The Union budget did not have anything specific for Fintech companies but they got a huge boost from the ministry of finance a few days before. In a bid to increase the adoption of digital payments in the country, the Union cabinet decided to remove surcharge and service tax on digital payments.
Still on the anvil for fintech and digital payment companies are the ministry’s proposals for income tax rebates for people using cards for payments and also rationalization of Merchant Discount Rate (MDR). An MDR is an interchange fee which is paid to the bank that issued the credit card that was used in each transaction.
But the finance minister’s speech was met broadly by approval from finance tech companies. Here are some of the announcements that finance tech companies should capitalize on:
– Aadhaar legislation to be introduced: The finance minister announced that the government will enact a law where Aadhaar will be given statutory backing. This would give much needed clarity for the Aadhaar project and help especially payments bank companies carry out financial inclusion.
“I am really happy for Aadhar and IndiaStack. Finally, the government has provided legislative backing that will unleash the full potential of such an incredible platform,” Paytm’s CEO Vijay Shekhar Sharma said in a statement.
Readers will remember that the government and the Reserve Bank of India wanted payments bank applicants to demonstrate the ability to cash out using the Aadhaar to identify intended recipients. (More on that in this interview with Oxigen’s chairman and managing director Pramod Saxena.)
– Digital literacy: Jaitley announced that the government will launch a digital literacy mission which will cover around 6 crore families in rural areas. One of the best ways to improve digital literacy is digitizing people’s transactions. Participating in digital literacy programmes will directly help fintech companies tap into rural markets.
“The cost of managing high cash dependence is over Rs 20,000 crores in the formal banking system and much more in the entire economy,” Freecharge chief operating officer Govind Rajan said.
– Fair price shops: The finance minister also said that around 3 lakh fair price shops will be automated by March 2017. This could represent significant opportunity for wallets as processes get more streamlined.