needs to be understood here is that while businesses can be adventurous and inclined to take on greater risks in pursuit of profits and investor returns, the regulators have the responsibility to protect depositor and customer interests and preserve financial stability. the role of the regulator is to establish guardrails or a balanced framework that encourages innovation while ensuring that risks are managed prudently. 3 / 5 bis - central bankers'speeches for example, the fintech platforms often provide customers with a seamless, efficient experience. by leveraging digital public infrastructure, these platforms can reach a wider customer base, including those who previously had limited access to financial services, thereby advancing financial inclusion and empowering underserved communities. they help reducing the cost of customer acquisition as well as transaction costs. digitisation also allows banks and nbfcs to leverage data for greater insights into their customers requirements and behaviour which can be used for developing bespoke products apart from facilitating better risk management and compliance. reserve bank has been playing an encouraging role all through such initiatives. however, this digital shift also introduces risks that must be properly identified, mitigated and managed to maintain a stable and secure financial ecosystem. the integration of disparate entities delivering a digital product, often results in complex structures with overlapping responsibilities. in many instances, the actual lender may not even be visible to the borrower, despite regulatory requirements for transparency. while fintech platforms drive innovation and revenues, credit, and operational risks along with consequent losses still primarily rest with the regulated lenders who collaborate with these platforms. this can create a disconnect between the service providers and those bearing the risks, leading to potential vulnerabilities for the individual lender as well as the financial system collectively. for instance, while loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a'feet on the street'and empathetic approach. many fintech platforms operate on a business model that involves extending small - value loans to customers often times with poor credit profiles. unfortunately, this is often followed by aggressive recovery tactics, such as invading customers'privacy by accessing their contacts and personal data. these practices can seriously damage the reputation of the regulated lenders associated with these platforms. according to rbi regulations on outsourcing, even though a regulated entity may rely on third parties to perform certain activities, it remains ultimately accountable for the actions of its outsourced agents. another narrative i would like to address today

robust regulatory structure. 25. however, new entrants into the financial services space, including fintech and bigtech firms are altering the universe of financial service providers. a range of new lending platforms, including p2p and marketplace lenders, have appeared in jurisdictions around the world. highlighting some of the related challenges and opportunities, the recent annual economic report of the bank for international settlements ( bis ) states that such firms can collect large amount of data at nearly zero costs, which can be used to better assess the riskiness of borrowers and could reduce the need for collateral to assure repayment. these new players have also made inroads in the provision of payment services, remittance services and crossborder payments. moreover, they have the potential to grow very quickly and become large and systemically important financial institutions, raising concerns over financial stability and consumer protection. 26. faced with such profound changes, the policy makers ’ dilemma is more than walking the middle path between innovation and regulation. the public policy approach here needs to be more comprehensive and holistic, taking into account issues such as financial regulation, competition policy and data privacy regulation. coordination among various authorities – such as financial regulators, competition authorities and data protection supervisors – becomes critical at this juncture. 27. the reserve bank ’ s vision - 2021 for payment and settlement systems in india visualises empowering every indian with access to a bouquet of e - payment options that is safe, secure, convenient, quick and affordable. the committee on deepening of digital payments under the chairmanship of shri nandan nilekani has suggested to increase the volume of digital payments by 10 times in the next three years which can be facilitated by initiatives such as removing transaction charges on digital payments, simplifying kyc processes, and reducing kyc costs for banks. the reserve bank is taking necessary action based on the committee ’ s recommendations. concluding observations 28. at the end, i would like to highlight the significance of consumer protection which is not only important from the point of view of access but also from a broader context of stakeholders ’ trust. the trust of the consumers that the services are fairly priced, the trust of the investors that the stakeholders are acting in their best collective interest, the trust of the regulators that the audited financial statements do represent a fair and reasonable assessment of the activities of a firm – all have intangible but substantial contribution to national savings and financial stability. post 5 / 6 bis central bankers'speeches lehman