India FinTech Forum organised FinTech Policy Roundtable at ISDI Ace in Mumbai on 21st April 2017. The objective of this Roundtable was to discuss Regulatory Framework for Non-Banking Finance Companies Account Aggregators (NBFC-AA). The attendees shared their views on “Master Direction- Non-Banking Financial Company – Account Aggregator (Reserve Bank) Directions, 2016”.
Highlights of FinTech Policy Roundtable
- Data privacy seems to be the guiding principle behind ‘Master Direction- Non-Banking Financial Company- Account Aggregator (Reserve Bank) Directions, 2016’.
- It is suggested to regulate companies specializing in Internet-related services to prevent scraping of SMSs in the Android operating system,thereby protecting financial data of users. In addition, prevention of scraping of SMSs seems to be on the horizon eventually given Aadhaar and OTP based transaction architecture.
- RBI may draw inspiration from open banking system implemented in the UK–Banks shall be mandated to share the financial data of customers who have consented,while FinTech firms shall be able to store customer data with consent.
- A Regulatory Sandbox approach can be adopted, allowing selected companies to test innovative products, services, business models and delivery mechanisms in alive environment.
- A minimum capital requirement of INR 2 Crore and requirement of NBFC-AA license prevents startups from applying for the license. Only 2 organizations have applied so far for the aggregator license.
- It is suggested that RBI formulate a tiered structure, nominating and authorising third parties to monitor and give sub-licenses to aggregators (as in the case of IndiaStack)– and balance this tiered structure with more liberal regulations when compared to current policy.
- Technology barrier exists in aggregating and processing data ‘real time’. Core banking systems and data structures of different Banks and NBFC-AAs are different and impose a technology challenge. Standardization may be required in the long run.
- RBI has been pushing innovation via banks since last many years and will continue to do so in a regulated manner. There is a suggestion for RBI to moderate regulations based on the level of risk involved. However, this may be a future proposal.
If you have any views on the above list, please feel free to post your comments below.