Union Budget 2018: India needs to cover more ground to sustain Fintech wave

The Union Budget 2018 must account measures to upgrade digital infrastructure and digital literacy in rural India to achieve the financial inclusion goal.

Union Budget 2018, Fintech, Truebalance, Charlie Lee
The must account measures to upgrade digital infrastructure and digital literacy in rural India to achieve the financial inclusion goal. (Image: Agency)

2017 was a great year for the 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 digitisation to be sustained.

With India's fintech adoption rate now second only to China, this year the industry will expect more policy support from the government to incentivize 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 cybersecurity 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 digitization: The industry expects the government to continue to push digitization 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 Aadhar 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 demonetization will need more policy support to be sustained. The government must address demand side concerns and continue to incentivize 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% 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.

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 government of India to promote digital payments and to link tax returns, bank accounts, mobile SIMs, 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 and hit 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.

Collaboration between Banks and fintech companies: Budget 2018 is expected to focus on government's push to banking sector reforms alongside infusion of fresh capital in this sector. Partnerships between payments and lending companies typifies what can be collaborative model going forward wherein payment companies rich in transaction data can monetize 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 maximize its beneficial impact upon the nation's economy. Making the GST data accessible through a sec-ured 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.

The writer is the founder and CEO of Balance Hero which promotes True balance – a digital wallet on Playstore.