Why CCI is important to protect customers from digital readers

The Standing Parliamentary Finance Committee, headed by Jayant Sinha, is just the latest to voice its concerns about the potential risks from the rapid growth of the digital economy (the report is expected to be presented soon). In particular, the risks deriving from the intrinsically anti-competitive nature of the players in the digital world due to the so-called network effects, the peculiar characteristic that exponentially increases the value of digital platforms as more and more people join.

Unfortunately, the same characteristic that translates into large externalities (not always positive, unfortunately) due to economies of scale, also lends itself to the creation of monopolies, allowing powerful players, riding network effects, to potentially exploit gullible consumers. Add to this the fact that in the digital world it is much easier and faster to deceive customers, and hence the need for greater vigilance on the part of both authorities and the public, including, as Sinha points out in an interview with the Mint , the need for competition law to evolve in sync to address the issues that arise thanks to the dramatic increase in digital transactions.

EU digital markets law and digital services law and similar legislation considered by other countries offer a possible model as we navigate a relatively new and rapidly changing world.

But what is becoming increasingly clear, especially when it comes to the financial sector, is that the Competition Commission of India (CCI), guardian of consumers’ interest in anti-competitive behavior, must join forces with other regulators in the sector. financial: the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Pension Fund Regulatory and Development Authority (PFRDA), Insurance Regulatory and Development Authority (IRDA) and Investor Education and Protection Authority (IEPF) under under the auspices of the Ministry of Corporate Affairs (MCA), to ensure that customers, whether they are savers, investors or borrowers, are not taken for a ride into the digital world, where a click of the mouse is enough to lose hard-earned money.

The RBI’s decision to draw up a list of eligible lending apps that can be hosted on app stores, as part of a multi-pronged government strategy to curb illegal digital lending outside of normal banking channels, is in tune with this. As well as the MCA’s attempt to identify and deregister shell companies to prevent misuse.

However, it is important to remember that the RBI’s mandate only applies to regulated entities, not unregulated ones. Similarly, SEBI’s jurisdiction is over listed companies, not unlisted ones. It is possible that many unscrupulous elements will slip through the cracks. This is where law enforcement comes into play.

True customer protection is more than just ensuring that savers and investors get their money back. It includes providing them with more choices, greater transparency and market integrity – in other words, protecting themselves from uncompetitive business practices. As well as ensuring quick and easy access to compensation in the event of fraud. This includes improving investigative and judicial systems to work in sync with the pace of the digital world. And last but not least, it also involves ensuring that the sheer amount of data collected by these entities while carrying out financial transactions is not misused.

The government’s Digital India program aims to transform India into a knowledge-based society and economy with digital powers. The goal is to move to a “faceless, paperless, cashless” society. While this is a grand ideal and promises tremendous efficiencies even as it empowers the bottom of the pyramid, like anything else in life, it presents both opportunities and challenges. One of the biggest challenges is ensuring that abuse and fraud are minimized, even if they can never be eliminated.

True, financial literacy is the best safeguard to ensure that the promise of the digital finance world is fully realized. But authorities must always be vigilant to fill the gaps even as they walk the fine line between regulation and innovation.

The Unified Payments Interface (UPI), which feeds multiple bank accounts into a single mobile application (from any participating bank) and combines multiple banking features into one platform, has democratized the payment system like never before. But it is also an area prone to fraud.

Likewise, digital lending platforms have facilitated access to finance for the small borrower. But aside from the risks to the financial system where funds come from banks and non-bank finance companies, as recent media reports have shown, retail borrowers are often harassed by collection agents; not to mention the risk of sensitive data and funds being stolen from other countries, particularly China.

In the non-digital world, financial regulators have resisted any move to include the CCI in their welcoming club. But given the inherently anti-competitive nature of digital actors, meaningful client protection must involve not only traditional financial sector regulators – SEBI, RBI, IRDA and PFRDA – but also the CCI and at a future date, once the data protection bill will become a reality, a new data regulator, if the bill provides for the need for such a regulator.

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