Important Facts to Know before starting a Fintech Company in India

From automobiles to the financial industry, technology has streamlined the operations of almost every sector in India. Financial Technology or Fintech is a remarkable innovation that has emerged in recent years. It is a strong technique that revitalises lending and borrowing activities. 

Fintech aims to dethrone traditional financial modes and enable more customer-friendly experiences. It has not only transformed the financial sector, but it has also created a channel for startups to channel their talents. Many aspiring entrepreneurs want to start a FinTech company and therefore want Fintech company registration but lack the necessary knowledge. Undoubtedly, this blog will provide a comprehensive guide to launching a successful FinTech company. 

What is a FinTech Company?

FinTech is a mixture of two words finance and technology. FinTech companies are those that provide financial solutions using technology such as the internet, mobile phones, cloud services, or software technologies. 

The combination of finance and technology has emerged as one of the largest business sectors in the financial industry. FinTech is used by multinational companies, small-scale business industries, and individual customers to improve the management of their financial tasks. Previously, technology was used in Financial Services for back-end services such as organising day-to-day transactions and handling the company’s daily affairs. However, it has evolved and is now an important part of the financial sector.

Services offered by FinTech Company

Fintech companies have expanded their domain at both the micro and macro levels. Currently, such businesses provide a variety of services, such as personalising specialised digital platforms and online accounting software. So, let’s discuss the services that one can obtain from a FinTech company:

1. Peer-to-Peer Lending 

This lending service is already very well-known in today’s society. It is an online platform that eliminates the need for any middleman by connecting lenders and borrowers directly. The P2P lending platform uses financial technology to offer a more rapid and practical way of getting the required finances.

2. Retail investment service

FinTech companies aim to meet a person’s various personal and professional needs. Hence, it offers personalised financial services to individuals or businesses. FinTech ensures the best use of finances and thus promotes the best management of funds as per the specific requirement. 

3. Crowdfunding services

Having insufficient funding is unavoidable, whether the business is large or small. FinTech has, however, also addressed these concerns and given rise to crowdfunding service providers. It makes it simple for entrepreneurs to secure funding for new company endeavours. These internet-based platforms offer the opportunity to collect money from many different sources. 

4. E-commerce payment services

FinTech has developed a number of online payment methods that make cash flow management easier. FinTech has surpassed all previous innovations thanks to the ease with which online platforms may be used to send and get payments via mobile and web. It makes it easier to send money directly to the payee from the payer’s bank account. Paytm, FreeCharge, Mobikwik, and other popular payment methods are widely used in India.

5. InsureTech

Insuretech is a term that combines insurance and technology. Fintech software customises the Insurance model for the users. It also facilitates the insurance process by allowing for online claims filing and policy management.

6. Regulatory Technology

Regtech enables the efficient and cost-effective management of large amounts of data, including transaction records and required documents such as corporate tax returns.

Guidelines for starting a FinTech company in India

You must hire a knowledgeable lawyer in your area who can assist you with the legal formalities and advise you on the Fintech company registration process. The legal prerequisites and process to start a FinTech in India are discussed in this guide:

1. Choose the appropriate business structure

Brainstorming about the best business structure is the first step in starting an online financial business. Three different business structure types that are appropriate for Fintech are: 

• One Person Company: An OPC is a combination of a sole proprietorship and a company where one person controls all the business operations. 
• Limited Liability Partnership:  An LLP is a combination of a company and a partnership that carries limited liability for each partner’s individual shares.
• Private Limited Company: Directors and shareholders of the Private Limited Company are not personally liable to the company’s creditors. Separate from its members, the Private Limited Company has its own rights and obligations. It is the best organisational structure for FinTech companies in India.

2. GST Registration 

The new business would have to submit an application for GST Registration and get a GSTN for their enterprise. There are many advantages to being registered, such as the ability to claim an input tax credit, simple registration on e-commerce websites, advantages in terms of competition with other businesses, fewer compliance requirements, etc.

3. Get legal documents and agreements

Obtaining documentation is very much important for starting a business in online finance. So, if your company requires the drafting of legal documents, seek help from an expert lawyer. The following list of crucial documents and agreements is provided.

1. Agreement of Co-founder
2. Agreement of Intellectual Property Licence 
3. Privacy Policy
4. User policy
5. Terms of use for mobile app users
6. Agreement related to Vendor
7. Agreement related to Product development 
8. Agreement related to Employment 
9. Affidavit on stamp paper.
10. Office address proof, or rental agreement of the office if any.
11. Director’s Passport-size photos.
12. Director’s ID proof i.e., Passport, Driver’s License, or Voter ID card.
13. Self-declaration of the company’s proposed director
14. Aadhar Card of Applicant.
15. Applicant’s PAN Card.

4. Obtain Intellectual Property

Companies must obtain Intellectual Property (IP) to safeguard their website content, web/ app design, brand name, logo, brochure, etc. from being violated. Getting IP registration will help to protect the brand and differentiate it from competitors, and the business will be able to seek legal remedies if any of the registered IP is violated. Copyright, trademarks, patents, trade secrets, and industrial designs are a few examples of legally protected intellectual property.

5. Apply for the licence

Licencing and regulation of FinTech company will depend on the kind of service it plans to provide. A business can offer the following services through an online finance business.  

• Payment Services: The Reserve Bank of India introduced the “Differentiated Banking Licence” scheme for the purpose of providing “on-tap” licences to companies that seek to offer financial or banking services. They can apply to register themselves for this with the RBI.
• Retail Service providers: Obtain a retail FinTech licence to provide lending and depositing services to micro and small-to-medium-sized businesses.
• Financial management: There are no such rules for finance management. The RBI has, however, suggested that all Financial Management FintTech register as NBFCs (Non-Banking Finance Companies). 

6. Register Domain

A fully developed website and a registered domain name are essential for a technology-based company to create its online presence and appear in search engine results. 

By registering the domain, you can prevent others from indulging in cybersquatting, which is the illegal utilisation of a domain name that is similar to the domain name of a well-known business in order to gain access to its customers or reputation. 

Conclusion 

Fintech company concentrates on using cutting-edge technology for financial services, which makes them quicker and more effective. It will be a good decision to start your Fintech company since the industry seems to have a bright future. 

Starting a new FinTech company is a difficult process for new entrepreneurs. Hence, consult a reputable and experienced legal expert of Online Legal India if you want to start a top-notch online financial platform. Our knowledgeable professionals will guide you and make the FinTech company registration procedure easier for you.