The Reserve Bank of India recently released a statement addressing the concerns of financial technology companies operating in the country. After enforcing stringent data localization norms on FinTechs operating in the country, the RBI has revised its stance.
Upon a meeting of the Commerce Minister with heads of e-commerce and technology companies, the Government released a statement regarding the norms. They announced that they were "not sure about the final shape of the (Data Protection) Bill", with the final version reflecting feedback given in the meeting.
Companies such as Mastercard, WhatsApp and many more have been working hard towards ensuring these norms, as they are required for operating in the country. What does this move represent for the future of the fintech industry?
About The Data Localization Norms
In April 2018, RBI released a notification to fintech companies regarding the storage of payment system data. Citing the growth of the payment ecosystem in India, they observed that not all of the payment service providers were storing data in India.
They went on to state:
All system providers shall ensure that the entire data relating to payment systems operated by them are stored in a system only in India. This data should include the full end-to-end transaction details/information collected/carried/ processed as part of the message/payment instruction."
This meant that all non-Indian companies operating in India needed to store their data only in the country. The RBI stated that this would be to ensure unfettered access to the payments data to ensure through regulation.
Fintechs were given 6 months to comply with the circular, with the deadline later being extended upon request for some companies. However, many companies have expressed concerns with respect to the flow of data across their world.
India Inc Speaks Up
The meeting was held on Monday and saw prominent tech and e-commerce companies attending. These included Snapdeal, Flipkart, Amazon, PayPal, MasterCard, VISA and more. In addition to the companies, the Secretary of the Department for Promotion of Industry and Internal Trade, the Secretary of Ministry of Electronics and Information and Deputy Governor of RBI attended.
Piyush Goyal, the Minister of Railways, also attended the meeting and moderated the interaction by opening up room for companies to put forward their concerns.
The meeting was held to "take their suggestions towards building a robust data protection framework that will achieve the dual purpose of privacy and innovation". The Secretary of MeitY also stated that data free flow will be an integral part of the new revision of the bill.
This comes after data flow was one of the most discussed topics in the recent G20 meets in Japan. Moreover, participants such as the National Association of Software and Services Companies (NASSCOM) also contributed to the conversation. They elaborated on the "necessity of harmony across all policies" to capitalize on the growth of India emerging as a data powerhouse.
Best Move Forward
This is sure to bring a breath of fresh air for companies who have been struggling with data localization. Primary among these is WhatsApp, whose WhatsApp Pay UPI-based transfer system is still in beta.
The reasons cited for this is a refusal to comply with the norms, with Facebook storing the data both in India and abroad. MasterCard also faced issues with clearing the norms but seemed to be well on the way to complying with them.
Data localization seemed to be an expensive endeavour for companies and also prevented the smooth flow for analytics and similar operations. The meeting is sure to enable a more comprehensive and inclusive take on data in India.
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