OKCredit, Khatabook, BharatPe all are fast-growing Fintech startups. All these Fintech companie...
With the growth of start-ups in the Fintech industry, the future of fintech looks bright in India. Other factors such as penetration of mobile users, continuous build-up of digital networks and streamlining of financial processes in many industries have played a massive role in its expansion. Hence in this article, we shall discuss some of the legal requirements and compliances for a Fintech Startup in India.
Fintech refers to Financial Technology. It is an organization who through the digital medium, provide financial assistance, planning and management services to other organizations/companies and individuals. Fintech leverages the use of technology to enhance or automate financial services and processes.
Services provided by different types of online finance companies
There are certain legal requirements and compliances which should be fulfilled by the Fintech startup in India. They have been enumerated below:
The first step for a fintech startup is to determine the business structure. As a Fintech Startup, you can opt for any of the following business structure:
An online finance business or a fintech startup should register for GST and get GSTN for the business.
One should get certain legal documents to start a fintech startup. An advocate can help you draft customized legal documents as per your business requirement. Some of the contracts and agreements are as follows:
Intellectual Properties such as Copyright, Patent, Trademark and Design should be obtained. It will help in protecting your brand, website, mobile app etc. By registration, you will possess the right to seek remedy in case of IP infringement.
Licensing and regulation will depend upon the type of service provided by the Fintech Startup in India.
A technology based company would want to have their presence on the internet therefore, it is a must to have a domain name and a fully developed website. If you are a small start-up, then consider setting up a mobile app.
There are a slew of compliances required for fintech. To classify a startup in any one category would be a complex task as most of them provide an array of services. In this segment, we shall look at compliances for Fintechs.
Fintech companies operate on the internet therefore, they must comply with the directions set out in the Information Technology Act 2000. These companies rely on the individuals’ personal data therefore, to prevent legal complications, they are required to follow specified data security requirements.
Corporate bodies should get permission from the information provider to disclose any personal confidential data. Further, they must maintain security control structures and follow information security protocols. Certifications like IS, ISO and IEC 27001 are included.
With the advent of Fintech players, traditional financial market has been disrupted greatly. As they use modern technologies for providing financial services, their objective of financial inclusion is targeted. However, certain uncertainty with respect to regulations, customer mistrust and lack of a large customer base have caused complications to certain extent. There have been times when fintech players have been forced to adapt to the regulations that were designed for traditional financial institutions. However, the attitude of regulators is expected to change towards the fintech industry. If you are planning to start a fintech startup in India, then you should be aware of these information.
Read our article:Fintech and NBFC: Key differences