The fintech industry has experienced tremendous growth in recent years, and it is expected to continue to play a significant role in the financial sector in the coming years. In 2021, India’s fintech market size was $50 billion and by 2025, it is estimated to reach $150 billion.
With this rapid evolution, there are high expectations from the fintech industry for the government to unveil policies and initiatives in the upcoming Budget for 2023 that will further support and encourage the growth of this sector. Before we delve deeper to understand the various expectation of the fintech players, let’s get to know some of the factors that are contributing to the rapid rise of the sector.
Factors leading to the growth of India’s fintech industry
The fintech industry is booming and is set to continue to do so in the near future. But why is fintech growing at such a rapid pace? Let’s take a look at some factors that are driving the growth of the fintech sector.
- Increased access to financial services: The use of technology has made it easier for people to access financial services, particularly in underbanked or unbanked areas. Mobile banking, for example, has made it possible for people to access banking services without having to visit a physical branch.
- Convenience: Fintech companies often provide convenient and user-friendly services, such as the ability to make payments or transfer money online. This has made it easier for people to manage their finances and has increased the popularity of fintech services.
- Competition: Fintech companies have emerged as an alternative to traditional financial institutions, providing competition and driving innovation in the industry.
- Investment: The fintech industry has attracted significant investment, which has helped fuel its growth. The years 2021 and 2022 witnessed more than $19 billion of fintech funding and the addition of 18 fintech unicorns.
- Regulatory changes: Changes in regulations, such as the introduction of open banking in some countries, have made it easier for fintech companies to enter the market and offer financial services.
What is the fintech industry expecting in the 2023 Budget?
The fintech sector has kept high hopes from the Indian government to take necessary initiatives for the advancement of the sector. Here are some of the things the fintech industry is expecting in the 2023 Budget:
- Enhanced Regulatory Environment: One of the key expectations from the fintech industry is for the government to provide a more enabling regulatory environment. The fintech industry operates in a highly regulated space and any changes in regulations can have a significant impact on the industry.
The government can consider providing more clarity on existing regulations, streamlining the process for obtaining licenses and approvals, and reducing the compliance burden for fintech firms.
- Liberalisation of Tax Regime: Fintech Companies are subject to corporate income tax rates. The GST is charged at a rate of 18 per cent on services rendered by fintech businesses that are mentioned in Section 65(12) of the Finance Act, 1994.
We expect the government to reduce start-up taxes across the board with no GST until Rs 10 crore turnover annually. We believe that this could SMEs build a stronger economy and aid in more jobs.
- More Investments Opportunities: Another expectation is for the government to invest in infrastructure and new technologies such as artificial intelligence, blockchain, and machine learning that will support the growth of the fintech industry.
This could include initiatives to promote the adoption of digital payments, such as expanding the use of point-of-sale (POS) terminals and mobile payments, as well as investing in cybersecurity and data protection measures to ensure the safety and security of financial transactions.
- Tax Benefits: The fintech industry is also hoping for the government to provide incentives for the adoption of new technologies, such as artificial intelligence (AI) and machine learning (ML). This could include tax breaks for companies that invest in these technologies and training programs to upskill the workforce.
- Access to Capital: The fintech industry is looking for the government to address the issue of access to capital for start-ups and small businesses.
This could include measures such as easing the process of obtaining loans and financing, as well as providing access to funding through venture capital and other sources.
- Greater Access to Global Markets: The budget may also include measures to make it easier for fintech companies to access global markets. This could include measures to reduce barriers to entry and make it easier for fintech firms to compete in international markets.
Quoting a study by EY, it is expected that the promising Indian FinTech market will generate $200 billion in revenue and $1 trillion in AUM by 2030.
To achieve this mark, the fintech industry is expecting the government to take a proactive approach in supporting the growth and development of this sector.
Fintech companies are all set to keep an eye on the Budget to see what measures the government take for the technological and financial growth of the country.
Hemant Sood is the founder at FinDoc.
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