According to chief executive officers and founders of payments firms, the disruptive growth seen by the fintech ecosystem in 2020 has shored up the need for a more focused approach towards sustaining the growth and protecting customer confidence.
Exemptions on procurement of point of sale terminals, GST rates for rural banking agents remitting funds among households, and subsidies to compensate for merchant discount rate (MDR) waiver are among some of the measures industry executives are keeping an eye out for.
“Given the surging prominence of digital initiatives in multiple facets, further attention needs to be given in the budget, towards enhancing its application and effectiveness,” said Madhusudan Ekambaram, co-founder of industry body Fintech Association for Consumer Empowerment.
“The multi-pronged implications of the same could be tax and policy reforms for the startups and tech-centric firms, and a prominent support towards strengthening the digital infrastructure,” said Ekambaram, who is also the chief executive of digital lender KreditBee.
On Monday, Union Finance Minister Nirmala Sitharaman is expected to present a budget that addresses the needs to bolster an economy ravaged by the pandemic. Industry experts said reforms to further the country’s financial inclusion mandate through effective use of technology could be expected from the budget.
According to Shilpa Mankar Ahluwalia, partner and head of fintech at corporate law firm Shardul Amarchand Mangaldas, the sector is looking to this budget to lay out the road map for recovery and growth in 2021.
“There is an expectation that the government will emphasise the role of technology in accessing financial services and renew its commitment to invest in Internet infrastructure, particularly in Tier-II and Tier-III cities,” she said.
Furthermore, credit support schemes for small non-bank financial companies and fintech lenders can boost support for small businesses. “The industry is also hoping for lower GST rates on financial services which will lower costs of distributing financial products,” she said.
Executives also pointed out that exemptions on taxes for financial intermediaries catering to underbanked segments of the population could help reduce the cost to access digital modes and push adoption in small towns and villages.
According to Dilip Modi, founder of Spice Money, a reduced goods and services tax and tax deductible at source (TDS) for banks’ business correspondents (BC) in rural areas could help reduce cost of domestic money transfers among households.
India’s domestic remittance volume had plunged to multi-decade lows amid the migrant crisis during lockdown months.
“The government should consider providing some GST relief on smaller transactions conducted on the BC network,” said Modi. “Further, tax benefits to the rural end-customer on digital purchases will also help boost adoption of digital financial services in the low-income groups.”
Another pressing concern among digital payment stakeholders including the banks is the skewed pricing regime on Unified Payments Interface (UPI) where MDR was waived in an announcement made by Sitharaman in the budget of 2019.
“Financial Inclusion has been the focus for the government and there should be a push towards a digital economy for faster adoption,” said Yogendra Kashyap, CEO of rural-focused fintech firm RapiPay.
“For the Tier-2/3/4 cities and the rural population to have seamless banking services at their disposal, there should be higher incentives for banking transactions through BCs so that more and more retailers offer money transfer, micro ATM and AePS services,” he added.