Budget 2023: What fintech companies expect from Finance Minister Nirmala Sitharaman

Budget 2023 Expectations: With just a week left for the annual budget presentation by Union Finance Minister Nirmala Sitharaman, most sectors are jotting down their wish lists for the upcoming financial year. The fintech sector in India, which has been labeled as one of the fastest growing fintech markets in the world, has witnessed major transformation and growth in recent years, especially during and after the pandemic.

The sector has been recognized as a crucial element in the government’s financial inclusion journey along with the Unified Payments Interface (UPI) rollout across the country and beyond. The fintech firms are also playing a major role in India’s Digital India movement and expect to achieve the $5 trillion milestone by 2025. According to the latest Tracxn report data, there are around 9,154 fintech companies in India with urban and rural customers. Most firms aim for their consumers to become more financially savvy, tech-savvy and comfortable buying financial products through apps and online portals. In an effort to achieve this goal, most companies expect the Center to introduce sufficient policy and tax measures to boost the fintech sector.

Here are some key points and expectations from the fintech sector:

A recent Tracxn report has stated that there has been a nearly 47 percent decline in fintech startups’ fundraising in 2022. According to the report, startups have raised $5.65 billion in 390 rounds in 2022, which was about 29 percent in 2021 .The drop in funding, the report says, can be attributed to the drop in late-stage funding from $8.3 billion in 2021 to $3.7 billion in 2022, a 56 percent drop.

With growth in the space expected to continue in the long run, driven by a large unbanked population and increasing mobile phone use, the 2023 budget could bring in measures to increase spending and investment that could contribute to the growth story.

Anand Kumar Bajaj, Founder, MD & CEO, PayNearby

“Currently, India’s path to financial inclusion is paved, thanks to the cutting-edge financial solutions offered by leading fintech players. A robust technology stack running on the back of a strong distribution network has opened doors for Bharat to access innovative financial products and services. The work we are doing to make banking services accessible to everyone in Bharat is an example of the unique infrastructure we have built to deliver these services. But in order for these services to reach inland residents, technology, security, trust and the necessary support from the authorities are needed. Towards this end, budget 2023 should urgently assess and offer some tax benefits on the total expenses incurred by fintechs involved in the mission of financial inclusion. A GST subsidy, even in a small percentage, will go a long way in helping banking services and government benefits reach the masses with great ease. Additionally, this will encourage financial inclusion companies to innovate more and build revolutionary technologies to make financial services accessible to everyone, everywhere.”

Mandar Agashe, Founder MD & VC of Sarvatra Technologies

“There have been several incentive schemes announced by the government in recent budgets that have helped promote digital payments, especially UPI-based payments. This is in line with the government’s ‘Digital India’ initiative aimed at financial inclusion. We expect the momentum to continue in the upcoming budget.Serving the unserved and underserved is the mission that should continue with UPI 2.0’s recent products like UPI 123 and UPI Lite, the two most crucial products that will help penetrate the semi-urban and rural regions of India because of the ease of accessibility it offers to those who cannot afford smartphones but use feature phones and want to shop digitally.At the gram panchayat level or at the village level, Self Help Groups (SHGs) can also promote the use of offline payments through UPI . This will help UPI to grow very quickly.”

Swapnil Jambhale, Co-Founder, SafexPay

“We will recommend tax incentives that will be effectively passed on to the end consumer to encourage them to contribute to automation and digitization. In the current GST framework, fintech companies usually suffer loss of input credit. With the government ensuring that the input credit is fully covered, the revenue leakages are avoided and ultimately the benefits can be passed on to the end user (retail). In December 2021, the Union Cabinet approved 1,300-crore incentive scheme to promote digital payments and digital transactions using UPI and RuPay debit cards. A similar incentive scheme may be extended to RuPay -credit card in the upcoming budget.This will encourage greater use of RuPay credit cards in the country.”

Kumar Shekhar, Deputy Country Manager, Tide India

“Today, the Indian fintech market is predicted to reach $200 billion by 2030. This highlights the huge growth potential of the industry unlocking the doors of financial inclusion across India. In the same vein, we expect the Hon’ble Finance Minister to unveil the Budget 2023 with business-friendly tax policies that encourage smaller fintech companies/startups by providing exemptions in GST up to a certain limit of revenue. In the long run, this will reduce the tax burden and the challenges that startups face in the nascent stage. In order to increase the development and growth of the fintech and financial industry holistically, we look forward to the central government’s support to bring changes that create a push for fintech incubation centers across the country that will subsidize basic facilities such as internet and rent of office space or give them a line of credit to help them avail unsecured loans with the first year interest free etc.

Deepak Kothari, co-founder of ftcash

“The Union Budget 2023-2024 has the opportunity to help give the fintech sector the much-needed impetus. Currently, fintechs are working with banks on a one-to-one basis. The provision of a government scheme that provides a sovereign guarantee per Govt. of such lines of credit will help channelize and improve access to funds for fintechs and also allow targeting of certain sectors/segments/regions in a cost-effective manner. Fintechs today collaborate with other financial service players and it is always in such arrangements. a potential loss of input credit in the current GST framework. Ensuring that input credit is fully provided for will go a long way in ensuring that revenue leakages are avoided and benefits can consequently be passed on to the end consumer.”