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Finance Minister Nirmala Sitharaman’s Budget announcement of ₹1,500-crore allocation to boost digital payments in the country is set to spawn a large number of new-age fintech start-ups in the country.
“The allocation of ₹1,500 crore is a very big amount. More importantly, it signifies the government’s intent of removing cash and introducing digital payments by favourably backing fintech start-ups that can help solve the huge cost of handling cash and the risks associated with it,” Harshvardhan Lunia, co-founder and MD, Lendingkart Technologies, told BusinessLine . “The country is home to 2,000-plus fintech start-ups. This announcement will spawn many B2C and B2B fintech start-ups in the areas of payments, credit, insurance and investments. ”
Concurring with Lunia, Akash Gehani, COO and co-founder, Instamojo, a payments gateway and e-commerce company, said: “In light of the other initiatives announced by the Finance Minister towards the betterment of start-ups, we will see the rise of fintechs in a growth-enabled ecosystem. The introduction of norms for one-person companies is sure to spur interest among budding entrepreneurs. The days ahead will definitely see peer-to-peer platforms grow, with a demand for both payments and credit services. However, it is unclear how this ₹1,500 crore will be used.”
Fintechs here to stay
The move to set up a Fintech Hub in GIFT City is a welcome step, believes Raj N, founder of fintech company Zaggle. “The decision is a clear validation by the FM that fintechs are an important part of the financial ecosystem. Recognising fintech as an industry would have been much sweeter, but overall, this allocation will contribute to a 360-degree growth for fintechs” he said.
The year 2020 saw an 80 per cent increase in digital payments, especially in tier II and III cities, and the government has understandably focussed on capitalising on this momentum, observed Harshil Mathur, CEO and co-founder, Razorpay.
Digital financial literacy
“I believe the ₹1,500-crore incentive announced will open a plethora of opportunities for fintechs to innovate for the new normal, leading to large-scale adoption even in the smallest of towns/villages. I’m hoping the funds will be used towards developing alternatives to Zero MDR (merchant discount rate) policy and initiatives towards bringing digital financial literacy in vernacular languages. These will instil trust in the system and accelerate adoption from MSMEs and entrepreneurs who are apprehensive towards moving money digitally, Mathur said.
Consumers have experienced digital payments and are now comfortable with it. Therefore, it is important to make digital payments the preferred mode of payments (send and receive) for all. This doesn’t require a large set of incentives — rather a marketing and education programme similar to the ‘ Mutual Funds Sahi Hai ’ campaign, said Sanjay Swamy, Managing Partner at Prime Venture Partners.
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