On 8 April, Reserve Bank of India (RBI) governor Shaktikanta Das said the Indian banking regulator was looking into looking into Inc42 Digital Lenders Including BNPL Under RBI Lens Read more the practices of digital lenders, especially buy now, pay later (BNPL) companies.
The statement made one of India’s oldest fintechs that had partnered with a consumer finance company to offer BNPL loans anxious. It disbursed loans worth more than Rs 200 crore (~US$25 million) every month to micro, small, and medium enterprises (MSMEs).
The fintech player reached out to one of the Big Four auditing firms—Deloitte, Ernst and Young (EY), PricewaterhouseCoopers (PwC), and KPMG—for advice. Result: the company hived off its BNPL business into a separate unit to avoid a major disruption from regulatory changes.
The RBI has been getting very active in issuing directives. Earlier in June, it came up with the prepaid payment instruments prepaid payment instruments The Ken Slice, Uni Cards, other fintechs start over as RBI says no to easy credit Read more (PPIs) rule—fintechs made a beeline to the Big Four for that too.
Traditionally, retail banks, pharmaceutical companies, and listed firms availed of the Big Four’s services to meet the regulatory-compliance requirements mandated by governing bodies such as the RBI, Securities and Exchange Board of India (Sebi), stock exchanges (National Stock Exchange and Bombay Stock Exchange), and the Central Drugs Standard Control Organisation (CDSCO).
But since at least 2019, fintech startups such as Paytm, PhonePe, Razorpay, BharatPe, Cred, and Slice have started paying for these services. Other prominent Indian startups such as foodtech giants Zomato and Swiggy, Ola (which also has a fintech arm, OlaMoney, that offers BNPL loans), edtech Byju’s, and hospitality company Oyo have also contracted the Big Four to ensure compliance with Indian laws, according to people close to the matter.
For the Big Four, this is a high-margin business that can be executed once and serve multiple clients. They charge between Rs 5 and 15 crore (~US$625,000-1.8 million) yearly—earning a margin of at least 50%—to conduct policy and regulatory checks.
They also cross-sell services like cyber and information security, along with assessments of credit, financial, and market risks, among others.
Though it’s a significant expense for a company, it is crucial for them to know which aspect of their business might run into regulatory crosshairs.
“After every report, at least I know I won’t be out of business in the next six months,” says a senior executive at a leading BNPL company that utilises EY’s regulatory-advisory services.