The growth of big techs has led to the rise of regulatory collaboration that necessitates clear demarcation of responsibilities over such business entities, the latest report on currency and finance released by the Reserve Bank of India has suggested. The report also raised concerns over digital financing and said that if went unchecked this could lead to volatility issues.

“Since FinTech unbundles services across a wide number of domains, it is necessary to clearly demarcate responsibilities of various regulators over relevant aspects of the business entity and to ensure the existence of adequate avenues for regulatory collaboration,” the report stated. “This may be done with the overarching goal of facilitating innovation through competitiveness, while ensuring a level playing field.”

The report also highlights that with increasing dominance of BigTechs in digital payments, there could be an acceptance of data-fueled oligopoly for cheap services. Though, digital literacy and healthy competition could alleviate some of these concerns, and hence there is a need for re-aligning incentives to foster smaller, more innovative firms.

The report on currency and finance also red-flagged the need to restrain the unchecked growth of digital financing.

“Since digital lending mainly originates from debt and equity rather than from deposits, digital lenders’ supply of funds could be more procyclical and volatile due to lack of standard credit guidelines,” it stated. “Further, credit activity outside the prudential regulation space could render credit-related countercyclical policies less effective.”

Over the past few decades, India has witnessed a remarkable growth in its digital ecosystem, supported by a robust policy foundation, expansion of smartphones, internet coverage, digital literacy, as well as proactive participation by the private sector. With the proliferation of digital payments concerns over data privacy have risen especially due to absence of adequate legislation and demarcation of statutory rights and obligations of service providers and other stakeholders.

“As the Indian population becomes data-rich with increasing internet and mobile coverage, the next challenge might be empowering consumers through adequate legal and regulatory support,” it stated.