Barun Dey ( name changed ), a Kolkata resident, applied for a personal loan of Rs 1 lakh from a reputed non banking finance company through a fintech platform.

He needed some emergency cash and the terms of the loan seemed attractive. But it was only when the money was transferred into his wallet that he realised the catch-- he could not send it to his bank account and had to spend it only on specified services through his wallet. When he raised a complaint, the NBFC referred him to the fintech firm. A week later, Dey is still stuck with the money in his wallet.

A quick search on Twitter will show that Dey is not alone. On a daily basis, there are hundreds of complaints posted against banks, fintech and payment players - some are resolved while others are not.

While banks, NBFCs and wallet players are regulated by the Reserve Bank of India (RBI), the big dilemma is on pure play fintech players.

Many fintech firms tie up with NBFCs and insurance companies to provide easy loans and simple risk covers through their tech enabled platforms and apps. Payment companies offering Unified Payments Interface use the NPCI architecture.

To be fair, most of these players do have very responsive customer care teams who look into customer grievances and try to address them as far as possible.

“It is a dilemma globally on how to regulate fintech companies as it is felt that regulation could disturb their innovative spirit. But if they are not regulated, how are they to be managed is the question? What does a customer do?,” said R Gandhi, former Deputy Governor, RBI.

Industry experts say regulation depends on who handles the money directly. The best recourse for such customers is often to contact the bank directly or the authorised payment operator.

“Depending on whether fintech players settle, clear or otherwise handle the payment made in a transaction, would determine whether they would be subject to RBI regulation and otherwise require an RBI authorisation or license to operate,” said Aaron Kamath, Technology Law Practice Leader at Nishith Desai Associates.

Certain fintech players merely provide technology and API integration services to connect merchants with banks and authorised payment operators who process transactions between the merchant and consumer. Kamath said these fintech players should not be subject to RBI regulations.

“Though, in such cases, banks and authorised payment operators may contractually pass down certain obligations and liabilities on such fintech players. But, fintech players that operate payment systems, including prepaid instruments such as e-wallet providers would need to operate under an RBI authorisation and be subject to specific RBI eligibility criteria and regulation,” he added.

A recent RBI report on Assessment of the progress of digitisation from cash to electronic has said that overall, digital payments in the country saw a CAGR of 61 per cent and 19 per cent in terms of volume and value, respectively over the past five years.

But it has noted that the factors inhibiting the digital push are connectivity issues, inadequate acceptance infrastructure, lack of familiarity with newer, alternative payment methods as well as delay in getting complaints resolved and security and privacy concerns.

“Reserve Bank has acknowledged the same and to address these issues has put in place systems like, consumer awareness programmes, ombudsman schemes, increasing the category of billers in Bharat Bill Pay, etc,” it further said.

The RBI has also announced that it will put in place a framework for establishing an SRO for the digital payment system by April 2020 to help foster best practices on security, customer protection and pricing.

Gandhi said this will have several benefits as the RBI can’t deal with each and everybody. “It becomes a platform for communication,” he said.

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