Budget 2018: The year 2017 was great for the Indian fintech industry in terms of a positive policy environment, new technologies and innovation. The government so far has taken tremendous efforts to promote future digital penetration but there is still much more ground to be covered in order for this wave of Digital India to be sustained during the Budget 2018.
With India’s fintech adoption rate now second only to China, this year the industry will expect more policy support from the government to incentivise digital payments and further improve the adoption rate. The budget must account measures to upgrade digital infrastructure and digital literacy in rural India to achieve the above goal. The sector will also benefit from a continued evolution of GST and a much-needed clarity on its implementation. We also look forward to sops for fintech companies providing data protection since along the rise in digital payments/ online lending, the cyber-security issues have also increased.
Though India has a high fintech adoption rate, it lags behind countries like US, Singapore, China and UK in terms of funding and growth. In order to boost the growth of the fintech sector in India, the Government will have to take strong policy initiatives with a stated mission to become a global fintech hub by year 2020.
Riding the wave of digitisation: The industry expects the government to continue to push digitisation of financial systems whilst the consumer will, more and more, be encouraged to shift to digital platforms for financial transactions. Some of the recent initiatives such as UPI, Indiastack, eKYC, and Aadhaar provide a good opportunity for banks, e-wallets, and other players in the fintech sphere to promote financial inclusion in the country.
However, this remarkable momentum that we have seen in the digital payments ecosystem post demonetisation will need more policy support to be sustained. The government must address demand-side concerns and continue to incentivise digital payments in order to strengthen the payment infrastructure and to push more and more people towards it.
India has a large unbanked population; cashless forms of transactions constitute less than 5 percent of all transactions in India. This makes India a lucrative market with a high growth potential for fintech companies to disrupt the traditional financial system by creating seamless digital financial solutions.
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Push on Data Security: The rise in digital payments and online lending also makes the sector exposed to hackers who are always on the prowl to feed on vulnerable security. In the past year, the overdrive by the government of India to promote digital payments and to link tax returns, bank accounts, mobile SIM cards, mutual funds has raised the inevitable question: How safe is Digital India? The recent spate of cyber-attacks across the globe has caused a sense of unease, among citizens, corporates, governments alike and global experts are now pegging India as a potential market where cyber-security crisis hits next. In lieu of ever-burgeoning cybercrimes, the Indian government now more than ever needs to play a larger role in creating secure business and society. This goal can only be achieved through stricter regulations and mechanisms to ensure information protection as well as investments by the government to ensure data security.
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Collaboration between Banks and fintech companies: Budget 2018 is expected to focus on government’s push to banking sector reforms alongside an infusion of fresh capital in this sector. The partnerships between payments and lending companies typifies what can be a collaborative model going forward wherein payment companies rich in transaction data can monetise the same for lending; such a partnership can help lower acquisition costs. Developing a policy framework and allocating budget to enable small value lending without excessive documentation can further help small businesses.
Simplification and clarity on GST implementation: The Goods and Services Tax (GST) has been a great undertaking by the government that has provided the much-needed stimulant for economic growth in India. However, it does need more refinement for it to maximise its beneficial impact upon the nation’s economy. Making the GST data accessible through a secured API to fintech players that lend to the sector, credit bureaus, and legacy BFSI players would help create a more seamless credit process for countless MSMEs in the country.
Written by Charlie Lee, CEO, True Balance