I put this question to every fintech founder I speak with: when did a compliance gap last cost you a deal, hold up a banking partnership, or keep your team working late into the night? The response is nearly always the same. They chuckle, and then share a story.
It typically unfolds like this: a large enterprise client sends over a 300-question security questionnaire with a three-week turnaround. Half the responses require supporting evidence in formats nobody has prepared before. The compliance lead, a couple of engineers, and a product manager vanish into a documentation black hole for an entire month. They pull it off, just barely.
Then the next questionnaire lands. This is the unspoken operational reality of building a fintech in India in 2026, and almost nobody discusses it openly.
By any standard, India’s fintech story is remarkable. The nation ranks as the world’s third-largest fintech ecosystem, with over 10,000 registered players, an adoption rate of 87 percent compared to a global average of 67 percent, and a market expected to surge from $111 billion in 2024 to $420 billion by 2029. Yet beneath all that ambition lies a structural problem that compounds quietly, one deal and one audit at a time — until suddenly it is no longer a quiet issue.
Fintechs don’t face one regulatory challenge. They face five.
When regulation in Indian fintech comes to mind, most people picture the Reserve Bank of India (RBI), and for good reason. Its rules covering payments, digital lending, know-your-customer (KYC) norms, and data localisation affect virtually every fintech operating today.
In 2024 alone, the RBI imposed over ₹56 crore ($5.9 million) in financial penalties across more than 300 enforcement actions, making it clear that the days of relaxed oversight are firmly over. But the deeper issue is that a growing fintech in India doesn’t answer to a single regulator. It answers to several, all at once.
Layer in insurance distribution and the Insurance Regulatory and Development Authority of India (IRDAI) steps in. Offer investment products and the Securities and Exchange Board of India (SEBI) rules come into play. Partner with a non-banking financial company (NBFC) for embedded lending and an entirely separate set of credit-side frameworks pile on.
Handle card payments and the Payment Card Industry Data Security Standard (PCI DSS), now in its most rigorous version to date, sets the floor. Go cross-border and you’re contending with compliance obligations in Singapore, Abu Dhabi, or the US, depending on the corridor. For fintechs operating across multiple verticals — which increasingly means all of them — the regulatory surface area doesn’t simply add up. It multiplies exponentially.
Where compliance breaks down
Compliance doesn’t break down because founders are indifferent. It breaks down because the system was never built for what Indian fintechs actually look like today. Every bank or NBFC that a fintech works with conducts its own technology service provider audit, and no two are alike. One bank sends a 400-question spreadsheet, another uses a custom framework drawn from RBI’s IT risk guidelines, and a third has its own bespoke format entirely. The outcome is a compliance team constantly collecting the same core evidence — access logs, data flow diagrams, encryption records — and reformatting everything from scratch for each new partnership.
On top of that, fintech runs on data. Customers entrust these platforms with information they would hesitate to share almost anywhere else: identity documents, bank statements, transaction histories, and credit profiles. That is precisely why weak internal controls can quickly turn into serious business risks.
Where compliance begins eating into revenue
The Paytm situation grabbed headlines, but the quieter version of this story plays out every week across the sector without making a single news story: a banking partnership pushed back six months because the paperwork wasn’t ready, a deal lost because the audit report was out of date, a co-lending arrangement put on hold because fund flows weren’t properly documented.
In 2024, several NBFCs had their co-lending arrangements suspended for failing to meet direct disbursement requirements, and many of the violations in that year’s RBI penalty wave weren’t exotic breakdowns. They were lapses in basic institutional hygiene — such as outdated KYC records and insufficient fraud monitoring — that had simply been left to slide.
The shift fintechs must make today
What lies ahead is even more complex. In August 2025, the RBI released a framework for responsible AI in financial services. Fintechs are also working through the next phase of the Digital Personal Data Protection (DPDP) Act, which has raised the bar around consent, data governance, and breach reporting. The regulatory landscape is expanding faster than most teams can keep up.
The fintechs handling this well share one common instinct: they treat compliance as a continuous discipline rather than a one-off exercise — with ongoing monitoring and real-time visibility — so that an auditor’s visit is a non-event and a new banking partnership doesn’t demand a three-month document dig. The same core evidence is often requested repeatedly in different forms across DPDP requirements, RBI reviews, partner bank audits, and internal governance checks.
Access controls, data flows, vendor records, incident logs, and monitoring proof don’t need to be rebuilt each time. They need to be centralised once, mapped intelligently across frameworks, and automated so teams can respond in minutes instead of weeks — cutting repetitive manual work, staying continuously audit-ready, and instantly pulling up the right evidence when a regulator, auditor, or banking partner comes calling.
This isn’t about company size. A 50-person payments startup can operate with the same regulatory rigour as a 500-person NBFC if the underlying architecture is designed for it. India’s fintech story is far from finished, but the next chapter isn’t just about who builds the best product. It’s about who builds the infrastructure to sustain it.
Raghuveer Kancherla is co-founder of Sprinto, a provider of governance, risk and compliance software
