Is Indian FinTech Suffering From Unfavorable Conditions Or Creating Them?

Before I express my stance on the existing FinTech landscape of India, here are three recent events that will help set a clear context:

• Paytm’s repeated run-ins with the RBI due to KYC violations, Data Security Concerns, and Management Overlap compelled the RBI to ban new account openings and, ultimately, restrict banking services.
• The measly legal litigations between BharatPe and PhonePe regarding the right to use the suffix ‘Pe’ have led to a huge distrust in the FinTech ecosystem’s collaborative and inclusive nature.
• WazirX and Binance were involved in a public spat regarding their acquisition and the broader issues surrounding crypto regulations in India, leading to uncertainty among investors toward FinTech businesses in India.

The three examples above involve all Unicorns with billions in revenue, making them one of the representative leaders of the Indian FinTech ecosystem. Paytm is a publicly listed company that has experienced a sharp fall in stock value, clearly reflecting the stockholders’ anger at ignorance.?

Why ignorance?

Because RBI issued multiple warnings and notices regarding various compliance issues, overlending risks, and a lack of data security measures, the delay in action and untimely communication at Paytm's end has helped its rivals strengthen their hold on the market share due to resulting restrictions on the company’s lending wing.

In any country where innovation is booming, compliance always catches up. You simply cannot create a compliance regulation for something that doesn’t exist. FinTech companies like PayTM should consider this aspect and match the innovation pace with stricter compliance processes. Being a unicorn and an impactful contributor to the economy, setting transparent communication with government entities to form regulations will help the entire FinTech space prevent penalties and loss of opportunity.

Creating A Negative Outlook Of Peer Relations

Another negative outlook about the FinTech industry came from the battle for the Pe suffix between BharatPe and PhonePe. Instead of a lengthy legal battle, exploring co-existence strategies or collaborating in specific areas could have been mutually beneficial.?

The public spat between WazirX and Binance, both of which are great Unicorns, is one of the best examples of why proactive and preventive compliance is a must to thrive in an evolving FinTech landscape. It could have saved a lot of money and resource energy and prevented the bitterness created among investors for the Indian FinTech community. No investor would want to put money in a company that engages in an otherwise avoidable battle, let alone convert it into a growth opportunity.

Regardless of the recent incidents, the FinTech industry is flourishing, driven by digital transformation. It is expected to reach $70 billion in annual revenue by FY’30, comprising 18-20% of overall financial services revenue. New government regulations have more concise directions, making the path for compliance teams clear.?

Investors and VCs are still looking for innovation backed by a strong data security wall, leaving open opportunities for budding FinTech startups to take serious steps and avoid shortcuts. However, considering the recent chaos created by the leading Indian FinTech giants, other businesses should work on rebuilding trust regarding the collaborative nature, ROI focus, security measures, and strict compliance with regulations. Ensuring these aspects will sustain a healthy revenue lifeline and attract global business partnerships and expansion opportunities.

What do you think should be the priority for FinTech businesses to thrive in 2024? For me, it would be ensuring compliance at all costs.