Learning Objectives:

  • Understand the regulatory landscape for digital banking.

  • Explain the role of RegTech in compliance.

  • Identify global FinTech regulations.

7.1 Regulatory Framework for Digital Banking
Digital banking is governed by a complex regulatory framework . Key elements include:

  • RBI’s Digital Lending Guidelines (2022) : Fair practices, data privacy, and transparency .

  • KYC/AML Procedures: Digital identity verification (e-KYC, Video KYC) for customer due diligence .

  • Digital Payment Regulations: Rules for payment systems, tokenisation, and transaction limits .

  • Outsourcing Guidelines: RBI’s framework for managing outsourced functions to FinTech firms .

7.2 RegTech and Compliance Technology
Regulatory Technology (RegTech) refers to the use of technology to facilitate compliance with regulatory requirements . Key applications include:

  • Automated Compliance Monitoring: Real-time tracking of regulatory changes .

  • KYC/AML Automation: Automated identity verification and transaction monitoring .

  • Regulatory Reporting: Automated generation and submission of reports to regulatory bodies .

7.3 Global FinTech Regulations
Regulatory frameworks vary across jurisdictions. Examples include:

  • PSD2 in Europe: A directive that mandates open banking and strong customer authentication .

  • FinTech Sandboxes: Regulatory sandboxes that allow FinTech innovations to be tested under regulatory supervision (e.g., RBI’s Sandbox Approach) .

  • Cross-Border Compliance: Challenges of operating in multiple regulatory environments .

 
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