Role of FinTech in Simplifying Business Compliance: Insights from SEBI Chairperson at Global FinTech Fest 2024 At the Global FinTech Fest 2024, Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), shared her vision on how FinTech can play a transformative role in simplifying business operations and regulatory compliance

In her keynote address at the Global FinTech Fest, Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (SEBI), elaborated on the relationship between technology, regulation and the ease of doing business, especially within the rapidly evolving financial sector. Buch began by addressing the inherent complexities in business, likening them to the tangled strands of a rope. She emphasised that while businesses are multi-faceted, the key to success lies in weaving these facets together in a manner that is not only strong but also simple to navigate. She pointed out that the role of technology in achieving this balance is crucial and while regulatory compliance is often seen as a hurdle, in reality, it is essential for protecting the interests of consumers and investors, thereby fostering trust in the system.

Buch stated, "When SEBI launched a concept called small and medium REITs (real estate investment trusts), we saw that the response from the industry was very, very positive. They wanted to be regulated. They were operating in an unregulated environment, and they were suffering from the fact that investors did not have faith and trust in their products and services, because it was unregulated. They weren't sure that the organisations would follow any rules. So when we proposed that we will bring a framework for small and medium REITs, the industry actually said we would like to be regulated, we would like compliances because that is what will foster trust in the system and will facilitate growth. So compliance is important not just for the investor but also for the business. Both of them benefit from the requirement of protection of the consumer."

Regulation and compliance are often perceived as constraints on business innovation. However, Buch argued that they serve a fundamental purpose, protecting the rights of consumers and investors. In a market where large corporations wield significant power, regulations level the playing field, ensuring that small investors and consumers are not disadvantaged. She cited the positive response from the industry to SEBI's introduction of small and medium sized Real Estate Investment Trusts (REITs) as an example of how regulation can actually boost business by instilling trust and confidence among investors.

Standardisation for innovation

A significant portion of Buch's address was devoted to the importance of standardisation in promoting low-cost innovation within the FinTech industry. She highlighted the extensive market infrastructure in India, ranging from stock exchanges to depositories, and the challenges posed by a lack of standardised data and API formats. SEBI has been working on standardising these formats to reduce the cost of innovation and facilitate easier integration for new FinTech players. This standardisation has already yielded positive results, enabling a wave of innovation across various financial segments, including mutual funds, bonds and alternate asset classes.

"What we have been working on is to standardise. Whether you are talking to NSE, BSE or MCX, it should be the same file format so that your cost of innovation comes down. Whether you're talking to CDSL or NSDL, it should be the same API structure so that your cost of innovation comes down. So we've been working very hard at making sure that standardisation happens in our market ecosystem to encourage low-cost innovation in terms of fintech," she explained.

Leveraging technology for enhancing market efficiency

Buch also discussed SEBI's internal efforts to enhance market efficiency and reduce the time required for approvals, particularly for initial public offerings (IPOs). She noted that SEBI has been closely monitoring the ageing of IPO applications and has made significant strides in reducing the backlog. By leveraging technology, including AI, SEBI aims to further expedite the approval process and ensure that businesses can capitalise on market opportunities without unnecessary delays.

Buch added, "Compared to when we started tracking in March of 2022, we had a very large number of IPO papers pending more than three months, today we have just eight. Most of those are really in the realm of where there is either a judicial intervention or there is a regulatory approval from another fellow regulator which is why they are still pending at our end. So this effort on our part will continue and we need to facilitate that SEBI does everything it can to speed up approvals. The objective is to bring down the ageing now we have about almost a dozen projects using AI, which are in the works in SEBI. Half of those are ones which will speed up our approval process, and half of them are the ones that will speed up our supervision process."

Beyond market operations, Buch emphasised SEBI's commitment to simplifying compliance. SEBI has set up 16 working groups to explore how compliance requirements can be made more manageable for businesses. The regulator has also embraced technology to automate consultation processes, enabling more extensive and efficient feedback collection. This has allowed SEBI to stay responsive to industry needs and adjust regulations in a way that supports both innovation and compliance.

In closing, Buch envisioned a future where compliance becomes a seamless, almost invisible part of business operations, much like the act of breathing. "We're not having to think about breathing. We're just breathing. There is an in, there is an out, that's the real capability of our entrepreneurs, of our industrialists, of our entire economy; really focused on growing the country and delivering services to its citizens. Compliance should just become this low hum in the background," she explained.

By continuing to integrate technology, particularly APIs and automated reporting systems, SEBI aims to ensure that compliance is no longer a cumbersome process but a 'low hum' in the background, allowing businesses to focus on growth and innovation.