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UK fintechs want to enter Indian start-up sandboxes

Peter Estlin, Lord Mayor of the City of London, was on a tour of India last week to convince local regulators and companies to allow UK-based fintech companies to operate in IndiaPremium
Peter Estlin, Lord Mayor of the City of London, was on a tour of India last week to convince local regulators and companies to allow UK-based fintech companies to operate in India

  • Peter Estlin, Lord Mayor of the City of London, speaks about the city’s interest to allow its fintech firms to operate in foreign markets and 'allow for a cross-fertilisation of ideas'
  • India and the UK have been among the top five investors in each other’s economies since 2010

Mumbai: India's financial regulators want to encourage innovation in the fintech space by allowing start-ups to experiment in "sandboxes" that will offer them temporary regulatory protection. As regulators like RBI and SEBI develop the framework for these sandboxes, UK-based fintech start-ups now want to be allowed into these sandboxes as well.

Peter Estlin, the Lord Mayor of the City of London, was on a tour of India last week to convince local regulators and companies to allow UK-based fintech start-ups to be incubated in India. As Lord Mayor, Estlin presides over the governing bodies of London’s central business district. In an interview with Mint, he spoke of the City’s interest in its fintech companies operating in foreign markets that would “allow for a cross-fertilisation of ideas".

As Indians get more comfortable with making financial transactions online, the domestic fintech industry, which facilitates this, is growing at breakneck speed. The industry is projected to generate revenues of over $2 billion in 2020. Fintech can be found everywhere – from peer-to-peer lending platforms crowdfunding to mobile banking, online payments and insurance technology. The sector saw deals worth more than $1.8 billion in 2018 and $300 million in the first half of 2019, according to a KPMG report.

“As regulators and state governments here set up sandboxes for fintech companies, we are working with them to open the sandboxes to international fintechs as well," the Lord Mayor said.

Sandboxes are regulatory safe havens created for start-ups to operate in. They allow live-testing of new products or services on real customers in a controlled environment. If these experiments are successful and the firm grows to a pre-determined scale, they exit the sandbox to operate in the open market under full regulatory supervision. Regulators such as SEBI, IRDAI and RBI are setting up the framework under which such sandboxes will operate in India.

“One of the successes of the City of London is that nearly half of its fintech companies operate internationally," the Lord Mayor said. “So this creates a richer product set with a much broader set of perspectives.

“For India, given the scale of the market, the international aspect is not as important but (local firms) can still draw on these capabilities and see what is relevant to this market. We want regulators to open markets in a structured way to allow international fintech companies to operate in the sandboxes here."

UK-based insurance platforms Agvestoa and Aon, fintech companies Asset Vault and Greensill Capital and digital documentation firms iProov and Onfido were part of the delegation to India. The team met members of NITI Aayog, the Maharashtra Fintech Hub, Development Credit Bank and private companies including Paytm, GIC and Standard Chartered.

India and the UK have been among the top five investors in each other’s economies since 2010. According to data from the British Office of National Statistics, UK’s foreign direct investment into India grew by 9.7% in 2017, valued at £14.4 billion, while Indian FDI in the UK the same year stood at £7.5 billion.

“We encourage British businesses to expand to new markets and for businesses in other markets to look at London as a port of their expansion," Lord Mayor Peter Estlin said. “We want growth businesses to access capital markets and international services. One of the businesses we have brought this time is Aon, a reinsurance platform. Clearly there is domestic reinsurance capability but Aon can look at supporting reinsurance at the scale of catastrophic risks or flood risks. We’re looking at how businesses like Aon can tap into the ecosystem here."

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