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Manav Jeet

Manavjeet Singh is the CEO & MD of Rubique.

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What to Expect from the Government in 2018 for Fintech Industry

According to EY Fintech Adoption Index, India has the second highest fintech adoption rate among digitally active consumers at 52%, only second to China at 69% even though a large population remains unbanked or underbanked.


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The Indian financial services industry has gone through a remarkable transformation in the last few years thanks to the advancement in technology, the ever-evolving customer and favourable government regulations. The fintech industry supported by innovation across multiple streams – payments, alternative lending, e-wallets, insurance, among others; has seen a radical growth curve.  According to a recent report by KPMG, the fintech industry is likely to continue its current growth trajectory, with the Indian Fintech market poised to touch USD 2.4 billion by 2020 from the current USD 1.2 billion in the Financial Year (FY) 2016. The current marketplace has created an ecosystem which is complementary to the growth of these fintech start-ups into big businesses. It is providing an opportunity for these start-ups to participate in a range of unexplored segments to engaging with foreign markets, Fintech start-ups are delivering innovation that was previously difficult to achieve.

The fintech industry in India is still at a nascent stage and has a lot of growth opportunities. The youth demographic in India is growing, the smartphone penetration is likely to witness an upsurge - from 53% in 2014 to 64% by 2018. Apart from this, the financial services market in India is primarily untapped. According to industry reports, around 40% of the population have no association with any bank and over 80% of the transactions are carried out through cash. This huge gap represents an opportunity for Fintech start-ups to massively spread their wings in different segments and for this, they need support from the government and there is no better platform than the budget to announce these. Financial Institutions might think that the fintech start-ups get free rein while they are saddled with regulatory burdens whereas fintech start-ups might need the government support more than financial institutions. The key is to strike the right balance with the budget. Some of the expectation from the budget are:

Financial inclusion: With so many entrepreneurs venturing into fintech, it gives us a remarkable opportunity to reach out to the previously unbanked or underbanked members of the public. In a developing market like ours, fintech organisations can provide millions of people with basic financial services. Financial inclusion will not only help increase the amount of available savings, efficiency of financial intermediation and new business opportunities but it will also help the government plug gaps and leakages in public subsidies and welfare programmes. The government should provide incentives for such fintech start-ups which are not only venturing out to unbanked markets but also providing an opportunity to bring in more public under the financial purview.

Infrastructure and Efficiency: When the fintech industry started operating, their processes were anchored to the existing bank networks and banking processes to support the existing business models. However, over the last few years we have seen the fintech industry develop despite the issues faced with the existing infrastructure thereby challenging the model and infrastructure itself. Credit scoring tools, payment and lending systems, data analytics for credit, distribution platforms and customer service applications have all created new and disruptive models which work independent of the existing infrastructure and technology. This has created a situation where the fintech industry is removing the middleman from the financial value chain. To help the fintech industry evolve further, the government needs to focus on building robust infrastructure for efficiency and safety especially for enabling technologies and solutions such as payments, lending, etc.  

Inspire competition: With new entrants in the fintech space every day, competition is rising. While healthy competition is always good to help drive the country’s economy, it is critical that these entrants are driving innovation and bringing a disruptive change in the market. One area where the government can support such fintech players is by creating robust authorization and entrant policies. This will ensure that only those players who have the capability to drive the industry further will stay in the market. In other countries, we have the government and regulatory bodies who have supported the risk of fintech organisation or ‘challenger’ banks to help drive the economy. This model can surely be replicated in India.

According to EY Fintech Adoption Index, India has the second highest fintech adoption rate among digitally active consumers at 52%, only second to China at 69% even though a large population remains unbanked or underbanked. This is a huge opportunity for fintech players to grow and provide innovative and disruptive solutions to the people. This Budget comes at a crucial stage for the industry where if given a few positives, the entire sector will prove to be a game-changer.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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Fintech Industry Union Budget 2018

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