Regulation needed for innovation to thrive

At the Business Standard BFSI Insight Summit 2024, SHASHANK KUMAR, co-founder and managing director of Razorpay, said regulation was necessary for the growth of the financial technology (fintech) ecosystem, and norms did not necessarily stifle innovation at new-age companies. In a conversation with A K Bhattacharya of Business Standard, he pressed on the need for the Reserve Bank of India (RBI) to be the single regulator for all financial institutions, including traditional ones and fintech firms. Meanwhile, he acknowledged that while innovation at firms outpaced regulation, there must be a system to ensure the safety of the sector. He also added that the collaboration between banks and fintechs had demonstrated immense growth for the payments sector in the form of the Unified Payments Interface (UPI). Edited excerpts:

- SHASHANK KUMAR Co-founder & MD, Razorpay

Razorpay has acquired eight companies in the 10 years of its existence. How do you balance acquiring companies with innovation and resilience?

I think the secret sauce is our culture and DNA. The company is very much bottom-up. Most companies are run top-down, which is fine. At Razorpay, companies are run by a bunch of leaders. Internally, we have 50 different teams that pursue their goals, decide the strategy and road map, and execute it. This allows us to launch new products every quarter, and that is the metric I track.

Regarding acquisitions, it is important how you absorb those acquisitions and make them successful. We care about the kinds of companies we acquire and how we integrate them with the mothership.

How big of a setback was it when the RBI took action against the firm, leading to an embargo? How did you go about it, and are there any learnings that you would like to share?

The company matured significantly in the past few years even before the RBI embargo came through. As a startup, one is trying to grow fast, build products, and solve customer pain points. The regulator ensures the overall safety of the ecosystem.

One major learning for us in the past few years has been that in the businesses we're involved in, we go the extra mile to ensure that the firms we deal with also have the right intent when using our platform. If any business is moving through our pipe, we have to go deeper and verify the authenticity and intention of that business.

Systems in the country are slow to respond to issues like fraud. I think for the regulator, and increasingly so for the industry, it is important to prevent issues from happening in the first place.

Do you believe regulation kills innovation or stifles the growth of companies?

The blanket statement that regulation kills innovation is wrong. I agree that bad regulation or overregulation kills innovation. Regulation is needed for innovation to thrive.