Why regulatory convergence is the next frontier in the Indian fintech journey

Moksha and machine learning may have little in common. After all, what has freedom from the cycle of life, death and rebirth got to do with a machine’s ability to learn from experience. But then, seen from the lens of fintech and the tidal wave of new age entities upending traditional finance, there are reasons to believe the life transforming possibilities that now seem possible as geeks attempt to guide greenbacks towards greater good.  

Gopal Srinivasan, the founder, chairman and managing director of TVS Capital Funds alluding to the Hindu philosophical concepts of moksha, Sadhana (dedicated learning) and Sankalp (heartfelt desire or determination) sees a clear link between an enlightened future for a country resulting from well thought-through deployment of technology that can help address the basic needs of every man.

Srinivasan was speaking at the FE Fintech Summit 2023 on the topic of ‘New Convergence For Population Scale Digital Business.’ He began by congratulating Financial Express.com for choosing to put together a rather timely and unique meet on fintech.

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He felt the various endeavours taken by India (like the deployment of Unified Payments Interface or UPI or the opening of the Jan Dhan accounts) were right enablers needed to succeed in unleashing the power of fintech, the need now was to leverage these and to build convergence in the way monitoring is done of the micro digital transactions and of the entities that offer them. 

The need to build convergence in the way monitoring is done of the micro digital transactions and of the entities that offer them would not just be a step in line with the way consumption happens (in a convergent fashion) but will also bring down several capital deployment inefficiencies.  “Today, products are being consumed though a single app- be it buying an insurance product, taking a loan, making a payment, opting for an investment product or just engaging in shopping. However, the regulatory system is still fragmented with entities offering the range of services having to put in place separate entities to address the concerns of different regulators – be it the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) or the Insurance Regulatory and Development Authority (IRDA).”

“As an investor, I see so much capital is deployed inefficiently because of the walls that entities have to create separately for different regulators.” One entity providing the digital services needs to therefore have separate compliance officers, separate CEOs, governing boards for each operation. 

To Srinivasan, it is perhaps time for the regulator to use RegTech (regulatory technology that involves implantation of digital tools and processes that can help companies manage their regulatory compliance commitments better). He feels that a regulator using RegTech in such a way that with SupTech, granular micro level supervision of  transactions is made possible while also enabling a single organisation to operate across regulators.

The moksha equivalents for India being reaching goals like reducing the number of those below the poverty line (BPL) from 27.5 per cent in 2016 to say 18 per cent by 2025. To get there and to improve the general wellbeing of people, he sees the need for also ensuring that the 250 million odd people that are still to fully realise the potential of digital financial services are brought into its fold. Referring to his own fund at TVS, he says, about 80 per cent of our portfolio or about 1600 crore out of the Rs 2000 crore fund is invested in digital financial services. One way to enable this, he says, is by the digital financial service providers themselves start leveraging their network to deliver range of products. Like PhonePe for instance, he felt, could opt to pension products at no cost to those using its services.