Fintech Company Incorporation

Compliances & Legal Procedure for Fintech Company Incorporation

Online Legal India LogoBy Online Legal India Published On 05 Sep 2022 Updated On 05 Jan 2023 Category Fintech

The future of fintech in India is bright, given the increase of startups in the sector. 

Other elements have contributed significantly to its growth, including the prevalence of mobile users, the ongoing development of digital networks, and the simplification of financial procedures across numerous sectors. So, we'll talk about some of the legal standards, processes of registration & compliance requirements for a fintech startup in India in this post.

What do mean by Fintech?

Financial technology is referred to as fintech. It is a company that offers financial support, planning, & management services to other businesses, organisations, and people over the internet. Technology is used in fintech to improve or automate financial services and procedures.

Advantages of Fintech Companies

Greater Accessibility

Since anybody with internet access may create an account and submit a loan application without any issues, this also results in an increase in the population that uses banks.

Response timeframes for fintech applications are typically between ten minutes to 2 days.

Time management 

The majority of the time, visiting a physical branch is not required because all processes are completed online.

Several services 

In order to satisfy the demands of both clients and producers of financial services, fintech has been successful in segmenting services.

  • From the consumer's perspective, financial services include opening a bank account, applying for a credit card, getting various forms of insurance, investing in a business that needs capital to grow, and trading on foreign financial markets.
  • Fintech solutions from financial service providers include, among other things, ways for optimising payment processes, assessing credit application profiles, and storing data in the cloud.

Reduce costs 

The fact that most fintech businesses provide cheaper commissions than banks is another key differentiation, with which most of them seek to fight against traditional financial institutions.


Physical branching is absent 

  • As everything must be handled via email or social media, this might be a drawback if there is an issue with the service's delivery.
  • Although some fintech companies leverage the usage of blockchain technology to increase security as a differentiator in this area, not all of them do, which puts the security of customer data in danger.
  • Although many people find it to be as simple as using their smartphones, the reality is that this situation immediately excludes a sizeable portion of the population who do not have access to the Internet and will therefore encounter challenges in opening a bank account, even in the presence of Fintech.

Lack of supervision

It is a fact that this occurrence is so well-known that governments continue to research and legislate in many countries throughout the world. 

Therefore, the laws governing fintech throughout the globe are not flawless, and there is a chance that some of these might be possible scams in the absence of laws.

Decoding the Procedure of Fintech Company Incorporation

There are some points to look after for the incorporation process of Fintech Company:

Choose the appropriate Firm Format

Choosing the appropriate Business Format is the first step in incorporating a Fintech company. Three different company structure types that are appropriate for fintech are available:

  • One-Person Company (OPC): An OPC is a hybrid of a sole proprietorship and a corporation in which a single person controls all business operations.
  • Limited Liability Partnership (LLP): An LLP is a hybrid of a corporation and a partnership, with each partner having only limited liability for their individual shares.
  • Private Limited Company: Directors and shareholders of a private limited company (PLC) are not personally liable to the firm's creditors. Separate from its members, it has its own rights and obligations. It is the best organisational structure for an Indian FinTech company.

The next step is to obtain a GSTIN and register your online financial company for GST 

The former indirect taxes, such as excise duty and service tax, would be combined under the GST regime.

Acquire Legal Documents & Agreements 

Establishing any online financial firm requires documentation. 

So, if your firm requires the writing of legal documents, seek assistance from an expert attorney. 

The following list of crucial documents and agreements is provided:

  • Co-Founders Accord
  • Privacy Principles
  • Terms of Service for Phone Application Users 
  • For the Website Vendor Agreement 
  • For Product Development Employment Agreements
  • Agreement for the License of Intellectual Property

IPR Procurement 

Copyright, patents, trademarks, and designs are all examples of intellectual property. 

Your brand's name, tagline, mobile app, website, etc. must be protected if you want to thrive in the fiercely competitive FinTech industry. 

By registering them and acquiring an intellectual property rights certificate, all such aspects can be safeguarded (IPR).

Apply for a License 

A FinTech startup's licencing and regulation depend on the kind of service it wants to provide. A firm can offer the following services through an online financial venture:

Payment Service 

To grant "on-tap" licences to companies wishing to offer banking or financial services, the Reserve Bank of India introduces the "Differentiated Banking License" programme. 

The candidates must submit an application to the RBI to register themselves & adhere to the rules:

Comparative Lending

Only if the applicant serves as an intermediary may he be granted a Peer to Peer Lending licence.

Providers of retail services 

Obtain a retail FinTech licence to provide lending & depositing services to disorganised and small- to medium-sized businesses.

Financial Management/Investment 

Businesses engaged in financial management are not subject to such rules. 

The RBI has, however, suggested that all Financial Management FinTech register as NBFCs.

Register Domain 

The FinTech startup must also satisfy the fundamental criteria of having a website. 

So, for an online financial firm, a domain name and a homepage are the top priorities. A FinTech business might also decide to create a mobile app in order to increase its client base.

Compliances for Fintech Company Incorporation in India

For fintech, a plethora of compliances is necessary. It would be difficult to categorise a startup because the majority of them offer a variety of services. We'll examine Fintech compliance in this section:

  • The largest player in the fintech sector is the payments market. This industry has experienced tremendous expansion, attracting significant investment. In the payments sector, mobile/digital wallets, point-of-sale systems, and payment gateways make up about 50% of new businesses. It should be mentioned that KYC compliance is required in order to use mobile/digital wallets.
  • Due to the increase in digital transactions, payment gateways & aggregators are essential in the payments industry. All communications between the RBI and the payment gateway are conducted through banks. To safeguard and secure digital payments, payment gateways must adhere to a number of regulations.
  • Online lending platforms have exploded in India's fintech sector. Banks formerly controlled the lending market in India, but P2P lending & SME lending start-ups have transformed it. Platforms for lending offer quick loan approval with less paper effort. This has immensely benefited MSME businesses since it makes it simple for them to obtain financing. These platforms have taken use of the newest technology, like ML and AI.
  • Online insurance service delivery is still a crude idea. This track the unique requirements of the consumer and leverages IoT-enabled services. Brokers must abide by IRDAI's laws and regulations. Additionally, insurance online aggregators provide a forum for users to learn more about different insurance packages. Customers, resemble an online purchasing interface. The IRDAI oversees their regulation. Online aggregators are unable to advertise a certain business.

Things to Consider Before Incorporating a Fintech Company

Win Client Trust

Customers' top worry is security, and they grow increasingly wary of new financial institutions while doing business with them. Nobody can stake their entire life's investments, thus there are obviously trust difficulties. Therefore, a company should be careful to gain the trust of customers before deciding on marketing techniques. 

Since sharing financial information increases insecurity, it is important to highlight the benefits of FinTech and ensure that it is sufficiently safe.

Identify the Niche of Your Business 

A clear picture of the sector that an entrepreneur wishes to enter is absolutely necessary. One could become confused due to the large range of FinTech industries, such as Payments & International Money Transfers, Peer to peer Borrowing, Bitcoin, Data Analysis, and Small Businesses Financials. Decide on a sector in which you have sufficient understanding.

Hire competent personnel 

You can only provide the greatest outcomes when you have competent staff with the necessary abilities. When starting a FinTech firm, the demand for effective workers grows even more. Hire a specialist who is knowledgeable about business, technology, and money. To complete the compliance requirements, you could also need to hire skilled attorneys.

Utilise the most recent technology 

Adopting the most recent trends and technologies is the only method to catch customers' attention. Before opting to invest in any of the dynamic technologies that are hot in FinTech, such as Blockchain, Machine learning, and Artificial Intelligence, contact Robo-advisors.


The entry of Fintech companies has significantly impacted the traditional financial sector. They are aiming for financial inclusion by using contemporary technology to deliver financial services. However, regulatory ambiguity, consumer mistrust, and a small client base have all contributed to some degree of difficulties. Fintech companies have occasionally been compelled to conform to rules that were intended for conventional financial institutions. Regulators' stance toward the fintech sector is anticipated to shift, nevertheless.


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