Promote Digital First To Push Financial Inclusion - Demands Indian FinTech Startups
As another financial year is about to start, expectations and hopes are running high with the anxiety and anticipation of that of a child waiting for the birthday present about to be unveiled. Along with the rest of industry, fintech startups are also looking forward to a favourable Union Budget 2018.
Fintech startups have had a good 2017, thanks to the positive policy environment and the clear intent of the current government to put digitisation on the fast track. But there is a long way to go and hopefully, the upcoming Union Budget will further pave the path for that. Here are some expectations of fintech startups from the Finance Ministry for the upcoming Union budget 2018 session.
Promote Digital First to Push Financial Inclusion
Fintech sector is looking for a major policy initiative to make India a Global Fintech hub. While this year saw some excellent initiatives like India Stack, UPI, increasing use of Aadhaar, e-KYC, to keep this momentum going they need to be sustained policy support.
Concerns about the implementation of Aadhaar need to be looked into. The government needs to raise the monetary limit to process paperless e-KYC. Experts are also hoping that policy will be in place for adoption of Electronic National Automated Clearing House (e-NACH) and DigiLocker technologies. Paperless access to financial products is the key to ensuring complete financial inclusion.
Hopefully, the Government will continue incentivizing the consumers for making digital payments.
Relaxation of Taxation Laws
Startups are driving Make in India campaign by investing in manufacturing and product development. The sector will benefit significantly if the Finance Ministry reduces the corporate tax for SME’s from 25% to a more reasonable tax rate, say 12%. They can then start profiting and will be able to pass on the benefits to their customers. They are also hoping personal tax reduction for people working in these startups, thus reinforcing the support system for the fintech startups.
Simplification of GST And Data Sharing
Goods and services tax is no doubt a significant tax reform, but it needs to be further simplified to benefit taxpayers and the nation. Furthermore, fintech startups are hoping to get access to the database of the taxpaying businesses to ascertain creditworthiness of the Micro, small medium enterprises (MSME). This can be achieved with the help of secured API’s. This would help fintech companies to have a seamless credit process.
Bring Fintech Startups Under MUDRA Ambit
MUDRA or Micro unit development and refinance agency bank is a public sector financial institution launched in 2014 under Pradhan Mantri Mudra Yojana. It provides loans at low rates to microfinance institutions and non-banking financial institutions which then give credit to MSME’s, Unfortunately; this doesn’t include the fintech startups. Even existing credit schemes for fintech startups do not support business-driven models. Fintech startups are expecting that the Union Budget 2018 would change this. They need support to be able to help MSME’s expand and grow and remain updated with the latest technology.
Establishment of Innovation Hub
Experts in fintech sector are hoping that policies are formed to promote a multidisciplinary innovation hub. Such innovation hubs will give fintech startups an environment for their growth. Similarly, a venture capital fund, if created under the ministry of finance could invest in fintech startups and thus ease the pressure on fintech startups to raise capital.
Relaxed Compliance Parameters
The different players in the ecosystem and the fintech startups are collaborating to redesign the financial services processes with their high-end technological expertise. However, the regulatory environment and compliance parameters leave a lot to be desired. Hopefully, the upcoming Union Budget will see relaxation in these settings so that fintech companies can focus on testing the new products and services.
Getting Rid of the Angel Tax
Angel tax has been the heart of contention for start-ups due to its pulling down nature. In the past year, many start-ups had to face the scrutiny of IT department over their funding raised from angel investors. At present, Angel Tax stands at a whopping 30%, which is a big deterrent to the investors and the startups. This has resulted in fall in angel funding.
The fintech startup sector is hoping that the Finance Minister will acknowledge the demonic nature of the tax and get rid of it in this coming Union Budget.
Despite many reforms and policies, fintech startups ecosystem has been facing roadblocks. Hopefully, the last budget of the tenure of the current government would give the fintech startups something to raise a toast to.
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