How RegTech can transform India’s Fintech industry

By Amit Tyagi, CEO, Payworld

India’s Fintech industry has grown rapidly in recent years and is now one of the world’s leading centers of Fintech innovation. However, the industry is still relatively young and fragmented, and faces many challenges in terms of regulation and compliance. Pegged at $31 billion, India’s fintech market ranks third in the world, behind only the US and China, and analysts at Inc42 are betting that the market opportunity will be over $1 trillion by 2025. India’s fintech adoption rates are also some of the highest in world, at 87% compared to the global average of 64%.

RegTech, or regulatory technology, is a new significant subset within the FinTech ecosystem that offers solutions to the challenges in the regulatory and compliance segment of the Fintech industry. It develops innovative technologies to help financial institutions comply with regulations more effectively and efficiently with regulations. RegTech has the potential to transform the Fintech industry in India by making it more efficient and effective. It can help financial institutions save time and money by automating compliance processes. The implementation of RegTech in the Fintech industry in India is still at an early stage. However, it has the potential to revolutionize the industry and make it more efficient.

The global regtech market is expected to grow from USD 5.46 billion in 2019 to USD 28.33 billion by 2027 at a CAGR of 22.3%. A recently released RegTech Market analysis report from Future Market Insights shows that the global sales of RegTech Market in 2021 was held at USD 8.2 billion. with 16.2%, the projected market growth during 2022 – 2032, the market is expected to reach a value of USD 45.3 billion by 2032. Cloud deployment based RegTech is expected to be the highest revenue generating category, projected to register a CAGR of 15 .8% during 2022 – 2032. There are some trends that are likely to be observed in the coming months and blockchain is going to be the leading technology driving the RegTech revolution.

Below are some ways RegTech can transform the Indian Fintech industry:

Improved security and prevention of fraudulent activities
Over the past four years, digital payment transactions have grown manifold from 3134 crore in FY 2018-19 to 5554 crore in FY 2020-21. With the addition of RegTech in the FinTech sector, we have clearly witnessed the rise in fraud prevention which is a key factor in the rise in digital payments over the years. The use of Regtech solutions in the FinTech industry helps them improve security, which helps them gain trust from their customers. This is because Regtech can provide a way to verify and validate financial transactions in real-time, meaning any suspicious or fraudulent activity can be detected and prevented immediately. Since the pandemic, we have also witnessed a huge increase in online transactions and RegTech has definitely helped financial companies serve their customers with increased security. “RegTech is a win-win for FinTech as the financial institutions get more and more satisfied customers; clients receive better service; and regulators get a more stable, regulated market, with more effective enforcement.

Automation of compliance
Numerous RegTech companies are now using agile and exploring the potential for advanced analytics and assessment methods to begin to “learn” and help accelerate the evaluation of new and future laws based on what has been observed in the past and how it has been interpreted. One area that has seen a significant change is compliance automation. There are a number of compliance-related tasks that can be automated, from the initial identification of risks to the ongoing monitoring of transactions. This can help fintech companies save time and resources, and reduce the risk of human error. Automated compliance can also be used to flag potential risks and provide alerts when unusual activity is detected. Automation of compliance is a major trend in the fintech industry, and one that is likely to continue to grow in the coming years.

Improved customer experience
By making compliance easier, RegTech can help improve the customer experience, making them more likely to use Fintech products and services. There are several reasons why improved customer experience helps the fintech sector. First, it helps build trust between fintech companies and their customers. Second, it makes it easier for customers to use fintech products and services. Finally, it helps create a more positive reputation for the fintech sector as a whole. Improved customer experience therefore plays a key role in the success of the fintech sector. This is likely to continue in the future as fintech companies continue to invest in customer experience.

The Reserve Bank of India (RBI) continues to announce new frameworks and regulations, from time to time, to conduct proper due diligence and ensure ethical and fair business conduct. Recently, RBI announced some regulatory guidelines for KYC update, loans and complaint registrations. But so far, RegTech solutions have mainly been focused on KYC (know your customer) and AML (anti-money laundering) compliance. Therefore, the regulatory environment is still relatively nascent, and there is uncertainty around many of the rules and regulations. This is where RegTech can help by using technology to automate compliance, improve data management, improve security and offer greater transparency to customers.