Exploring the Regulatory Contexts of Fintech Innovation for Financial Inclusion

Abstract

Innovation is a crucial growth driver for the financial services sector. Digital financial technologies or fintech are the latest innovation in this space. The growth and proliferation of fintech technology and the entry of non-finance technical firms are transforming this sector resulting in new business models, processes, and products. Their application is still at a nascent stage and while there are success stories, there are also issues in widespread use both globally and in India. This has left the governments and regulators in a dilemma about how to counter the newly emerging risks without disrupting their innovation potential. The regulation is also evolving. The challenges in regulation relate to cyber security, data protection, and consumer protection. In this chapter, we discuss the emerging forms of fintech policy regulation and challenges with special attention to distributed ledger technology. The study also provides a case study of Indian fintech regulation to demonstrate the evolution of fintech regulation and the emerging policy challenges. We also discuss the introduction of regulatory sandbox models in the Indian context.