Indian fintech startups grappling with KYC, data use norms: VCCircle FinServ Summit
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Firms in India’s nascent financial technology (fintech) segment are waiting for further clarity on know-your-customer (KYC) norms as well as rules for customer data access and use, according to panellists at the VCCircle FinServ Summit 2019 held on Wednesday in Mumbai.

The summit that attracted CEOs of top private lenders and insurers among others in the ecosystem had a separate chapter on the business of fintech. Discussions began with an address by Maharashtra fintech officer Suniti Nanda, who said that while the country already had two unicorns (startups valued at $1 billion or more) from the segment -- Paytm and PolicyBazaar -- fintech is an opportunity in the middle of a perfect storm.

To this end, the state administration has experimented with programmes including platforms for access to capital and bringing together academic institutes and industries. Nanda called on companies in the category to collaborate with each other and the government, saying that this was “no time to work in a silo”.

Following her address, panellists at the first discussion, which concentrated on the business-to-business space, agreed with the fact that a lot of infrastructure had been put in place to achieve the technological stability required for fintech companies to operate. Sarvatra Technologies founder and vice-chairman Mandar Agashe said technology was the key factor in defining the development of the space.

However, as Shardul Amarchand Mangaldas partner Shilpa Mankar Ahluwalia pointed out, companies are still seeking further regulatory clarity on KYC and data use, even as positive signs appear for the former.

It is the right time for the Reserve Bank of India to think of a model where a company can deliver financial products without the need for a face-to-face KYC element, Ahluwalia said. On data, she added that firms are looking at three key principles introduced in draft legislation: limitations around the consent to access data, storing this data and the purposes for which this data will be used.

Indifi Technologies co-founder and chief executive Alok Mittal said that companies are seeing an increasing formalisation of data, which is also helping them to serve customers who were either previously out of reach or underserved. However, he added that while developments on the demand side for such services were very encouraging, the supply side of lending was evolving very slowly.

Separately, Vivriti Capital founder and managing director Gaurav Kumar said the space was also witnessing a focus on asset quality and profitability, and even though there had been a blip in terms of the cost of funds, good-quality companies were continuing to attract capital.

The second discussion focused on the business-to-consumer side of the industry. Bhaskar Dasgupta, the associate director of the financial services regulatory authority of Abu Dhabi Global Market, said that for the space, there is a need for very long-term and patient capital as well as a stable regulatory environment that has the flexibility to handle new business models.

There is also a need for companies in the sector to reimagine fintech as the ownership of a product or service, with a focus on building extremely customisable products at an individual level, LoanTap co-founder and chief executive Satyam Kumar said.

To this end, companies must utilise data analytics methods and categorisation for their services, especially underwriting. However, they must also diversify and not just concentrate on one vertical because of the size of the market, Kumar added.

Other panels at the FinServ summit concentrated on the liquidity crunch in the non-banking financial company space, as well as the emerging picture in the insurance sector. Tata Capital managing director and chief executive Rajiv Sabharwal also gave they keynote at the conference, saying that well-capitalised NBFCs with an established parentage, strong governance and good-quality books have fared better than companies that have not taken measures to protect themselves during a down cycle.

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