{"id":5466,"date":"2021-05-24T10:15:08","date_gmt":"2021-05-24T10:15:08","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=5466"},"modified":"2021-05-24T10:15:11","modified_gmt":"2021-05-24T10:15:11","slug":"fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/","title":{"rendered":"Fintech Startups Striving to Get NBFC License Despite Numerous Challenges"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The\nfull form of Fintech is Financial Technology, which involves traditional\nfinance business through the P2P Model, asset management, crowdfunding, and\nmobile payments loan. Precisely, such companies don\u2019t fit with the legal\nmeaning of a band, as prescribed under the Companies Act, 2013. Extensive\ninternet diffusion and the wave of digitization have led to the growth in\nFintech sector financing from venture capitalists. The beginning of the <strong><em>UPI\nor Unified Payment Interface <\/em><\/strong>platform has amended the way we looked at\nthe traditional finance and payment services. <\/p>\n\n\n\n<p>Full digitization of banking services could be the next massive Fintech area because it obeys extraordinary growth. However, it could be easy for Fintech Startups to wander on that path with ease. Unified Payments Interface is an online payment system that provides inter-bank transactions. The <strong><em>National Payments Corporation of India (NPCI) <\/em><\/strong>advanced this system, and the RBI is the one who manages it. In this blog, we discuss about the Fintech Startups striving to get NBFC License despite numerous challenges.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a54d81898f65\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a54d81898f65\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Why_Some_Fintech_Startups_needs_an_NBFC_License\" title=\"Why\nSome Fintech Startups needs an NBFC License?\">Why\nSome Fintech Startups needs an NBFC License?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Highlighting_the_Capability_of_Fintech_Entities_to_Become_a_Full-Fledged_NBFC\" title=\"Highlighting\nthe Capability of Fintech Entities to Become a Full-Fledged NBFC\">Highlighting\nthe Capability of Fintech Entities to Become a Full-Fledged NBFC<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Capability_to_Revitalize_Conventional_Banking_System\" title=\"Capability to Revitalize Conventional\nBanking System\">Capability to Revitalize Conventional\nBanking System<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Capacity_to_Provide_Various_Services\" title=\"Capacity to Provide Various Services \">Capacity to Provide Various Services <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Right_to_Use_Alternative_Data_Sources_and_Current_Technology\" title=\"Right to Use Alternative Data Sources and\nCurrent Technology\">Right to Use Alternative Data Sources and\nCurrent Technology<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Present_Challenges_for_Fintech_Startups_to_work_as_a_Full-fledged_NBFC\" title=\"Present\nChallenges for Fintech Startups to work as a Full-fledged NBFC\">Present\nChallenges for Fintech Startups to work as a Full-fledged NBFC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Implantation_of_Strong_KYC_Consumer_Complaint_Mechanism_%E2%80%93_Fintech_Startups\" title=\"Implantation\nof Strong KYC &amp; Consumer Complaint Mechanism \u2013 Fintech Startups\">Implantation\nof Strong KYC &amp; Consumer Complaint Mechanism \u2013 Fintech Startups<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/fintech-startups-striving-to-get-nbfc-license-despite-numerous-challenges\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Some_Fintech_Startups_needs_an_NBFC_License\"><\/span>Why\nSome Fintech Startups needs an NBFC License?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are several entities or companies in India that are quickly consolidating their existence in the Fintech sector. All such companies in India are now RBI to obtain their <a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\"><strong>NBFC License<\/strong><\/a>. As per many experts, the reason behind this is to preserve the loan books rather than sharing the profit with the partner.<\/p>\n\n\n\n<p>The permit of NBFC License to such entities or firms will affect the process of loan disbursal and capital cost. However, it will decrease the capital cost and speed up the loan disbursal process. As per some industry experts, this will aid to restrain deceptive activities using technology and scale-up.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Highlighting_the_Capability_of_Fintech_Entities_to_Become_a_Full-Fledged_NBFC\"><\/span>Highlighting\nthe Capability of Fintech Entities to Become a Full-Fledged NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Fintech\nis the current approach to financial services. Since such companies or entities\nleverage the updated technology, they have more capability to provide quality\nservices to the users. Below are some pros of Fintech companies that make them\nfit entirely to work as a full-fledged NBFC in India.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Capability_to_Revitalize_Conventional_Banking_System\"><\/span>Capability to Revitalize Conventional\nBanking System<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Fintech\nhas been oscillating robustly in the Indian Financial space since its\ninception. They have also become a vital part of the Government&#8217;s vision\nconcerning financial inclusion. Owing to its supreme capability to revitalize\nthe conventional banking system, the Fintech space is now gathering popularity\nin the section of lending, asset management, deposits, and credit system. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Capacity_to_Provide_Various_Services\"><\/span>Capacity to Provide Various Services <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Currently,\nsuch companies are taking full benefits of the updated technologies to alleviate\nchallenges and build products like enterprise automation for fraud detection,\naccounting, last-mile reach &amp; delivery, alternative credit models, treasury\nand reconciliation for private lenders, and regulatory compliance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Right_to_Use_Alternative_Data_Sources_and_Current_Technology\"><\/span>Right to Use Alternative Data Sources and\nCurrent Technology<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Conventionally, lenders shined on the one size suitable to all approach, estimating all types of clients against standard credit policy. Such an approach is excluding an enormous population of capable customers. With Fintechs adopting AI combined with ML, it becomes simple to provide personalized services to the customers. Under the control of alternative data sources, Fintech has the capability to take a right and quick decision, exceptionally in the case where the creditworthiness of the clients is in question.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Present_Challenges_for_Fintech_Startups_to_work_as_a_Full-fledged_NBFC\"><\/span>Present\nChallenges for Fintech Startups to work as a Full-fledged NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following is the list integrates the possible loopholes that are considered as the major problem for the growth of new Fintech entrants:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"640\" height=\"171\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-29.png\" alt=\"growth of new Fintech entrants\" class=\"wp-image-5467\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-29.png 640w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/05\/image-29-300x80.png 300w\" sizes=\"(max-width: 640px) 100vw, 640px\" \/><\/figure><\/div>\n\n\n\n<ol><li><strong><em>Existence of Severe Compliances<\/em><\/strong>:\nSeveral laws and regulations in India give to the slow-down of Fintech startups\nin the financial markets. Not only such laws are strict; however, they have\nalso dispiriting Fintech players from creating their way into the Indian\nmarket. Compliance laws exist as a provisional regulatory framework to\nalleviate deceptive activities. However, unhappily, new Fintech entrants are\nfinding them as the biggest obstruction in the trail of growth. There is a\nbroad list of compliances that Fintech startups require to fulfil before\ncommencing their operation.<\/li><li><strong><em>Delicate Recovery Protocol<\/em><\/strong>:\nMost Fintech startups may find it very difficult to create strong management\nfor credit recovery. Regulating a continual connection with credit seekers for\npremium payment seeks raw professionalism and a correct code of conduct, which\nis something quite intimidating to maintain.<\/li><li><strong><em>Existence of a Huge Unbanked\nPopulation<\/em><\/strong>: At present, the enormous portion of\nIndian population lack access to proper banking services that makes them based\non the cash transaction instead of digital purchases. A government enterprise\nsuch as <strong><em>Pradhan Mantri Jan Dhan Yojana<\/em><\/strong> has tried to repair that\nloopholes to some extent; however, that too remained largely unproductive owing\nto low-interest infiltration and literacy levels. Catering<\/li><li><strong><em>Data Breaching<\/em><\/strong>:\nMost Fintech entities have a great quantity of client data to deal with.\nRegularly observing and protecting such data against a possible cyber threat is\na supreme challenge for such companies. Any loopholes in this regard could\noutcome in enormous financial losses at the time of online transactions. Hence,\nensuring end-to-end encryption to client\u2019s data is a primary concern for the\nnew Fintech entrants.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Implantation_of_Strong_KYC_Consumer_Complaint_Mechanism_%E2%80%93_Fintech_Startups\"><\/span>Implantation\nof Strong KYC &amp; Consumer Complaint Mechanism \u2013 Fintech Startups<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Establishing a <strong>KYC (Know Your Customer<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Know_your_customer\" class=\"text-primary\"><strong>[1]<\/strong><\/a><\/sup><strong>)<\/strong> and customer compliant mechanism would add to the adversity of these companies. Also, it seems such companies or entities would have no influence over the client&#8217;s bank account, charges &amp; fees that the bank administers. Since such firms will work as technology participant, they might not have access to all banking services.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is no refusing that Fintech Startups are playing a crucial role in transforming the financial services of India. Nowadays, many Fintech startups have combined with Banks and leveraged their <strong><em>APIs or Application Programming Interface<\/em><\/strong>. While playing such actions, these entities are under the duty to stay in line with current regulations. By doing business, the Government of India may quicker or later decide to increase the digitization of banking services, and that is the only thing that keeps the expectations of many concerned Fintech entrants live.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/housing-finance-company-and-nbfc-its-exemptions-filing\/\">An Overview of Housing Finance Company and NBFC: Its Exemptions &#038; Filing\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The full form of Fintech is Financial Technology, which involves traditional finance business through the P2P Model, asset management, crowdfunding, and mobile payments loan. Precisely, such companies don\u2019t fit with the legal meaning of a band, as prescribed under the Companies Act, 2013. Extensive internet diffusion and the wave of digitization have led to the [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":5473,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58],"tags":[659],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5466"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=5466"}],"version-history":[{"count":12,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5466\/revisions"}],"predecessor-version":[{"id":5480,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/5466\/revisions\/5480"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/5473"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=5466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=5466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=5466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}