Fintech Partnerships: Compliance Before Growth

Quick View

Why It Matters

Begin with a role map. A payment aggregator handles merchant payment flows under the applicable RBI framework; a payment gateway may provide technology; a regulated entity lends; an LSP performs specified services for that lender.

RBI’s Digital Lending Directions require a contractual RE–LSP structure, enhanced due diligence, borrower disclosures, direct fund flows, data controls, grievance arrangements and continuing responsibility of the regulated entity.

Payment partnerships need merchant due diligence, escrow or settlement design, refunds, chargebacks, customer communication, security and data allocation under the current payment framework. Marketing should not imply an RBI endorsement.

Control Framework

Action Checklist

1. Create a role and fund-flow diagram.
2. Verify licences and counterparties.
3. Review every customer-facing screen.
4. Test settlement, refund and repayment flows.
5. Agree data, security and incident duties.
6. Set audit rights and exit assistance.

Practical Example

Evidence to Keep

• Licence and entity verification.
• Executed partnership agreements.
• Fund-flow and settlement map.
• Customer disclosures and KFS.
• Data-flow and security schedule.
• Complaint, audit and incident reports.

Warning Signs

Management Decision

Complete regulatory design before commercial integration. Rebuilding money flows, screens and contracts after launch is expensive and can harm customers.

Monitor the partnership through complaint data, failed settlements, refund ageing, data incidents, recovery conduct and regulatory change—not only revenue.

Document the decision, owner, due date and evidence expected. A verbal explanation should be converted into a board note, approved working, contract amendment, portal acknowledgement or reconciliation before the item is treated as closed.

Rules, forms, thresholds and interpretations can change. The operating team should use the latest official source and the actual company facts instead of copying a control from another entity or prior year.

Monthly Review Test

Ask four questions: Is the obligation or accounting treatment applicable? Has the underlying transaction been completely recorded? Does the evidence agree with the books and portal? Has an independent reviewer challenged the exception?

The review should distinguish a timing difference from an error, a judgement from a missing document, and a control failure from a one-time operational delay. Repeated small exceptions deserve root-cause action because they often become material during audit, fundraising, notice or distress.

Exception Review

The operating record should connect the control stages—regulatory perimeter, money flow, customer journey, oversight—to the same transaction population. If the source list, accounting ledger, tax return, board record and management dashboard use different populations, the review can appear complete while exceptions remain outside the test.

Management should define an exception threshold, but the threshold must not hide repeated failures. A small error occurring every month can signal weak master data, unclear ownership or a broken interface. The reviewer should record root cause, immediate correction and preventive action separately.

Closure requires evidence. At minimum, the file should show who prepared the work, who reviewed it, which source documents were used, what differences remained and when the next follow-up is due. Screenshots without context or spreadsheets without source references are not a durable control record.

Map the actual data and money flows rather than relying on contract labels. Systems, vendors, user screens and bank accounts should agree with the legal role allocated in the contract; a platform cannot avoid regulatory responsibility through marketing terminology.

Incident and complaint data should feed the control review. Repeated consent withdrawals, failed settlements, customer complaints or access exceptions are evidence that the designed process is not operating as intended.