The government should ease the regulatory environment to boost the fintech sector’s growth

Representative image. News 18 Hindi

The fintech and payments sector has seen significant momentum in recent years with exceptional growth and progress boosting financial inclusion and digital payments. However, great expectations persist. With the global economy slowing down, financial accessibility and a robust financial sector have become essential.

Fintech has now evolved into one of the fastest growing technology segments, changing the way financial services are offered. The fintech market is expected to register a CAGR of 24.96 percent between 2022 and 2027 at Rs 9.2 billion. Hence, there are high hopes for the government to unveil policies and initiatives to support and encourage the sector’s growth.

Complex regulatory landscape affects fintech

The fintech landscape is in unprecedented growth with many startups appearing in recent years. Against this backdrop, fintech and software-as-a-service (SaaS) have become essential in expanding financial access to a large segment of the Indian population. Despite these positives, the fintech sector in India still faces challenges before it can reach its full potential. The regulatory environment is complex and digital infrastructure still has a long way to go.

With technology like AI and blockchain, fintech companies have opportunities to develop innovative solutions to transform the Indian financial sector. The government’s recognition of the need to invest in cutting-edge technology is essential, as well as drive high levels of research and development of technologies, new products and services.

Promote innovation, R&D

The budget must run and even seed many digital laboratories, so that research centers can develop innovative ideas and products in the fintech ecosystem.

The government must promote innovation. and research and development within fintech and SaaS. Measures such as R&D tax credits, subsidies for innovation and research and other forms of support for companies engaged in R&D will drive innovation and lift the sector.

Policies, incentives needed for SaaS usage by MSMEs

Another priority must be to promote the introduction of Software-as-a-Service (SaaS). SaaS has become increasingly popular recently as companies can subscribe to software and services, rather than purchasing and maintaining them. This is an effective, strong and economical way to drive transformation among companies. The government can promote policies and incentives to use SaaS by SMEs to increase their competitiveness in the digital age.

The government should take steps to improve the digital service infrastructure by expanding internet connectivity in rural and remote areas, and invest in cloud infrastructure development.

Improve the ease of doing business for fintech, SaaS firms

While India has done well in ease of doing business, the government can also take steps to improve the overall ease of doing business for fintech and SaaS companies. This can be through measures to simplify the process of starting and running such businesses, as well as reducing the overall compliance burden for such businesses.

In addition, competence and upskilling of the workforce are crucial. The government can announce measures to support the training and development of workers in fintech and SaaS to ensure they have the skills and knowledge needed in these rapidly developing industries. It should encourage all types of education and investment to create a complete ecosystem.

Regulation is necessary to protect personal data

Another important area is data security and privacy. With increasing use of digital payments and fintech services, it is important to have robust regulations to safeguard consumers’ personal data and ensure digital transaction security. Steps should be taken to address this and provide a safe and secure environment for fintech growth.

It is also important that the government takes steps to further strengthen the financial inclusion of micro, small and medium enterprises (MSMEs) in India. In the wake of COVID-19, it is imperative to extend priority sector lending to NBFCs and microfinance companies that can provide last mile financing. The government should also focus on expanding the use of digital payments in SMEs.

The fintech sector holds significant promise for fostering innovation and improving financial accessibility. Therefore, measures to increase support for this sector in the upcoming budget are essential. Investing in the expansion of fintech services, with specialized fintech expertise, can cultivate an ecosystem conducive to fintech expansion. This will allow businesses to offer superior services to their clientele and increase financial inclusion, promote growth and be the catalyst to strengthen the Indian economy.

With rapid digitization and user-friendly products emerging daily, the Indian fintech sector is experiencing strong growth. An EY report says India leads in fintech adoption at 87 percent, more than 20 percent higher than the global average adoption rate (64 percent). At this rate, Indian fintech is projected to grow to $200 billion by 2030.

With more investments, and a favorable regulatory environment created by the government, fintech can be a strong catalyst to drive India’s growth in the coming years.

The author is the Managing Director and CEO, Zaggle, a B2B SaaS fintech company. He tweets @avinashgod @zaggleapp. Views expressed are personal.

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