Customer-centricity, governance, self-regulation critical for fintech ecosystem: Shaktikanta Das

Customer-centricity, governance, and self-regulation are critical for the fintech ecosystem to be stable and future-ready, according to Reserve Bank of India Governor Shaktikanta Das.

The Governor observed that in the dynamic and ever-evolving world of business, it is 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 intricately tied to the satisfaction and trust of its customers, he said.

“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.

Also read: RBI Governor vows commitment to 4% inflation target amid food price shocks

“This calls for developing an organisational culture in which continuous feedback mechanisms are embedded in the business strategy,” said Das in his keynote address at the Global Fintech Fest.

The Governor underscored that designing solutions that safely and efficiently meet customer needs would not only elicit trust of customers, but 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,” he said.

Digital innovations 

Das noted 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 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 which are permitted under the regulations,” said Das.

By providing clear governance structures, fintechs can demonstrate their commitment to transparency, accountability and responsible decision-making, said the Governor.

Also read: RBI plans to introduce CBDC in call money market

In fact, effective governance in fintechs require a collaborative effort involving regulators, industry associations and the fintech community itself.

Das emphasised that regulators play a critical role in addressing arbitrage, ensuring compliance with existing laws, and adapting regulations to technological advancements. Industry associations can facilitate development of best practices.

“…The most critical role, however, has to be played by FinTechs themselves. They must proactively adopt high standards of governance.

“…Good governance must focus on ensuing effective oversight, ethical conduct and risk management. Ultimately, it is good governance which would be key to durable and long term success of FinTechs,” Das said.

Self-Regulatory Organization

The Governor highlighted the need to establish an effective self-regulatory structure by the FinTech players themselves.

“They need to evolve industry best practices, privacy and data protection norms in sync with the laws of the land, set standards to avoid mis-selling, 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 (SRO) themselves,” he said.

The RBI is following a strategy of calibrated and phased implementation of Central Bank Digital Currency (CBDC).

Also read: RBI too bullish on private capex

“As the next generation currency system, CBDC needs to be introduced in a non-disruptive manner…Recently, we have enabled full inter-operability of CBDC with UPI QR codes and are targeting one million CBDC transactions per day by December 2023. This will give us enough data points to study various design choices, use cases and also behavioural pattern,” said Das.