2017 government needs to ensure that while they are


2017 has been an exceptional
year for the Indian fintech industry. With technological advancements,
ever-evolving customers and favourable government policies, we have seen the
Indian marketplace transition from a cash dependent model to a more sustainable
cashless economy.


India is likely to experience
an accelerated growth spurt in the fintech space considering the strong,
proactive policy level support from the government which has provided a much-needed
boost to user adoption. Initiatives such as Jan Dhan Yojana, Aadhaar and the
emergence of UPI will provide a good foundation for FinTech companies to cover
the ‘last mile’ touchpoints and boost financial inclusion across the country.

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While there has been
advancement in this space, there is still a lot that can be done. The
government needs to ensure that while they are managing expectations for
multiple eco systems, they also realise the potential of the fintech industry
and take aggressive steps to promote it. And there is no better platform than
the budget for this, some of key expectations of the Indian fintech sector from
the Union Budget 2018 – 2019 are:


Push towards paperless and e-KYC


With the improvements in internet
connectivity and smart phone penetration across the country, significant progress
has been made in consumer awareness about being able to access financial
products online. With Aadhaar linkage to cellphones, bank accounts etc; this
will truly become the starting point of paperless access to financial products.
Paperless procedures and e-kyc will not only allow the processes to become
mechanized but also help in reducing costs and time spent. Additionally, with
Aadhaar linked verification mandatorily required, it will most likely weed out
fraudsters from the system. Apart from this, fintech startups are increasingly pushing
for a widespread usage of e-signature to verify the documents digitally, and
for a complete paperless on-boarding of accounts. With IndiaStack getting
ready, we can look at 2018 to be the year to enhance digital financial
inclusion across all pockets of the country.


Enhancing financial inclusion


The government has done a
great job in setting up the foundation for future digital penetration, however
if we are to continue to maintain and evolve to the next stage in financial
inclusion, there needs to be some incentivisation to not only help develop the
infrastructure but also strengthen the eco-system for the same. Not just
developing but another important aspect of the financial inclusion will be the
safety features. With transactions happening online, a strong security model
will have to be developed


Push for alternative lending


According to industry reports,
the ‘Payments’ segment has been the most funded within the Indian FinTech
landscape however, banking technology solutions, including B2B products, are
also experiencing strong growth and enabling financial institutions to create seamless
solution delivery for end users.  Despite
significant reductions in incoming global investments in the FinTech space, the
India opportunity remains promising. The government has been very focused on
creating policy and infrastructure support for the payments segment but now
they should actively start exploring the alternative lending segment as well


MSME outreach


According to a PwC Research, around
37% of GDP is contributed to by MSMEs but the supply of credit lines is
disproportionate. It isn’t surprising then that there are 158 new startups in
the space as of 2016. However, competition is stiff, with only 27% of founded
companies obtaining funding, and 27% of those going on to raise Series A
capital. While the government has identified the need to provide them with
credit through the Micro Units Development and Refinance Agency (MUDRA) Bank,
there is still a drawback in terms of the MSMEs which qualify for credit. The
government should provide regulatory assistance to fintech organisations which
are working on similar models i.e. to supply and digitize India’s MSME sector
to promote greater growth


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%. Despite this,
the financial services market in India is primarily untapped with 40% of the
population having no association with any bank and more than 80% of the
transactions carried out through cash, according to industry reports. This represents
an opportunity for Fintech start-ups to massively spread their wings in
different segments. The Indian Fintech software market is poised to touch USD
2.4 billion by 2020 from the current USD 1.2 billion in the Financial Year (FY)
2016. With this momentum, the transaction value for the Indian Fintech sector
is likely to touch USD 73 billion in 2020, growing at a five-year CAGR of 22%.This
Budget comes at a very important stage for the Indian fintech industry, where
they have quite a lot of expectations and are waiting to see what degree of
these expectations will be realised to determine the next stage of evolution
for the industry