Over the last few years, the financial services industry has seen the emergence of many fintech startups, and the launch of innovative products, especially in the consumer ecosystem.
At the same time, threats related to cyber security have also risen. Reserve Bank of India Deputy Governor T. Rabi Sankar says it is paramount that fintech firms ensure robust cyber security measures given the huge amounts of financial data that these companies now have.
"The reliance on digital platforms also amplifies vulnerabilities to cyber threats and data breaches. As fintechs amass sensitive financial data, ensuring robust cyber security measures and maintaining data privacy becomes paramount to safeguarding consumer information and financial systems," Sankar said in his address at the Global Fintech Fest in Mumbai.
He further said the rush to roll out new products and services could potentially undermine market integrity and compromise customer protection.
"Therefore while fintech innovation holds immense promise, a balanced evolution where innovation is responsible and inclusive is essential for sustained positive impact of fintechs on financial services," said Sankar.
He said self-regulation was the way to go about it.
"Fintech entities are not strictly financial entities. So, the regulation approaches and the models of regulations that currently exist may not apply in their entirety for fintech firms. So, regulators as well as fintech firms are learning to evolve this arrangement where regulators need to know what needs to be regulated and to what extent. Fintech firms need to know the priorities of regulation and how do I ensure the products I develop will remain compliant as we go forward. The solution for that at least to begin with is self-regulation," he said.
He said self-regulatory bodies (SRO) could play a pivotal role in the fintech industry by promoting responsible practices and maintaining ethical standards.