Testing ground for fintech a game changer or a work in progress? RBI's sandbox move divides industry

MUMBAI: High-street lenders are divided on the central bank’s regulatory sandbox programme, with backers calling the initiative a game changer even as others seek more operational clarity to ensure the experiment helps them keep pace with rapidly changing technology.Private lender Kotak Mahindra Bank said that the sandbox will create a perfect collaboration opportunity with startups to test emerging solutions such as video KYC and alternative data-based lending models. Payments major Visa believes the initiative would accelerate India’s digital economy dream.“The RBI’s Regulatory Sandbox framework is a welcome move that will help accelerate our journey toward a digital economy,” T R Ramachandran, Visa’s group country manager, told ET. “Payment innovations are destined to transform the way we interact, shop and pay and the regulatory sandbox will provide the perfect platform for such payment innovations to be tested in a controlled environment.” Others such as Bank of Baroda are in the process of analysing how the programme would add value to their already operational startup initiatives before they decide on participation.“The RBI is too late (in rolling out the guidelines),” Papia Sengupta, ED, Bank of Baroda, said jokingly, responding to ET’s query at a recent press event. “We have tied up with IIT in setting up an incubation programme where we are collaborating with young startups…We’ll discuss internally and decide whether to participate (in RBI’s sandbox) based on what benefits it’ll provide.”As per the final enabling guidelines placed in public domain on August 13, the sandbox would function in five stages over a period of six months where representatives from the regulators would scrutinise the solutions.“It takes away some amount of uncertainty between ideation and launch for start-ups, banks and regulators to understand risks associated with a new product,” said Deepak Sharma, chief digital officer, Kotak Mahindra Bank.Some players, however, believe that lack of operational clarity may deter both smaller startups and established players from participating in the programme.“One major area of concern is that there is no clarity on the next steps, growth or implementation roadmap once a company tries/ tests and exits the sandbox,” according to Sampad Swain, CEO, Instamojo. “Some of the cohorts may build an extremely successful product, but after exiting the Regulatory Sandbox, might not have the relaxation of regulations to continue the product in the larger picture.”The RBI has also made it clear that any losses incurred by the customers during the time of testing would be borne by the liable participant. These companies have also been mandated to take compulsory insurance cover to apply in the sandbox.“These additional costs would make it harder for fintech start-ups to get approvals from their boards,” said Vikas Kumar, CTO, LoanTap.

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