Budget 2018: Over the last year and a half, India has witnessed the implementation of one of the most revolutionary policy reforms with the introduction of the Goods & Services Tax (GST) regime and the 2016 demonetization initiative. Following the disruptive demonetisation reforms, this move has shifted the collective economic consciousness of the nation towards digital adoption. The essence of these reforms lies in the timing of their introduction. At a time when the nation is on an exponential growth trajectory, a policy impetus will help overcome some roadblocks and hence the role of Budget 2018 will be critical.
The FinTech ecosystem and the policy landscape in India already enjoy a mutually beneficial relationship as policy changes have powered FinTech’s growth and in return, FinTech has taken on the crucial responsibility of helping establish a formalized and digitized economy. These policy changes have led to a digital awakening and now the industry needs to formulate a strategic approach to ensure long-term sustenance of this digital movement without sacrificing speed, safety, and efficiency. So, how about exploring how Budget 2018 can be a game changer for FinTech companies?
What the Budget can change for FinTech companies
Globally, the most successful economies are driven by an unwavering focus on innovation, consistent building and reinforcement of digital capabilities. For the financial services industry, this is possible by enhancing the payment experience for customers and simplifying their lives. Can Budget 2018 encourage digital transactions via tax rebates?
WATCH | Budget 2018: FM Arun Jaitley May Tweak Income Tax Basic Exemption Limit
Encourage digital transactions via tax rebates
Post demonetization, there is a distinct shift in the mindset of consumers and merchants towards electronic modes of transaction, but concerns pertaining to security, convenience and connectivity continue. By providing tax rebates for digital transactions beyond a certain amount in Budget 2018, the government can encourage digital adoption. This can also enable the government to track transactions transparently and reduce black money circulation.
Curtail the usage of ATMs and reduce cash in circulation
Current rules around withdrawing cash from parent and non-parent ATMs are unclear. Certain rural sectors and industries rely heavily on cash but people living in metros are familiar with digital modes of transacting. By dis-incentivizing the use of cash and incentivizing the use of digital modes of payments in Budget 2018, the government can encourage digital adoption by the digital natives. Combined with the rise in PoS services over the next few years, this will increase digital transaction dependency.
WATCH | Budget 2018: How Modi Government Can Deal With Agricultural Stress; These Steps Will HelpClick to use this video
Extend the MUDRA scheme for small exporters
The government’s Micro Units Development and Refinance Agency (MUDRA) was developed to supplement institutional finance for the country’s vast number small businesses. By extending this scheme to FinTech players in Budget 2018, the government can aid credit accessibility and digitization and enable growth. As proposed in the last Budget, the Government can consider formalising the payments regulatory board in order to bring about structural changes and realise the less cash vision. Further, B2C exporters of goods and services can also be allowed annual filing of return to help reduce the cost of compliance and overheads.
As proposed in the last Budget, the Government can consider formalising the payments regulatory board in order to bring about structural changes and realise the less cash vision.
Enable annual filing for B2C exporters
B2C exporters of goods and services be allowed annual filing of return to help reduce cost of compliance and overheads.
Grant infrastructure status to digital industry
By granting infrastructure status to digital payments companies, similar to the status granted to telecom companies, the government can influence the backend mechanisms that govern the industry. Such a move in Budget 2018 will enable industry players to gain intangible benefits such as better access to credit, favorable regulatory policies and greater potential for raising money.
The way forward
In order to realise India’s Digital India vision, the industry and regulators need to be laser-focused on two aspects – driving adoption and enabling scalability in a safe and secure manner. While regulatory guidelines in India protect the consumer, the evolving landscape and scale of growth demand that the focus shifts from consumer protection to the enhancement of the experience. There is immense potential in the Indian digital payments system with regards to innovation and Budget 2018 holds immense promise for the sector.
Anupam Pahuja is Managing Director, PayPal India