RegTech And Digital Public Infrastructure: Navigating Compliance In India’s Digital Landscape.
The rapid advancement of India’s Digital Public Infrastructure (“DPI”) – exemplified by initiatives such as Aadhaar, the Unified Payments Interface (“UPI”), and DigiLocker – has reshaped the nation’s digital ecosystem. This DPI has created transformative efficiencies, enabling streamlined interactions between citizens, businesses, and government services. However, as India solidifies its digital-first approach, regulatory challenges around data privacy, user consent, and cybersecurity have surged, demanding robust compliance mechanisms. Regulatory Technology (“RegTech”) is emerging as a solution to these complex regulatory demands, leveraging automation to help entities comply with the country’s Digital Personal Data Protection Act, 2023[1] (“DPDP Act”), among other regulations.
DPI in India: A Catalyst for Digital Identity Inclusion
India’s DPI initiatives – e.g., Aadhaar for biometric identity verification and UPI for instant, low-cost digital transactions – have catalysed significant progress in financial inclusion and economic accessibility. With Aadhaar providing a foundational digital ID and UPI supporting billions of monthly transactions, DPI has enabled seamless, inclusive access to essential services. However, the scale of these systems has amplified regulatory challenges. The DPDP Act, which mandates data protection and privacy standards, adds additional regulatory requirements for compliance. Striking a balance between accessibility and compliance with these privacy protections is now critical to sustaining user trust and fostering sustainable growth in India’s digital ecosystem.
To streamline compliance, automated tools handle Know Your Customer (“KYC”) processes, anti-money-laundering checks, and consent management. For example, using Aadhaar-based digital KYC, these systems can automate identity verification in line with UIDAI guidelines, reducing risks of data breaches and safeguarding user privacy across large-scale, inclusive platforms.
Account Aggregator Framework: A Case Study in Financial RegTech–DPI Integration
A standout example of RegTech’s application in India’s DPI ecosystem is the Account Aggregator framework (“AA Framework”) launched by the Reserve Bank of India. [2] This facilitates consent-based data sharing between financial entities, enabling users to control how their personal financial data flows between institutions. Financial institutions can meet the DPDP Act’s stringent consent and privacy mandates more effectively by using automated compliance tools that manage and verify consent processes. The AA Framework exemplifies how these solutions can enable secure, transparent, and user-centric data sharing, fostering a regulatory-compliant digital environment that supports financial inclusion.
Health DPI: National Health Authority and Data Privacy in Healthcare
Expanding India’s DPI into the healthcare sector, the National Health Authority (“NHA”) has implemented the Ayushman Bharat Digital Mission (ABDM)[3] to establish an interoperable digital health ecosystem. This health DPI includes digital health IDs, electronic health records, and secure patient–provider interactions, advancing the accessibility and quality of healthcare. However, with the sensitivity of health information, rigorous compliance with the DPDP Act is essential, particularly concerning explicit consent for data collection and processing.
RegTech solutions assist the NHA in meeting these stringent requirements by automating data handling, enabling real-time audits and supporting secure consent management. These compliance mechanisms are crucial for upholding data integrity to ensure that the digital expansion in healthcare aligns with privacy safeguards and reinforces trust in digital health systems.
FASTag: Improving Transport Efficiency with Compliance
In the transport sector, the FASTag electronic toll collection system, managed by the National Highway Authority of India (NHAI), allows for efficient, cashless toll payments using RFID technology. FASTag has reduced congestion and operational costs across highways, but it also entails significant data privacy and localisation requirements under the DPDP Act, especially as it expands to new use cases such as parking and fuel payments.
RegTech provides automated compliance solutions by overseeing data security measures, verifying encryption standards, and ensuring audit trails. These systems allow FASTag to adapt seamlessly to the DPDP Act’s data processing standards, thereby balancing transport efficiency with user privacy – a model for expanding digital systems while ensuring strict compliance.
Government eMarketplace (GeM): Digital Transparency in Public Procurement
The Government eMarketplace (“GeM”) exemplifies how DPI can enhance public procurement, providing a transparent and competitive platform for government entities to procure goods and services. Administered by the Ministry of Commerce and Industry, GeM’s structure supports small and medium-sized enterprises by reducing procurement costs and timelines. However, the platform processes substantial transaction and vendor data, making compliance with the DPDP Act essential for protecting data security and maintaining trust.
GeM can effectively address its compliance needs through automated Know Your Business checks, real-time consent management, and end-to-end data traceability, all essential for safeguarding against data misuse. By ensuring data transparency and adhering to regulatory requirements, these technological solutions enable GeM to operate as a trusted and compliant public procurement platform.
Bridging Compliance and Innovation: Future Trends in RegTech and DPI
As India’s digital ecosystem expands, the role of RegTech in ensuring compliance will only become more sophisticated. Emerging technologies like blockchain are poised to enhance data traceability, even as artificial intelligence promises more effective, predictive compliance monitoring. Privacy-enhancing technologies (PETs), such as differential privacy and homomorphic encryption, are increasingly relevant for secure, compliant data flows in line with both domestic and international standards.
India’s DPI model has garnered international recognition as an effective tool for digital transformation and financial inclusion. As the G20 President, India has advocated for DPI’s potential in fostering global digital growth, highlighting user empowerment and regulatory compliance as integral to digital governance. Moreover, in September 2023, the United Nations published A Global Digital Compact, which calls for DPI that prioritises inclusivity, accessibility, and data protection on a global scale. India’s DPI model aligns closely with these principles, highlighting the need for compliance technologies to adapt to international best practices, such as the General Data Protection Regulation (GDPR), which underscores similar standards of data privacy and cross-border protections.
Compliance Challenges: Balancing Innovation with Regulatory Rigor
Despite its strengths, India’s DPI system faces complex regulatory challenges. Each DPI platform, whether in healthcare, transport, or public procurement, must navigate data-localisation requirements and cross-border data restrictions under the DPDP Act. Additionally, interoperability across DPI systems introduces significant complexity, as each operates under unique sector-specific regulations and processing standards. RegTech solutions must therefore be adaptive, enabling compliance across a wide variety of regulatory requirements while maintaining a cohesive standard of data privacy.
The integration of RegTech with DPI represents a critical step towards establishing a resilient and compliant digital economy in India. Through real-time compliance solutions and adaptable risk management systems, regulatory technology tools not only reinforce user trust but also position India as a leader in global digital governance. By adopting international best practices[4] and fostering cross-border collaboration, India’s digitally governed DPI framework has the potential to set new benchmarks, showcasing how strong digital governance can advance economic and social progress without sacrificing privacy or data security. The future of India’s digital landscape depends on how effectively these tools are integrated, ensuring that compliance keeps pace with innovation and fostering a secure, inclusive digital environment.
For further information, please contact:
Arjun Goswami, Cyril Amarchand Mangaldas
arjun.goswami@cyrilshroff.com
[1] Ministry of Electronics and Information Technology, Government of India, Digital Personal Data Protection Bill, 2023, available at https://www.meity.gov.in/writereaddata/files/DPDP_Bill.pdf (last visited on 27 October, 2024)
[2] Reserve Bank of India, Report on the Implementation of the Account Aggregator Framework, available at https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=1133 (last visited on 27 October, 2024)
[3] National Health Authority, Ayushman Bharat Digital Mission, available at https://abdm.gov.in/ (last visited on 27 October, 2024)
[4] United Nations General Assembly, Draft United Nations Convention Against Cybercrime, available at https://www.unodc.org/unodc/frontpage/2024/August/united-nations_-member-states-finalize-a-new-cybercrime-convention.html (last visited on 27 October, 2024)
