Fintech industry seeks tax incentives and measures to spur growth in 2022 budget
The government has consistently pushed for digital transactions and the use of technologies such as the Unified Payments Interface (UPI), which was one of the goals of the demonetization announcement in 2016.
Since then, smartphones have become a valid mode of financial transactions. Mobile wallets and other forms of digital payments are made through smartphones.
In addition to this, fintech companies are using the smartphone to provide instant financial services to its users like approving loans, activating stock trades, offering peer-to-peer loans, etc.
Many apps have now partnered with banks and financial institutions to offer their users a “buy now, pay later” option. The installation allows buyers to make in-app purchases and pay at a later date. This facility has grown exponentially from 1.6% market share in 2019 to 3% in 2020 and is expected to reach 9% in a few years.
“The year 2021 has been a phenomenal year for the Indian fintech and startup industry. With over 40 startups achieving unicorn status during the year, the startup industry has witnessed phenomenal growth India has seen a continued explosion of digital payments and increased adoption of digital payment methods,” Murali Nair, president of banks at Zeta, told timesofindia.com.
Nair pointed out that the digital payments ecosystem can be a force multiplier for economic growth. He added that boosting this industry is a great way to accelerate overall growth and bring greater transparency.
Around 44 billion digital payments were recorded across India in 2021. The Union Budget 2022-2023 must accommodate this growth in the industry and continue to drive this industry to flourish in the coming months.
Therefore, Nair hopes that the 2022-23 budget will take into account the industry’s phenomenal growth and continue to provide incentives in the months to come.
“Given the increase in digital payments, the budget should consider offering tax incentives to consumers, merchants, and ecosystem enablers. To accelerate innovation in the fintech space, the budget should support more partnerships between banks and fintechs – this will help push the economy towards financial inclusion We expect the budget to include support initiatives to deliver a modern payments framework that can ensure performance high quality while preparing for the next wave of transformation,” he said.
To enable access to digital financial services for all, Sumit Gwalani, co-founder of Fi – a neobank created for working professionals – said the budget can encourage the adoption of technologies such as UPI and account aggregator in the financial sector through partnerships with digital services. suppliers either through direct funding or through tax incentives.
With increased interest in capital market participation, Gwalani believes that digital infrastructure for financial services, from banking and payments to credit, investing and wealth management, must reach the last mile.
“While the Reserve Bank of India (RBI) has paved the regulatory way for innovations such as UPI and Account Aggregator, the budget can encourage the adoption of these technologies in the financial sector through partnerships with digital service providers, either through direct funding or through tax incentives,” he said.
Gwalani added that the government has made progress towards financial inclusion through the implementation of the JAM trinity concept, and in combination with regulatory support in the form of digital banking licenses, fintechs can play a major role in the India’s growth trajectory.
Citing similar opinions, Kapil Banwari, Founder and CEO of Fyp – a neobank providing numberless prepaid card to teenagers – said that the fintech ecosystem has significantly revolutionized the banking industry over the past 2 years.
He also believes that neobanks have paved the way for financial inclusion and have emerged as the next big banking revolution.
“We expect the budget to take steps to support and stimulate the growth of neo-banks and fintechs in India. With the comprehensive digital banks proposed by government think tank, Niti Aayog, we hope it will open doors to growth and opportunities in terms of foray into full banking,” Banwari said.
“Additionally, we expect the budget to consider reforms and policies that provide increased space for local innovation,” he said, adding that “a structured regulatory framework for the operation of neobanks India would also be a welcome move”.
Neobanks are financial institutions that offer customers a cheaper alternative to traditional banks. They can be seen as digital banks without physical branches, offering services that traditional banks do not, and doing so efficiently. They leverage technology and artificial intelligence to deliver personalized services to customers while minimizing operating costs.