Budget 2023-24 Expectation: Government should ease regulatory environment to boost fintech sector growth
The fintech and payments sector has seen considerable momentum in recent years with exceptional growth and progress increasing financial inclusion and digital payments. Huge expectations, though, persist. With the global economy slowing down, financial accessibility and a robust financial sector have turned imperative.
Fintech has now evolved into one of the fastest-growing segments of technology, transforming the way financial services are offered. The fintech market is expected to register a 24.96 percent CAGR between 2022 and 2027 to R s9.2 billion. Hence, high hopes exist for the government to unveil policies and initiatives to support and encourage the sector’s growth.
Complex regulatory landscape impacts fintech
The fintech landscape is undergoing unprecedented growth with many startups emerging in recent years. Against this backdrop, fintech and software-as-a-service (SaaS) have become vital in extending financial access to a vast segment of the Indian population. Despite these positives, the fintech sector in India is still faced with challenges before it can reach its full potential. The regulatory environment is complex and digital infrastructure still has a long way to go.
With technology such as AI and blockchain, fintech companies have opportunities to develop innovative solutions to transform the Indian financial services sector. The government’s recognition of the need to invest in cutting-edge technology is vital, as well as drive high levels of research and development of technologies, new products, and services.
Promote innovation, R&D
The Budget must drive and even seed many digital labs, so research centres can develop innovative ideas and products in the fintech ecosystem.
The government must promote innovation. and research & development in fintech and SaaS. Measures such as R&D tax credits, subsidies for innovation and research, and other forms of support for companies engaged in R&D will drive innovation, and boost the sector.
Policies, incentives needed for SaaS use by MSME
Another priority must be to promote the adoption of Software-as-a-Service (SaaS). SaaS has become increasingly popular recently as companies can subscribe to software and services, rather than purchase and maintain them. This is an effective, strong, and economical way to power transformation among companies. The government could promote policies and incentives to use SaaS by small and medium-sized enterprises to boost their competitiveness in the digital era.
The government should take steps to improve the digital service infrastructure by expanding internet connectivity in rural and remote areas, and invest in developing Cloud-computing infrastructure.
Improve ease of business for fintech, SaaS firms
While India has done well on ease of doing business, government could also take steps to improve overall ease of doing business for fintech and SaaS companies. This can be through measures to simplify the process of starting and operating such businesses, as well as to reduce the overall compliance burden for such companies.
Besides, skilling and upskilling the workforce is vital. The government could announce measures to support training and development of workers in fintech and SaaS to ensure they possess skills and knowledge needed in these rapidly-evolving industries. It should encourage all kinds of education and investments to create a complete ecosystem.
Regulation needed to safeguard personal data
Another paramount area is data privacy and security. With mounting use of digital payments and fintech services, it is imperative for robust regulations to safeguard consumers’ personal data and ensure digital-transaction security. Steps should be taken to address this and provide a safe and secure environment for fintech growth.
It is also imperative that government take steps to further strengthen financial inclusion of Micro, Small and Medium Enterprises (MSMEs) in India. In the COVID-19 aftermath, extending priority-sector lending to NBFCs and micro-finance companies that can provide the last mile funding is imperative. The government should also turn the lens on widening the adoption of digital payments by SMEs.
The fintech sector holds considerable promise of fostering innovation and enhancing financial accessibility. Therefore, measures to augment support for this sector in the forthcoming Budget are imperative. Investment in fintech services augmentation, with specialised fintech competencies can cultivate an ecosystem favourable to fintech expansion. This will allow companies to provide superior services to their clientele and increase financial inclusion, promote growth, and be the catalyst to invigorate the Indian economy.
With rapid digitisation and user-friendly products emerging daily, the Indian fintech sector is experiencing strong growth. A report by EY says India leads in adopting fintech at 87 percent, more than 20 percent higher than the average adoption rate worldwide (64 percent). At this rate, Indian fintech is projected to grow to $200 billion by 2030.
With more investments, and a conducive regulatory environment created by the government, fintech could be a strong catalyst to drive India’s growth in the coming years.
The writer is Managing Director and CEO, Zaggle-a B2B SaaS fintech firm. He tweets @avinashgod @zaggleapp. Views expressed are personal.
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