RBI Governor Shaktikanta Das's keynote address at the Global Fintech Festival 2023

Credit appraisal exists in separate systems of different entities like central and state governments, technology and fintech companies, banks, service providers like credit information companies, digital identity authorities, etc. Accessing customer data available with multiple data sources is a challenge for both banks, as it would require multiple integrations with each information provider. It's also a challenge for the borrower to enable frictionless credit. We have launched this pilot on the 17th of August, last month, through a public tech platform, and the platform enables a seamless flow of techno-digital information from all the above sources to lenders, obviating the need for multiple integrations.

Now let me finally come to the final part of what I wanted to say, and that focuses on customer centricity, governance, and self-regulation. You see, as a regulator, it is our responsibility to maintain financial stability of the system. It is our responsibility to also see that there is customer centricity in every lending, whether it is by a conventional loan by a bank or by an NBFC or by a fintech. Not just lending, but any other kind of financial service which is provided and which falls in the regulator's domain. It's our responsibility to highlight issues like customer centricity, governance, and self-regulation.

I would like to touch upon certain key issues which are critical for the fintech ecosystem in particular to be stable and future-ready. In this context, three critical issues: customer centricity, governance, and self-regulation merit attention. Now I would urge and I would like to impress upon all the players in the fintech sector not to see these aspects as impediments, not to see these things as difficulties or creating barriers in your growth of business. I feel as a regulator, we feel, and I am sure most of you will agree, these are the things if you do successfully, in our view it will ensure the long-term sustainability and the long-term success of your product or your business model.

In the dynamic and ever-evolving world of business, it's easy to get caught up in the pursuit of revenue, bottom lines, and the relentless drive for valuations. Sometimes it is forgotten that the success of any enterprise is intrinsically tied to the satisfaction and trust of its customers. This is the first critical issue which I wish to highlight. We must remember what Steve Jobs once said, I quote: 'You have got to start with the customer experience and work backwards.' I repeat: you have got to start with the customer experience and work backwards to the technology. To focus on customers means embracing a customer-centric approach to innovation by understanding the needs of customers, making provisions that protect customer interests and earn their trust. This calls for developing an organizational culture in which continuous feedback mechanisms are embedded in the business strategy.

Designing solutions that safely and efficiently meet customer needs would not only elicit trust of customers, it would also meet business objectives in a sustainable manner. This can be achieved through simplified user interfaces and quick customer grievance redress mechanisms. Avoiding customer harassment is essential to achieving long-term customer trust. In this context, I would like to further add that digital innovations at times have also led to cyber risk and data security related issues. Illustratively, mushrooming of illegal loan apps, many of which had their origin in foreign jurisdictions, have led to serious concerns about the breach of data privacy, unethical business conduct, levying of exorbitant interest rates, and harsh recovery practices. This highlights the urgent need to ensure that innovations are accompanied by prudential safeguards and responsible conduct.

It is also imperative that regulated entities operate within the perimeter set by the licensing conditions and only undertake activities under the regulations. The second critical aspect which I would like to highlight is the important role of governance in fintechs. By providing clear governance structures, fintechs can demonstrate their commitment to transparency, accountability, and responsible decision-making. In fact, effective governance in fintechs requires a collaborative effort involving regulators, industry associations, and the fintech community itself. Regulators play a critical role in addressing arbitrage, adapting regulations to technological advancements. Industry associations can facilitate development of best practices. They must proactively adopt high standards of governance. A robust governance structure encompasses clear delineation of roles and responsibilities, transparent decision-making processes, accountability mechanisms, and stakeholder engagement. Good governance must focus on ensuring effective oversight, ethical conduct, and risk management. Ultimately, it's good governance which should be key to durable and long-term success of any company, and in particular the fintechs.

The third critical issue I would like to stress is the need to establish an effective self-regulatory structure, and this is very important and absolutely necessary for the fintech players themselves. Fintech players need to evolve industry best practices, privacy and data protection norms in sync with the law of the land, set standards to avoid misselling, promote ethical business practices, transparency of pricing, etc. I would like to use this opportunity to urge and encourage the fintechs to establish a self-regulatory organization, or an SRO, themselves. From Reserve Bank, we are willing to engage with you. In fact, we have self-regulatory organizations, what are called SROs, in other sectors also, where part of the regulation, part of the industry practices, part of the guidelines is managed by the SRO itself, which is a body of the industry players themselves. So I take this opportunity to make an appeal and to urge the fintech industry also to come forward and discuss with the Reserve Bank for formation of SROs. That will lead to two things: one, it will give you an opportunity to voice your requirements more frequently to the SRO, which is your organization—it's an organization to be created by you. The other advantage is that all the aspects of regulation will not be burdened on the Reserve Bank; there are aspects of regulation which the SRO can handle. So therefore, I would like to use this opportunity to make an appeal to all of you to come forward and discuss the possible structure of a self-regulatory organization with the Reserve Bank of India and take it forward. And I do hope next year, when we meet here in the 2024 edition—and I am sure the organizers will announce the dates for next year's event very shortly—next year when we meet, I would like to see an SRO to have either been actually formed or about to be formed, or we can probably launch the SRO next year in this event.

In today's world, one year is a long period of time, so I am saying next year as the outer limit, but I think there is possibility if we work together we can do this even faster. Let me now conclude. Technological innovation has unprecedented potential to make finance more inclusive, competitive, and robust. It is crucial that technological advancements in the world of fintech evolve in a responsible manner and are truly beneficial to the people at large. It's therefore vital for these innovations to be scalable and interoperable. Fintech players should themselves ensure responsible digital innovations. The Reserve Bank on its part will continue to drive the necessary regulatory and other policy measures to promote a vibrant and responsive fintech ecosystem. The Indian economy is growing rapidly, and with it the demand for financial services is also growing rapidly. The coming years hold immense promise, and innovators across the world should explore these opportunities. I firmly believe that the Global Fintech Festival will emerge as a key global platform to unlock the full potential of the fintech ecosystem not only in India but in other countries also. My best wishes to you all for the success of this Global Fintech Festival. Thank you very much.