New Delhi: The digital payment industry in India has seen a breathtaking spectacle over the past few years. In its Union Budget 2022-23 wish list, the industry now wants the government to close the gap between financial institutions and users across the country.
In the Union Budget, Finance Minister Nirmala Sitharaman has an opportunity to further strengthen the payment ecosystem and set the government’s vision for financial inclusion through digitalization. A look back at what manufacturers expect from the general budget which will be presented to Parliament on February 1:
Nikhil Sahni, Division President, South Asia, Mastercard
In the Union Budget 2022-23, we look forward to interventions aimed at further accelerating the impact of digital India on citizens, by promoting innovations in financial technologies, enabling digital infrastructure, and encouraging solutions focused on safety and convenience for merchants and consumers. R&D investments to introduce new products and diversify into underserved areas, especially in rural India, could be encouraged. Supporting initiatives to build technology skills in start-ups will go a long way towards creating a viable fintech ecosystem. To ensure that the benefits of fintech and digital payments reach customers in rural India, the government could introduce initiatives to expand digital infrastructure: payment touchpoints, internet connectivity in remote areas, and securing the digital ecosystem for individuals and businesses. This will facilitate fast transactions and improve the overall payments ecosystem. Mastercard has always welcomed and supported policy initiatives to encourage digital rather than cash. Providing the right incentives for banks and merchants to further digitize the country’s payments and a business model, which allows for investment in both issuance and acceptance, is essential to further develop electronic payments in the country. Small businesses have been hit hard by the pandemic. We appreciate the government’s timely measures to support the recovery. We must build on our momentum by equipping small businesses with innovative digital finance solutions such as supply chain finance, subsidizing loan insurance for financial institutions that serve MSMEs, and continuing to simplify the slabs GST to further strengthen the sector. Incentivizing asset-light innovations can enable millions of small business owners to adopt and benefit from digital payments. Finally, raising awareness of digital payments and promoting financial literacy is essential for India to achieve the vision of a trillion-dollar digital economy. Mastercard, together with its partners, will continue its efforts towards this objective.
Akash Sinha, Co-Founder and CEO, Cashfree Payments
The upcoming Union Budget 2022-23 is of great significance as India’s economy makes great strides towards full recovery and growth from the pandemic. This imperative will be largely supported by enhanced financial inclusion and digitalization, which makes it crucial to announce appropriate measures in this regard. It is heartening to see the government’s recognition of fintech’s ability to reach unserved and underserved sections of the country, as evidenced by multiple initiatives in recent times. To further increase financial inclusion, government support must be directed towards strengthening digital infrastructure and innovation. In addition, policy and regulatory efforts should aim to create an enabling environment for investment. While ensuring an appropriate degree of regulation, facilitating investment in unlisted private companies, especially in non-metropolitan cities, is crucial for a convenient flow of capital to tech start-ups for their healthy growth. In the same vein, reducing entry limits for alternative investment funds (AIFs) and syndicates, aligning with the government’s allocation to priority sectors, will ensure the injection of funds to companies.
Poshak Agrawal, Co-Founder and CEO, Florence Capital (an ethical lending platform designed exclusively for women)
The Union Budget 2022-23 will be crucial for women as they have suffered disproportionately due to the Covid-19 pandemic. The government’s latest periodic labor force survey shows that the unemployment rate for women was 11.8% in January-March 2021, even before the second wave of the pandemic hit – up from 10.5% in January- March 2020. The pandemic has forced more and more women into casual work – 9.3% in Jan-March 2021 compared to 7.7% in Jan-March 2020. So the budget must not only reverse this trend but create the ground for better employment opportunities in the formal sector for women. This requires hard work, including higher capital spending on education and health – critical issues for women. A recent paper by the National Institute of Public Finance and Policy found that gender-responsive budgeting for the 2021-22 Union budget was only around 5% of the total budget. We hope the budget for 2022-23 will prioritize spending on gender-responsive budgeting to help reduce inequality. We hope that 2022-23 will be a year of greater financial inclusion and easier access to credit for more Indians on a personal and business level. We welcome changes at the highest level of government and industry regulators.
Rohit Garg, CEO and Co-Founder, SmartCoin
The fintech landscape is changing tremendously due to some significant metrics. The allocation of Rs 1,500 crore for a new fund in the 2021 budget has further accelerated growth by incentivizing companies to offer digital payments to help fintech businesses thrive in the ecosystem. Last year’s budget was a testament to how the industry has proven itself during the Covid-19 crisis. However, there is still a long way to go with many other difficulties that need to be dealt with quickly and effectively. In recent years, digital lending start-ups have proven to be a huge asset to the country. The Union bBudget 2022-23 is expected to be announced soon. We look forward to increased spending on liquidity and collateral programs to help improve loan supply and make NBFCs more access to capital. The NBFC sector is expected to experience more modest growth this year and new capital should be provided to support this expansion. We look forward to working with a new era of NBFCs/Fintechs starting this year, in which the government promotes more banks and bigger NBFCs while also providing access to credit to people who are not yet served by the banks.
Mandar Agashe, Vice President and General Manager, Sarvatra Technologies
There have been positive signs of economic recovery from the severe pandemic crisis. The continuous government push has resulted in greater adoption of digital payment methods like UPI, AePS, QR codes, and others, and individuals have become accustomed to making digital transactions. Digital payments can expand their network to other parts of the country, and to do so; the budget must include bold policy interventions to build digital infrastructure, which will ultimately help digitize the entire economy. Given that the country has only 5.2 million active POS machines, the budget should include tax incentives to encourage the use of PoS/Micro ATM devices, which are significantly more cost-effective and less infrastructure demanding than ticket vending machines. Additionally, the industry would welcome a GST exemption for merchants who accept digital payments; this will encourage further digital adoption, especially in semi-urban and rural markets, where digital payments are still rare. Ultimately, we hope that the budget will place special emphasis on promoting the country’s FinTech ecosystem, as the FinTech industry can give India’s economy the position it deserves.
Anand Kumar Bajaj, Founder, Managing Director and CEO, PayNearby
The digital payments space has proven itself as a stable growth path during the pandemic. A positive impact was observed on digital payments due to benign taxation for digital self-service customers. To ensure that the same benefits flow to less knowledgeable citizens, our government could waive GST and TDS for financial inclusion services at Business Correspondent (BC) outlets across India. A waiver of GST and TDS will help reduce the cost of providing transparent financial services and help high-end tech reach the tech-aware segment. We support the government’s intention to bring digitalization to the last mile and pass the GST exemption to end-users as this will foster greater financial inclusion and a digital economy in the country. Moreover, low-income citizens are mainly served by low-income retailers who barely exceed the value of taxable income and therefore do not file IT returns to claim a TDS refund. So TDS is just a cost to them and not a refundable deduction as they don’t know how to get reimbursed by filing returns. We sincerely hope that the TDS for incomes below Rs 50,000 per year can be removed. We are confident that this budget will take into account the deplorable working conditions of the British Columbia network and make the necessary regulatory changes to ensure the viability of a community that has played a vital role in advancing the cause of inclusion. finance and the democratization of digital payments in the country.
Bhavin Patel, Co-Founder and CEO, LenDenClub
The economy should gradually return to its previous trajectory, with the fiscal priorities of the upcoming budget reinvigorating it. A regulatory body to oversee payment collection is the need of the hour. Enhanced procedural support for the judicial recovery of repayments from digital borrowers to better protect the rights of those who lend money. Such a specialized government vehicle to oversee fintech could not only help startups operate more efficiently, meeting compliance requirements, but it would weed out potential fraudsters. Returns from investments in peer-to-peer (P2P) lending may be exempt from tax under Section 80C of the Income Tax Act,
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