The relationship between banks and fintechs has evolved from competition to collaboration, according to Bank of Baroda's executive director Sanjay Mudaliar. As reported by Business Standard, both entities now recognize their distinct strengths - banks offer trust, scale, regulatory expertise and strong risk management, while fintechs contribute innovation, agility and niche-technology capabilities. Nitin Chugh, managing director and group CEO of Perfios, explains that legacy banks are becoming far more technology-led, while fintechs are maturing rapidly by adopting risk, governance and compliance rigour associated with established financial institutions. "So, the gap is closing not because banks are becoming fintechs or fintechs are becoming banks, but because both are moving towards a common model: Digital-first, data-driven, compliant and customer-centric financial services," Chugh notes, drawing from his previous experience as a lateral recruit as the State Bank of India's deputy MD and head of digital banking and transformation.
The partnership landscape faces significant regulatory changes that require operational trust over speed alone. According to Raghuveer Kancherla, cofounder of Sprinto, governance has evolved from being a compliance checkbox to a growth capability. The Reserve Bank of India's artificial intelligence framework released in August 2025, combined with the next phase of the Digital Personal Data Protection Act 2023, creates new compliance expectations around consent, data governance and breach reporting. As reported by Business Standard, fintechs are being asked to meet cybersecurity resilience, third-party risk management and operational governance requirements in just a few years, moving from periodic compliance to continuous compliance. "This shows up clearly in how fintechs now think about audits. It's no longer a once-a-year event they scramble to prepare for … the shift, from periodic compliance to continuous compliance, is the real story underneath the regulatory changes," Kancherla explains.
Fintech funding patterns show significant changes in the market dynamics. According to data from Tracxn, funding reached $2.2 billion in calendar year 2024, $2.4 billion in 2025, and $822.9 million year-to-date in 2026. However, the number of funding rounds has decreased from 379 in 2024 to 296 in 2025 and 60 in 2026, indicating that a smaller pool of firms is cornering funding opportunities. As noted by Perfios's Chugh, funding may no longer flow easily to models built on regulatory gaps, but high-quality fintechs with durable business models will continue to attract serious capital. "Funding may no longer flow as easily to models built on regulatory gaps, but high-quality fintechs with durable business models will continue to attract serious capital," Chugh notes, highlighting the shift away from growth-at-all-costs narratives.
The Fintech Association for Consumer Empowerment's third edition of the "Fintech Barometer" report reveals significant risk concerns among industry participants. According to the report, 59% of respondents identified reputation and brand risk as a high-severity concern, the highest-ranked risk in the study. Interoperability and infrastructure risks emerged as the second-highest concern with 51% of respondents, while market competition and conduct risk ranked third for 46% of respondents. The report also highlights the absence of a universally accepted definition of fintech, with the Financial Stability Board defining it as technologically enabled innovation in financial services with material effect on financial markets. "Digital lending illustrates the challenge of reputational spillovers: Misconduct by illegal or unauthorised applications has eroded customer trust across the broader ecosystem, including compliant entities," the report notes, emphasizing the need for differentiation between good and bad actors in the fintech space.
