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Fintech startups across the board welcomed FM Nirmala Sitharaman's Rs 1,500 crore proposal to boost digital payments, saying it was a testament to how the industry proved it worth during the COVID-19 crisis.
Union Finance Minister Nirmala Sitharaman's Budget 2021 contained several incentives for the burgeoning financial technology industry, which saw monumental growth last year in areas, including digital payments, retail investments via online brokerage platforms, insurance buying, and digital banking, among others.
Some of these were:
A Rs 1,500 crore scheme to develop, promote, and accelerate digital payments in the country.
A 'world-class' fintech hub at GIFT City (Gujarat International Finance Tec-City) aimed at encouraging and developing innovative financial technology services and products.
Setting up of development financial institutions with an outlay of Rs 20,000 crore in a bid to boost loan access for SMEs and MSMEs, and businesses working in the manufacturing and infrastructure sectors.
Increasing the foreign direct investment (FDI) limit in insurance to 74 percent from 49 percent.
Increase in limit for a tax audit, Rs 5 crore turnover initially, to Rs 10 crore to incentivize digital transactions and reduce the compliance burden.
Here's what startup founders, senior executives, angel investors, and experts think about the finance minister's fintech boost:
Need for sustained measures that increase digital and financial literacy - Kunal Shah, Founder, CRED
The initiatives to create a fintech hub and an investment of Rs 1,500 crore to promote digital modes of payments help indicate the importance of solutions and innovations in fintech, to help ease payments, incentivize spending and continue our lead and dominance in this space, globally.
With these provisions, however, there is a need for sustained measures that help increase digital and financial literacy, enabling more individuals to benefit from solutions made available to them. Incentivizing the use of credit and educating Indians about the responsible use of credit through financial education will help promote consumption, contributing to economic growth, which is dependent on personal consumption.
Will lead to many opportunities for fintechs to innovate in the new normal - Harshil Mathur, CEO and Co-founder, Razorpay
2020 saw an 80 percent increase in digital payments, especially from Tier II and III cities, and the government has understandably focussed on capitalizing on this momentum and incentivizing the adoption of digital payments for the year ahead.
I believe the Rs 1,500 crore incentive announced will open a plethora of opportunities for fintech to innovate for the new normal, leading to large-scale adoption even in the smallest of towns and villages. I'm hoping the funds will be used towards developing alternatives to the Zero Merchant Discount Rate (MDR) policy, and initiatives toward bringing digital financial literacy into vernacular languages. These will instill trust in the system and accelerate adoption from MSMEs and entrepreneurs who are apprehensive about moving money digitally.
Will ensure financial inclusion of the masses - Vikas Garg, CFO, Paytm
The finance minister has presented a balanced budget that is aimed at maximum growth of all sectors in the coming year. The Rs 1,500 crore proposed scheme to incentivize digital payments is a welcome move that will accelerate the growth of cashless transactions in our country.
During the pandemic, digital payments emerged as one of the key enablers of empowerment at the grassroots and brought millions of people under the fold of the formal economy. The government's continued emphasis on increasing investment in infrastructure, insurance, and digital payments will ensure the financial inclusion of the masses.