India, a big country with 1.3 billion people, is going through a fintech revolution. Currently, the Indian fintech industry has more than $27.6 billion in funding. It is likely to cross $150 billion by 2025. More than 2100 fintech companies are working in India, out of which 77% were established in the last five years. More companies are also willing to join the Indian fintech market, booming fast with each passing year. Seeing the fantastic progress of the industry, the finance ministry of the government of India has made special provisions in the union budget 2022-2023. Let’s look at the Indian fintech industry, its importance, and what they got from this year’s union budget.
Different Types of Fintech Companies in India:
PayTech:- Many paytech companies are working in India, such as Paytm, PhonePe MobiWik, and Google pay. These digital payment systems allow you to pay for services via the Internet. The electronic version of money has become ubiquitous in the life of a large number of Indians. As a result, many Indians use online payment apps in everyday life.
LendTech
In India, there was a time when individuals had to deal with traditional banks and financial organizations for loans and financial packages. But, nowadays, many fintech companies are involved in such services. Online personal loans, auto loans, salary loans, gold loans, education loans, P2P lending, etc., help people get much-needed money. Fintech services in this section are loan origination systems, credit bureaus, collection management. RazorPay, M-swipe, and Google Pay are prominent Lend Tech platforms for merchants and customers.
Digital Banking
Today, many Indians use digital banking to send and receive money in everyday life. Almost all banks working in India offer digital banking services to their clients to perform essential banking activities digitally and lead a healthy financial life. You can also use bank API to make transactions. SBI Yono, Khatabook, and CrazyBee are some major digital banking platforms.
InsurTech
Companies can use fintech services to sell insurance products online all across India. It allows people to get more information about insurance premiums and choose what suits them better. For example- you can get insurance from the Policybazaar.
Wealth Tech
Companies use fintech services to enhance personal wealth management and investment in this segment. E-KYC, Online money transactions, mutual funds, online investment management systems are some fine examples of Wealth Tech. In addition, companies can use big data, artificial intelligence, and deep learning tools to evaluate investment schemes, manage wealth and calculate associated risks.
Regulation Tech
Government agencies and departments use technologies to regulate companies and organizations and ensure that they comply with the established regulatory requirements in the financial sector. Aadhaar based e KYC system is a fine example of R-tech. The use of modern technology enables the government and regulatory authorities to track money movements, stop money laundering, locate suspicious transactions, etc.
Also Read: Latest Fintech Trends: What To Expect? Expert Predictions
Why Is The Fintech Industry Increasing In India?
Macroeconomic Factors
In India, many individuals are still disconnected from the official banking system. People living in village areas use cash to buy products and services. But the situation is changing little by little. Financial literacy is increasing among many people living in remote areas. As a result, the demand for banking services has improved a lot. This is increasing the growth of fintech companies in India.
Traditional Business Is Being Transformed In India
Many business organizations in India are still operating in traditional domains. But they are trying to innovate and modernize themselves with modern technologies to gain a significant share in the market. The fun fact is that many companies have resisted new technologies in the business for several years. But they are using it now because they will not survive in the next 5-10 years if they refuse to upgrade the business infrastructure.
Everyone Is Now An Investor In Our Country
It would not be wrong to say that falling bank deposit rates are a global trend now. That is why many individuals in India are looking for new ways to save their hard-earned money and gain a greater return on investments. Investment portals and tools have become quite popular. With the continued quantitative easing policy by the world’s central banks, many banks have their brokerage divisions, which provide clients with convenient access to the stock market and the Forex currency exchange platform. Hundreds of startups and interested individuals work in the same niche. All these activities are fueling the demand for fintech technologies.
Increased Demand For Cybersecurity Services
In today’s highly digitalized world, the tendency to strengthen cybersecurity measures remains valid. Because of people’s transition to the remote working model, the increase in the number of online services, the global digitalization of business, fintech companies working in India are getting lots of calls from customers. Keep in mind that the number of threats and activities of cybercriminals is increasing every year. For example- during the 1st half of 2021, the number of cyberattacks on critical infrastructure in the world increased by 150 %. It is believed that in 2022, the volume of the information security market will expand by 66%. Most companies face various cyber threats- network intrusions, ransomware viruses, and data theft. Always keep in mind companies that do not have a well-established information security management system are forced to make outstanding payments, the volume of which often exceeds the budgets of information security services. Therefore, it is more profitable to use fintech services to protect essential business data and create a safe business environment.
Also Read: RBI’s Latest Report: Merged Public Sector Banks Riskier Than Unmerged Ones
Growing need for digital medicine, biotechnologies, & pharmaceuticals
Covid-19 and its associated restrictions have acted as a catalyst for the digitalization of medical services. Patients all over the country have an urgent need for remote communication with doctors. So, telemedicine made it possible to provide medical services to needy individuals using telecommunications technologies remotely and interacting with medical personnel.
Remember that the covid-19 has caused a sharp increase in problems related to people’s mental health. Many people experience depression, anxiety, neurosis, and panic attacks. Restrictive measures become an obstacle to face-to-face visits to doctors. That is why the medical industry uses more fintech technologies to interact with patients and provide them with much-needed medical services remotely.
The Increased Demand For IT Solutions for Remote Work
Now, the world appreciates the advantages of remote work. So, many companies in India still use remote work formats even after the cancellation of lockdowns. To implement this model, companies, and freelancers use a lot of Fintech services:
- Cybersecurity services ((VPN networks, WAF, PAM, and EMM systems);
- Virtual workplace infrastructure (VDI),
- Robotics and business process automation,
- Remote electronic document management systems,
- Cloud services (IaaS, PaaS) and
- Videoconferencing, IP telephony, instant messengers.
The primary strategic trend for startups is the creation of solutions for organizing work from anywhere. It gives them the ability to hire employees from different parts of the world deploy business services in a distributed infrastructure.
Union Budget 2022-23: Announcements That Are Likely To Benefit Fintech companies
On Feb 1, 2022, India’s finance minister Nirmala Sitharaman floated the union budget 2022-23 in the parliament. She made several announcements that are likely to benefit Fintech startups and companies in the coming weeks and months. Important decisions are detailed here below:
India to launch 5-year program to boost MSME performance
Rapidly increasing retail and wholesale inflation, decreased demand for goods and services, Covid-19, unemployment, reduced exports, and other factors affected different industries in India. As a result, their overall business volume has gone down significantly, and the pace of recovery from losses is relatively slow. That is why the finance minister announced that she will extend the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023 and increase the guarantee cover by Rs 50,000 crore to Rs 5 lakh crore. Under this scheme, the government offers collateral-free personal loans to struggling MSMEs. This will benefit fintech companies in the short and long term.
The Government Will Establish 75 Digital Banking Units in 75 Districts
Currently, 63.97% of people in India use net banking. Their numbers are likely to grow in the coming years. The union budget promises to establish 75 digital banking units in 75 districts covered by commercial banks to promote digital banking. The government will also encourage people to use digital payment apps as much as possible. It will help the central government make the digital India campaign successful and associate more and more with the formal economy.
The Auction of 5G Spectrum in 2022
All tech-savvy individuals and companies understand the enormous benefits of the 5G spectrum. Remember, one of the main advantages of 5G is that it is designed not only for smartphones and mobile devices but can also light homes using fast wireless communication. It promises three essential things: high internet speed without delays, signal stability, and the ability to connect a considerable number of devices simultaneously. That is why the finance minister indicated the government’s intention to conduct the auction of the 5G spectrum in 2022. With this move, India will join the group of countries that have started introducing 5G services for personal, professional, and commercial use. A lot needs to be done in this direction in India.
The Provision of a Digital Rupee Using Blockchain
It’s good news for tech-savvy people who love to make digital transactions. The union budget 2022-23 promises to introduce Digital Rupee with the help of blockchain and other technologies. It will help the government to have a recognized public digital currency and encourage more and more people to be a part of the digital economy.
Government to Include Data Centres, Energy Storage in Infra Sectors
The government intends to include data centers and energy storage systems in the harmonized list of infrastructure sectors to ensure credit facilities for clean energy storage and digital infrastructure.
The public capital expenditure rose by 35.4% to Rs 7.50 lakh crore
In the union budget, the government made a provision to increase outlays for public capital expenditure by 35.4%, from Rs 5.54 lakh crore to Rs 7.50 lakh crore in 2022-23. This amount is about 2.9% of India’s GDP. This is an important decision taken by the government as it will inject more money into the economy, generate investment for private companies and generate employment to a great extent.
The government plans to tax digital asset transfers at 30%
To end the uncertainty in the taxation system on income coming from investments in cryptocurrencies, Union Finance Minister Nirmala Sitharaman said the government would charge a 30% tax on gains coming from such investments.
Crypto & NFT Are Now Under Tax Net
The government aims to tax virtual assets at 30%. However, the finance minister clarified that it would not replace any other income and 1% TDS, usually charged on transactions made by digital assets. This decision will help the government to tax cryptocurrencies and non-fungible tokens. The government did not make any clear move to ban private cryptocurrencies.
Now, You can revise IT returns for Omissions and Mistakes.
It’s beneficial news for regular tax-paying individuals and companies. Now, they can revise tax returns for omissions and mistakes. Moreover, they can make changes using a one-time window. After that, you have two years to correct errors and fix IT returns.
Surcharge on Unlisted Shares Reduced From 28.5% to 23%
The finance minister announced that the government would reduce the surcharge on unleashed shares from 28.5% to 23 %. This decision will accelerate investment churn and facilitate investor exits.
15% Capping For Surcharge On The Transfer of Any Long-Term Capital Gains
The government has reduced the Minimum Alternate Tax rate for cooperatives to 18.5%. Also, it decreased the surcharge for cooperatives to 7% from 12% for total income ranging between Rs 1-10 crore. It also prolonged the timelines for benefits under the new corporate tax regime. Now, newly established manufacturing companies can pay taxes until March 31, 2024.
The Outlook of Fintech Companies in India
New technologies are transforming the financial services industry actively and displaying traditional business models. The introduction of new Fintech solutions in India’s financial market has allowed companies to-.
- Change the structure of consumption,
- Reduce the cost of certain functionality (processing customer bases, loyalty programs, etc.),
- Improve the efficiency and quality of business processes &
- Significantly affect the
sustainability of the development of a core business.
In India, the financial technology industry is gradually becoming an independent and rapidly developing economy sector. Fintech became more popular in 2008 when the global financial crisis forced financial companies to cut costs. It accelerated the rapid development of the mobile technology market. Portable gadgets have made it possible to be in cyberspace around the clock, where trade, education, communication, entertainment, etc., occur. Thus, fintech companies in India respond more quickly to market changes than traditional financial organizations and ultimately add new products and services faster for consumption. Their future is exceptionally bright in India. Even the government of India understands the presence of fintech organizations in the country. So, it made many provisions for such companies in the Union Budget 2022-23.
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