Joseph Joshy, chief technology officer at India’s International Financial Services Centres Authority, speaks to Ian Hall about helping overseas fintech ventures to ‘land’ in India and helping Indian fintechs to ‘take off’
After a career that has included corporate postings in the US, Canada and Mexico, and more than four years back in his native India setting up an IT subsidiary for the central bank, Joseph Joshy is approaching two years as chief technology officer at the country’s nascent International Financial Services Centres Authority (IFSCA).
IFSCA was launched in April 2020 to develop and regulate financial products, services and institutions in India’s International Financial Services Centres (IFSCs). It is located in Gujarat International Finance Tec-City (‘GIFT City’), an 886-acre greenfield development near the city of Gandhinagar, being promoted as a ‘financial and technology gateway of India for the world’.
The under-development site is home to India’s first IFSC: there are plans for more (hence the plural ‘Centres’ in IFSCA’s name) and hopes are high. “The ambition is to create a financial centre that can do business and support the financial ecosystem, like Dubai and Singapore – and probably in the future like London and New York,” says Joshy.
The authority has both a development and regulatory remit. “When IFSCA started, there was no focus on fintech because in the domestic sector there was no regulation that was only for fintech,” Joshy explains. But the 2021-2022 Budget presented by finance minister Nirmala Sitharaman set the aim of ‘supporting the development of a world-class fintech hub’ at GIFT City IFSC – a trigger to a multi-faceted fintech programme with national and international tentacles.
At the start of a year that sees India’s government holding the G20 presidency, Global Government Fintech spoke to the 45-year-old by videocall about where fintech fits into his agenda.
Rupee convertibility challenge
India is, in many ways, well progressed when it comes to digital government, for example through programmes such as ‘Digital India’ and digital ID scheme ‘Aadhaar’. It is also an outsourcing destination-of-choice for global technology companies.
But the authorities were playing catch-up in terms of a strategy to encourage and regulate the rapidly evolving fintech market. In 2018 India’s government formed a steering committee to examine the development of the fintech space ‘with a view to make fintech-related regulations more flexible and generate enhanced entrepreneurship in an area where India has distinctive comparative strengths vis-à-vis other emerging economies’.
A parliamentary act in 2019 created IFSCA, which exists to both ‘promote the ease of doing business in the IFSC and provide a world-class regulatory environment’. To execute the latter half of its mandate, it was vested with powers of four pre-existing regulators: the Reserve Bank of India (RBI), Securities & Exchange Board of India (SEBI), Insurance Regulatory & Development Authority of India (IRDAI) and Pension Fund Regulatory & Development Authority (PFRDA).
Crucial to the development side is overcoming the challenge of rupee convertibility (India’s currency is not fully convertible). “IFSC is a zone that supports foreign currency so we do not have this rupee convertibility challenge,” Joshy says. “It’s like a country within a country, business here is done in foreign currency,” he says.
There are a whole host of tax breaks, too, across GIFT City’s Domestic Tariff Area (DTA) and Special Economic Zone (SEZ) (the IFSC sits within the latter).
To date about 370 companies are ‘registered entities’ (as listed by a ‘Directory’ section on IFSCA’s website). Twenty of these – including Barclays, Deutsche Bank, HSBC, MUFG and JP Morgan – are grouped as ‘Banks’ (for example, JP Morgan announced a newly established ‘international banking unit’ in GIFT IFSC in July 2022); and 11 are listed as ‘Fintech Entities’.
Infinity and beyond
Support for IFSCA’s mission goes to the very top of government. PM Narendra Modi laid the foundation stone of its headquarters and gave the keynote speech (by virtual means) at the ‘InFinity Forum’, a two-day event devoted to fintech that IFSCA curated in December 2021.
Joshy was one of the brains behind the event, which carried the overarching theme of ‘Beyond’ and three sub-themes: ‘Fintech Beyond Boundaries’ (“how we take Indian fintechs global”); ‘Fintech Beyond Finance’ (areas such as ‘green tech’, ‘space tech’ and ‘agri tech’); and ‘Fintech Beyond Next’ (“quantum computing is completely going to disrupt the security posture of our banks or financial institutions, so we need to be ready for that in the next four to five years,” Joshy says, recalling one prominent element here).
Indonesia, South Africa and UK were ‘partner countries’. The latter’s then-chancellor, now PM, Rishi Sunak was among the speakers, along with private-sector big-hitters such as SoftBank’s Masayoshi Son, IBM’s Arvind Krishna and Nandan Nilekani from Indian IT giant Infosys (Joshy’s former corporate employer).
The event also involved hackathons, with sprints (themes) of ‘BankTech’, ‘Quant Camp’, ‘InsureTech’ and ‘MarketTech’. IFSCA continues to have a “couple” of live sprints and is in discussions with two other organisations about running further sprints in the coming months, Joshy says.
Organised during IFSCA’s first year, the InFinity Forum overall constituted “a very good start for us” and “generated a lot of ideas” in terms of capitalising on fintech’s possibilities, he reflects.
Fintech framework and incentive scheme
One priority, though, lay firmly in IFSCA’s regulatory remit: to establish a regulatory framework for fintechs.
“We wanted the framework to be broad based, light touch and to build in the ‘fail fast’ principles that are famous in Silicon Valley,” Joshy says with a grin (an indirect nod to his corporate career, which was partly spent in California).
In April 2022 the ‘Framework for FinTech Entity in the IFSCs’ was launched. Running to 33 pages, it is applicable to what Joshy describes as ‘pure-play’ (vertical) fintech companies as well as ‘tech-fin’ companies providing cross-cutting (horizontal) solutions that often sit alongside fintech, for example, cybersecurity, know-your-customer (KYC) or digital identity services.
“One of our primary responsibilities is to ensure people understand what we have launched because this is a very unique framework,” Joshy says.
“Another thing we have done – probably for the first time for a financial sector regulator in India – is come up with an incentive scheme for fintechs,” he adds, explaining that IFSCA offers six different types of grants.
“It’s generating interest, especially given the ‘funding winter’,” he says. “There are a lot of queries coming in, and we need to ‘walk through’ the applications. At the end of the day, this is ‘common’ [public] money – it’s a regulator putting in money. These are grants – we’re not taking a stake in the company, nor are they loans. Applications have to be carefully evaluated.”
Joshy is member secretary of a recently formed 10-strong committee of people from outside IFSCA (with five nationalities represented) doing the sifting.
Sandboxes set up
No financial regulator would be worth its salt these days without at least one sandbox (test space for new projects). IFSCA has an innovation sandbox (for early-stage fintech projects) and regulatory sandbox (for more progressed projects), while the fintech framework also details an ‘Inter-operable Regulatory Sandbox’ (IoRS) for ‘hybrid’ financial products or services falling within the regulatory ambit of more than one domestic regulator.
“The sandboxes are what we use to bring in the ‘fail fast’ principle,” explains Joshy. “In the framework we said that if somebody has just an idea, we should let them experiment or build a POC [proof-of-concept]. So, there’s the innovation sandbox, where they can experiment with some market data or synthetic data.”
What are called ‘limited-use authorisations’ are important. “While projects are in the sandbox, we will give them a limited-use authorisation – this is to add some credibility to the fintech so that they can raise capital if the idea is good, provide customer confidence because they know a regulator is backing them, and so on,” Joshy explains. “So, that’s the first step, you come into the innovation sandbox and prove worthiness of your product or solution.”
After ‘graduating’ from the innovation sandbox, the regulatory sandbox awaits. “Again we give them a limited-use authorisation, and all these limited-use authorisations are capped at 12 months – of course for genuine cases, there can be extensions, but usually projects take three, six or nine months,” Joshy says.
India’s more established regulators, such as the RBI and SEBI, continue to operate their own sandboxes. “But the catch is that it’s not that easy [for non-Indian projects] to access the domestic regulators,” Joshy says. “If a foreign fintech wants a regulatory sandbox in India, the IFSCA sandbox is the one for them.”
One overseas authority with which Joshy and colleagues have made publicised headway is the fintech-savvy Monetary Authority of Singapore (MAS).
IFSCA and MAS unveiled a fintech partnership in September 2022 as they look to enable companies to test innovative financial products and services across borders. This was inked less than two months after the two authorities agreed a memorandum of understanding (MoU) on supervisory co-operation.
The authorities’ fintech agreement has two main elements: first, for the two authorities to ‘leverage’ sandboxes in their respective jurisdictions to support experimentation of tech-based innovations; and, second, to share non-supervisory related information and developments on innovation, facilitate discussions on emerging fintech issues and participate in joint innovation projects.
It was Joshy who was holding the IFSCA pen at the MAS partnership’s signing ceremony, describing the agreement as a ‘watershed moment that ushers in a “fintech bridge” to serve as a launch-pad for Indian fintechs to Singapore and landing-pad for Singapore fintechs to India’. The next priority is, he says, to undertake a “deep dive” to “complete the detail on the SOP” (standard operating procedure) to get ‘live’ projects flowing.
But Joshy and colleagues’ horizons stretch significantly beyond Singapore. IFSCA is aiming for similar arrangements with other nations’ authorities. “We have about 10-plus entities with whom we’re talking – each discussion is at a different maturity level,” he says.
‘Regulator as a start-up’
Joshy’s role at the IFSCA, where the number of staff has grown to about 80, has echoes of his previous positions – certainly his time at the Reserve Bank of India. At the central bank he was part of a five-strong management team that co-founded an IT subsidiary, Reserve Bank Information Technology (ReBIT), that grew to more than 300 employees.
“A technology guy, a start-up guy, gets to set up a start-up for the regulator,” he explains, describing his time in Mumbai as “terrific”.
The role saw him working across 25-plus departments in an authority that he estimates as employing between 10,000 and 15,000 people (and which has since also launched an Innovation Hub). “I was looking across currency management, communications, external investments, IT systems… you’re talking about the entire ‘lifecycle’ of the central bank. It wasn’t only the technology, but also regulatory aspects that came into play: what the central bank was trying to achieve with policies and regulations, and how they’re supervising, how they’re enforcing.”
The regulatory aspect was largely new territory for him. His background was in software engineering, spending 16 years with Infosys, including stints in the Texas city of Houston; in Pleasanton in California’s Tri-Valley area (traveling frequently to Fremont, San Francisco and Silicon Valley); Calgary, Canada; and Mexico City (with responsibilities across Latin America).
“When I joined Infosys, there were only 100 to 150 people in the location, and Infosys worldwide had about 2,000-3,000 people,” he recalls. “When I left, it was 100 times that, and the location where I was had more than 15,000-20,000 people.”
“When [the role at] IFSCA came up, it was like a start-up, but a ‘regulator as a start-up’ – that intrigued me,” he says, describing his current role as a “once-in-a-lifetime opportunity” to launch a government-created authority.
‘Change is the only constant in life’
Joshy was born in the tropical state of Kerala and grew up in the coastal city of Chennai. He loved his years overseas “absolutely – personally, as well as professionally… in fact, my organisation wanted me to stay in the US, they were processing my green card. But I was pretty clear – I wanted to come back to India.”
He returned to Kerala in 2015 on what he describes as a sabbatical, teaching engineering students in rural areas about entrepreneurialism. “They were all wondering, ‘Hey, what is a start-up?’, and I was telling them: ‘It’s time to be a job creator instead of a job seeker’.”
India’s government was also keen to encourage entrepreneurs. “The same year Prime Minister Modi announced the ‘Start-Up India’ mission and people started understanding what exactly I was trying to say,” Joshy remembers.
He has twin teenage daughters and a 12-year-old son. Asked how his children view the family’s location shifts around North America and, more recently, back in India, he says: “I think [it] has taught them that change is the only constant in life. They are very adaptable.”
Life nowadays is calmer in the Gujarat state capital, which has a population of about 300,000, than it was in hectic, sprawling cities such as Mumbai and Mexico City. “Gandhinagar is small – it’s one of the top five greenest cities in the country, and there’s no maddening traffic. It’s peaceful,” he says.
‘A lot of foreign fintechs will be coming in here’
GIFT City’s relatively sedate locale contrasts with the busyness of Joshy’s agenda for the year ahead.
“Now we have the fintech framework and incentive scheme out of the way, and it’s going to get operationalised, we are looking at focus areas,” he explains.
Fields in which he sees, in his words, “action” include: green and sustainability-related fintech, ‘space tech’-related activities (“there are a lot of capital needs”) and “longevity financing and longevity fintech”. In this latter area, he says that people in many countries are living longer and makes the unexpected but accurate point that adult nappies (diapers) outsell baby nappies in Japan because of the country’s rapidly ageing population. The ‘silver generation’, he says, “have a lot of experience [and] some of them have a lot of capital… they can start new businesses. Do we have government schemes to support that? Why are we saying people have to retire at 60 or 65? Why can’t they have a second career? We are looking at all those things.”
In terms of the political picture, Indian’s government has just assumed an elevated global role, having taken over the G20 presidency from Indonesia. “We are all working on that,” says Joshy. “The G20 has two ‘tracks’ – the ‘sherpa’ track and the ‘finance’ track – and the finance one we all contribute to. Just today we had a related meeting. There’s a lot of contribution that our teams will do from the G20 perspective.”
It is, he says, “too early” to be focused on the establishment of further IFSCs, adding that “we want the [current] centre to stabilise first.”
For now, day-to-day focus is GIFT City IFSC, which he describes as “taking off right now”. He refers again to helping to ‘land’ and ‘launch’ fintech companies.
“One thing I surely expect in 2023 is that a lot of foreign fintechs will be coming in here, because we are positioning it as a landing platform,” he predicts. “We are also expecting a lot of domestic fintechs to go global as it’s also a launch-pad for that.”
Global Government Fintech’s India coverage
Singapore and Indian authorities look to boost cross-border fintech innovation – our news story (27 September 2022) on IFSCA and MAS inking their fintech partnership
Indian financial services authority opens regulatory sandbox – our news story (28 October 2020) on IFSCA’s regulatory sandbox
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