Fintech Market Overview

This article does not constitute legal advice.

Payment services in India

Fintech Software

Payment services (defined as clearing, payment or settlement services) are regulated in India by the RBI under the Payment and Settlement Systems Act (PSSA). Certain services of payment system operators, such as those providing prepaid payment instruments, ATM networks, clearing and settlement infrastructure, money transfers and card network operations, are required to obtain an authorisation under the PSSA and comply with the operational directions prescribed therein. However, as discussed above, a bulk of the fintech innovation in the payments space in India is taking place on the technology side, falling outside the direct regulatory ambit of the PSSA.1

The National Payments Corporation of India (NPCI) has issued regulatory and technical guidelines for each of its products (such as the Unified Payments Interface (UPI) and RuPay). The UPI is a payment system that powers multiple bank accounts into a single mobile application, thus merging several banking features. This payment system can be integrated with third-party applications such as Google Pay and WhatsApp Pay, for digital transactions. However, there have been concerns on misuse of data collected through UPI-based systems and representations have been filed in the Supreme Court of India, seeking directions from the apex court for use of such data in line with the applicable privacy and data protection norms.1

To address concentration risk with the NPCI dominating the growing digital payments space, the RBI has introduced a framework for authorisation of a 'new umbrella entity' (NUE). The NUE will primarily focus on new payment systems, methods and technologies (especially in the retail space), as an alternative to the NPCI. Although several stakeholders have applied for licences, which are still pending with the RBI, the very need for setting up the NUE framework has been called into question by a group of Indian and global unions and associations on grounds such as competition risk, the privatisation of digital payment infrastructural platforms, the potential for abuse of the data of users and the drawbacks of granting licences to multinational corporations and giants.1

Recognising the crucial role of intermediaries in online payments (in particular, their involvement in handling funds in the transaction flow), the RBI has introduced a few changes to its guidelines regulating the activities of 'payment aggregators' in India, which are intermediaries that facilitate merchants to accept various payment instruments from their customers. These changes include restrictions on storage of card data, along with introducing new measures for tokenisation of card data.1

Cryptocurrencies in India

Fintech in India

Fintech in other countries

  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/india
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