Budget 2022-23: What India’s fintech sector wants from the government

India's payments infrastructure has seen substantial improvements, particularly with the introduction of new payment mechanisms and efforts towards making the ecosystem cyber secure. The growth momentum should continue.
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While the COVID-19 pandemic hit India’s economy hard and brought businesses across sectors to a standstill, digital-enabled startups exploded into growth.

2021 produced 43 Indian unicorns, valued at over a billion dollars. And powering them – and many other businesses, including kirana shops – through the lockdowns was fintech, which helped in connecting and continuing commerce and enabled normalcy. In fact, nearly a dozen fintechs turned into unicorns in 2021 alone.

Today, India is one of the fastest growing fintech markets in the world. According to the MEDICI India FinTech Report 2020, the country saw the second-highest number of new fintech startups in the last three years, right behind the US.

Measures announced by the government during the last budget provided a further boost to the fintech sector. This included the earmarking of Rs 1,500 crore to incentivise digital payments, which took off significantly in India following the pandemic. Also, the recent fintech department set up by the Reserve Bank of India (RBI) will be a game changer in boosting innovation in the sector.

Driving innovation in fintech

The government’s efforts to strengthen the digital infrastructure have been significant. India's payments infrastructure has seen substantial improvements, particularly with the introduction of new payment mechanisms and efforts towards making the ecosystem cyber secure. This growth should continue and accelerate. For this, it is important to encourage innovation while keeping the consumers and their needs at the centre.

Budget 2022-23 should focus on promoting innovation in fintech to build solutions that cater to evolving consumer needs and diverse segments. This would especially help segments that are yet to use technology to their benefit, like in the rural parts of the country. Measures that help in expanding the reach and empowering businesses and communities through improved internet penetration across rural parts of the country will play a big role in furthering financial inclusion. Digital payments have to be made more convenient, frictionless and safe, for both buyers and sellers.

Boosting credit flow for MSMEs

In 2020, the RBI allowed debt restructuring for stressed MSMEs – which likely helped many survive. Last year, additional relief measures were announced to help the MSME sector recover from the devastation of the pandemic. MSMEs need further support to address key challenges – especially that of access to credit. In the upcoming Budget, the government should aim to bring innovative digital financing solutions like supply chain financing. Subsidising loan insurance for financial institutions which service MSMEs and simplifying GST slabs will also strengthen the sector.

The budget should also focus on promoting ease of doing business for small businesses, reduce complexities in terms of incentives, regulatory clearances, labour laws and introducing measures that can help in preventing cyberattacks. Incentivising asset-light innovations will enable millions of small business owners to adopt and benefit from digital payments. A prosperous MSME sector will play a crucial role in introducing innovation and helping India achieve the vision of a $5 trillion economy.

The Reserve Bank of India (RBI) must be appreciated for introducing card tokenisation services to enhance safety and security of digital payment and for the efforts taken to minimise vulnerabilities in the system. It is crucial to use technology effectively to make cybersecurity even more seamless and develop a more foolproof payment ecosystem that enhances trust and increases the adoption of digital payments by individuals and businesses.

We are greatly optimistic about the India growth story – and the fact that there is still a huge section yet to avail digital payment services reaffirms our faith in the dream of becoming a $1 trillion digital economy. For this, fintechs and the government need to come together to focus on financial inclusion and bridge existing gaps.

With the proactive approach of the government and regulator in strengthening the digital payment ecosystem of the country, the fintech industry is always happy to support any government initiative that enhances and expands the acceptance of online payments among the unbanked and underbanked section of the country. Industry-government collaboration has always proven to be of benefit to the people of the country, and efforts should continue in this direction.


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