feedback with fintechs before and will remain so in the future,” said a person familiar with these RBI meetings who preferred not to be quoted.

“The need for a continued dialogue between finetchs and RBI came up in the fintechs meeting in New Delhi, and during the course of the discussion, RBI assured the finetchs that it would hold more structured regular meetings with the industry, as it does with banks and NBFCs,” added this person.

The regulatory action of Paytm Payments Bank had led a dozen startups to pen a letter to the government and regulatory officials, urging them to engage in constructive dialogue with the fintech ecosystem. In this letter, the startup founders even asked the regulator to reconsider its action on the bank, raising concerns that such an action would not only impact customers but have far-reaching and detrimental consequences for the entire FinTech ecosystem.

This prompted the finance ministry to hold a meeting with fintechs in New Delhi recently to assure them that the government supported innovation in the financial sector and was there to address any concerns or issues they may have.

“The Union Finance Minister noted the rapid growth of the start-up and fintech sectors of India, especially in the last decade, and welcomed suggestions from the FinTech leaders to achieve greater Ease of Doing Business and Ease of Living for consumers. During the meeting, it was emphasised that innovative solutions by fintech companies are essential to the financial services sector while ensuring strict compliance with regulations,” the finance ministry said in a press release after the meeting.

While the action on Paytm Payments Bank, and more recently on commercial card payments via Visa to unauthorised merchants by certain finetchs, have given rise to apprehensions among the industry that perhaps the regulator has taken a very strict stance on these players and this may affect the morale of the players in the ecosystem, the RBI has maintained that it remains supportive of the sector.

“Let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about the Reserve Bank’s commitment to promote fintech, to promote innovation, and to promote technology in the financial system,” RBI Governor Shaktikanta Das had said during the last policy press conference earlier this month while addressing issues around Paytm Payments Bank.

“Problem of a few startups can’t be taken as the problem of the entire startup ecosystem. Many of them are doing alright. I don’t want any sector to have any apprehension that they “can’t do business in India”. The government is very much with the startups. They will be given all assistance,” Finance Minister Nirmala Sitharaman also added at an Indian Express event recently.

Regulatory actions in the past, too, have been met with a mixed response from the fintech industry.

The regulator had first come up with Digital Lending Guidelines for the sector a couple of years ago to set guardrails for digital lending to protect borrowers, which brought legitimacy to a sector that was thus far lightly regulated. While this was welcomed by the industry, what followed after made life tougher for some fintechs.

For instance, in 2023, RBI capped the amount of a popular fintech product FLDG (first loss default guarantee) to 5% of the outstanding amount of a particular loan portfolio, which both provided relief to fintechs by allowing them to carry on with the offering, while also imposing a limit on the cover which would make the product less attractive to banks and therefore harder to sell.

Before that, RBI’s rule prohibiting non-bank institutions or fintech firms, including several buy-now-pay-later companies (BNPLs), from putting credit limits onto PPIs such as wallets and credit cards also came as a body blow to the likes of ZestMoney and Slice, which then had to pivot their business models to survive. ZestMoney eventually shut the shop after failed acquisition talks with PhonePe and other funding issues.

On the other hand, the Reserve Bank also instituted a whole host of measures to boost the fast-growing fintech ecosystem. It set up a FinTech Department to give dedicated attention to the sector, setting up of the Reserve Bank Innovation Hub (RBIH) as a wholly owned subsidiary of the RBI, to promote innovation across the financial sector, as well as set up a ‘Fintech Forum’ comprising representatives from the industry to promote advanced technologies, facilitate knowledge exchange, forge strategic partnerships, empower compliance and understanding and promote financial inclusion.

Among some of the more supportive policies RBI has recently come up with is a self-regulatory organisation (SRO) framework for fintechs to encourage self-regulation, the proposal to set up a fintech repository to enable the development of appropriate policy approaches, a Regulatory Sandbox (RS) framework wherein entities test new innovative products/services in a controlled regulatory environment with or without regulatory relaxation, and the introduction of Account Aggregators frameworks to manage consent and enable consumers to digitally access and share financial assets data in a secure, transparent, and efficient manner.

The increasing regulatory focus comes amid the fast-paced growth this sector has seen. India has over 10,200 fintech startups, the third-largest such cohort in the world. The mushrooming of instant digital loans, which brought convenience along with financial inclusion, also came with increasing instances of fraud, customer harassment and illegal mining of data. All this led the Reserve Bank to take steps to set more firm regulatory and supervisory guidelines for this industry.

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Govt to look at change of ownership holding of fintechs to enable regulatory compliance

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Amid the crisis at Paytm Payments Bank, Finance Minister Nirmala Sitharaman met fintech leaders on February 26 and announced that government authorities will look into changes in the ownership control of listed fintech firms for better regulatory compliance.

According to the government statement following the meeting, the Reserve Bank of India (RBI), Department for Promotion of Industry and Internal Trade (DPIIT) and Ministry of Finance will look at the change of ownership holding/control of listed fintech companies to enable them to be in-sync with regulatory compliance.

The Department of Financial Services (DFS) will conduct a day-long workshop with Law Enforcement Agencies (LEAs) wherein fintech ecosystem partners can voice their issues and concerns, the government said.

During the meeting, the DPIIT mentioned that new patent examiners have been added that will reduce the turn-around-time of patent applications.

The statement has stressed that the cost of lending and funding for critical areas including the priority sector should be rationalised and that the know your customer (KYC) process across all fintech segments must be simplified and digitised.

The government also noted that issues pertaining to cybercrime will be suitably addressed in the new Digital India Act.

The government statement on the meeting of fintech leaders and the FM comes at a time when the founder and majority owner of Paytm Payments Bank Vijay Shekhar Sharma has stepped down from the board. Sharma owns a 51% stake in Paytm Payments Bank, while One 97 Communications, as Paytm is formally known, owns the rest.

Paytm Payments Bank said on February 26 it was reconstituting the board of directors at the Paytm Payments Bank, an associate of Paytm, with the appointment of ex-Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former executive director of Bank of Baroda Ashok Kumar Garg, and Retd. IAS Rajni Sekhri Sibal as independent directors.

Sources have told CNBC-TV18 that the new board will focus squarely on the resolution of compliance issues pointed out by the RBI.

On February 19, Paytm shifted its nodal account to Axis Bank from Paytm Payments Bank. This will allow the company to continue operating the Paytm quick-response code, sound box as well as card machines after the RBI’s deadline of March 15.

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Finance Minister asks regulators to hold monthly meeting with startups, fintech firms to address their issues

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman on Monday, February 26, chaired a meeting with top executives of around 50 fintech firms to discuss regulatory issues being faced by them and impressed upon them to strictly comply with the norms, according to an official.

With over 10,000 fintech entities, making India the world’s third-largest hub in the sector, Sitharaman emphasised the need for consistent dialogue to address the concerns and challenges faced by startups and fintech firms. 

Recognising the pivotal role of innovation in driving financial services, the minister urged regulators, including the Reserve Bank of India (RBI), to convene monthly virtual meetings to promptly address queries and issues raised by stakeholders.

During the session, it was underscored that while fostering innovation, compliance with regulations remains paramount. Initiatives such as Aadhar, UPI, and regulatory frameworks like the sandbox environment have been instrumental in nurturing the startup ecosystem.

Participants lauded the efficacy of initiatives like the Gift City and the International Financial Services Centre Authority (IFSCA) for creating new avenues in the fintech landscape.

India’s startup landscape has witnessed exponential growth, with over 1.17 lakh startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) in 2023, generating millions of jobs, a significant portion being led by women.

The fintech sector, growing at a 14% CAGR, has drawn attention globally, with recent initiatives like the RBI’s draft framework for Self-Regulatory Organisations (SROs) further enhancing regulatory clarity.

Key takeaways from the meeting included plans for a workshop with Law Enforcement Agencies (LEAs) to address fintech-related issues, streamlining patent examination processes, rationalising lending costs for priority sectors, and enhancing digital KYC procedures across fintech segments. Additionally, discussions centered on adapting regulatory frameworks to accommodate changes in ownership structures and addressing cybersecurity concerns through forthcoming legislation like the Digital India Act.

Kunal Shah, the founder of Cred, expressed his appreciation, stating, “Remarkable bias for action and initiative shown by policymakers with diverse responsibilities who came together for positive engagement with fintech startups. Grateful to the Finance Ministry and RBI for the frank exchange, encouragement, and belief in the role fintechs play in enabling India’s economic and social ambitions.”

Remarkable bias for action and initiative shown by policymakers with diverse responsibilities who came together for positive engagement with fintech startups. Grateful to the Finance Ministry and RBI for the frank exchange, encouragement, and belief in the role fintechs play in…

— Kunal Shah (@kunalb11) February 26, 2024

The meeting was attended by top executives of private sector fintech firms, including RazorPay, PhonePe, Google Pay and Amazon Pay. NPCI officials too were present.

From the government side, the meeting was attended by Financial Services Secretary Vivek Joshi and MeitY (Ministry of Electronics and Information Technology) Secretary S Krishnan. RBI Deputy Governor T Rabi Sankar was also present. The meeting comes at a time when the Reserve Bank of India’s action against Paytm Payments Bank has put the spotlight on regulatory compliance in the fintech industry.

Representatives of Paytm was not invited for the meeting on Monday. On January 31, RBI barred Paytm Payments Bank Ltd (PPBL) from accepting any fresh deposits or top ups from customers after February 29 for not complying with regulations. The deadline was later extended till March 15.

Last week, RBI advised the National Payments Corporation of India (NPCI) to examine the possibility of migrating the users from PPBL to four to five other banks. PPBL has 30 crore wallets and 3 crore bank customers.

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IDFC First Bank CEO stresses compliance and controls amidst positive banking outlook

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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V Vaidyanathan, the Managing Director and CEO of IDFC FIRST Bank has emphasised the importance of compliance and controls in business operations, stating that it sends a crucial message for businesses to adhere to regulatory standards.

“The larger message is that people should be more compliant about the way they run their businesses and run them with good controls. I think it’s an important message. But coming back to banking as such, things are looking very good. For people who work with compliance and controls, I think the market is very large,” Vaidyanathan was speaking with CNBC-TV18 from the sidelines of the 25th EY Entrepreneurs of the Year Awards.

The banker’s comments are significant given that over the past year, the fintech sector in India has been under increased scrutiny by the Reserve Bank of India (RBI), with regulatory actions impacting various segments, including digital lending. In 2022, the RBI introduced stringent guidelines for digital lending, aiming to enhance consumer protection and ensure fair lending practices.

More recently, on January 31, 2024, Paytm Payments Bank faced regulatory action from the RBI, further highlighting the evolving regulatory landscape in the country.

Vaidyanathan highlighted the substantial growth opportunities available for emerging banks in the market, especially in terms of deposits. He noted that while larger banks may face more stringent regulatory conditions, emerging banks still have room to expand their deposit base and drive growth.

In the case of IDFC FIRST Bank, deposits have been growing at an impressive rate of 40%, indicating positive momentum in the market.

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Vaidyanathan reiterated the importance of listening to regulatory directives, especially regarding deposit requirements and capital adequacy ratios. He emphasised that the entire banking industry is closely monitoring regulatory developments and adapting its strategies accordingly.

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PhonePe adds former revenue secretary Tarun Bajaj, 2 Walmart executives to its board

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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PhonePe has expanded its board by appointing three new members in a bid to strengthen governance. The Walmart-owned mobile payments major has appointed former revenue secretary Tarun Bajaj, as an independent director on the board and chairman of the risk committee.

A 1988-IAS batch officer from the Haryana cadre, Bajaj served as the revenue secretary until November 2022.

It also announced the appointment of John D Rainey (Executive Vice President and Chief Financial Officer, Walmart Inc.) and Donna Morris (Executive Vice President, Chief People Officer, Walmart Inc.) on the PhonePe Board as Non-executive Directors.

With this, the PhonePe board now has eight members. The existing members include founders Sameer Nigam and Rahul Chari, Flipkart co-founder Binny Bansal, Rohit Bhagat, and Walmart’s Leigh Douglas Hopkins.

PhonePe’s moves come at a time when rival Paytm’s Paytm Payment Bank has come under the Reserve Bank of India (RBI) scanner for regulatory and compliance issues.

PhonePe has the largest market share for UPI in India. It has been expanding its business to stock broking, lending, wealth management, and ecommerce.

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FM Sitharaman says the world is looking to India for fintech solutions

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharman pointed out that India has made some significant contributions to the fintech sector. She added that everyone across the world is looking to India for fintech solutions.

Network18’s Editor-in-Chief, Rahul Joshi, in conversation with Sitharman, highlighted the restrictions imposed by the Reserve Bank of India (RBI) on the operations of Paytm Payments Bank on Wednesday, January 31. However, Sitharman demurred and said she didn’t want to comment.

Sitharaman said, “Fintech is an area in which all of us are very enthusiastic. India has contributed a lot to the sector. India’s contribution to the sector has been globally recognised. Today, if people are looking at fintech solutions, they are looking to India.”

Praising youth, she said, “Our (Indian) youth have contributed a lot and built capacities for themselves. This (fintech) is an area that we certainly like to work with and encourage.”

While Sitharaman did comment on Paytm Payments Bank, the bank has been directed by the central bank to stop deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, NCMC cards, etc after February 29, 2024. This does not include any interest, cashback or refunds which may be credited.

Earlier in the day, Paytm clarified that its app will continue functioning in collaboration with other banks and not with the Paytm Payments Bank (PPBL) after February 29. The company added that the directives from the RBI are for Paytm Payments Bank (PPBL) and not Paytm.

Moreover, Sitharaman appreciated the central bank for working in collaboration with the stakeholders and keeping growth in sight. She said that RBI has been steady and expects it to continue treading the same path.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow