Post demonetisation, focus has shifted to digital, cashless transactions. Government and experts feel India can take lead in evolving and developing of financial technologies companies that can lead to a complete digital economy not only in India but also globally, writes Parul Manchanda

NEW DELHI, JULY 28, 2017: Post demonetisation, India has managed to add over 91 lakh new income tax-payers, besides witnessing a steep jump in digital transactions, said Union Minister of State for Finance Arjun Ram Meghwal.  “Post demonetisation, digital transactions has increased…We have been able to achieve aims and objectives which were laid down. The basic purpose of demonetisation was to reduce shadow economy, which we have able to achieve,” he said while addressing a conference on financial technology titled “Making India a Global FinTech Hub” organised by CII.

“According to a World Bank report, 23.4% was shadow economy in India. In developed nations, only 7% amounts to shadow economy, whereas in China it is only 13%. Shadow economy creates economic activity but on the other side it is not counted in GDP. Digital transactions has increased in 2017. With GST, tax base will increase with the use of integrated technology and will reduce corruption,” Mr. Meghwal added.

Speaking on the occasion, Telecom Secretary Aruna Sundararajan said: “India is under-capitalized economy, the only way forward is FinTech. We are in a state to move into a completely digital paradigm, no other country is seeing policy and regulatory push on FinTech as India is. However, there are key gaps between players and stakeholders. India comes under top 10 global hubs for FinTech as it has IT capabilities. We just need to tackle regulatory challenges. We also need to retain the strength which India’s financial sector has. The FinTech sector needs regulatory freedom to launch innovative products and services.”

NITI Aayog CEO Amitabh Kant said: “The cost of producing cash is quite high. RBI spends Rs.21,000 crore annually as currency operation cost. Around half of that spends in ATM operations. Post demonetisation, there was a massive thrust of digital payments. Digital finance could increase the GDP of India by 10-12%. NEFT transactions has increased by 44%, IMPS by 154% and credit/debit card transactions by 69%. Digital solutions must go beyond cashless transactions.”

“FinTech has exploded in India in the last couple of years but there is still room for massive growth. The growth and shift will be primarily led by innovative FinTech startups in collaboration with local and regional governments through specialised accelerators. They will provide integrated and automated services. Rural market is waiting to become a prime customer of financial technologies. E-KYC and BHIM App will be a new forward. There are more than 600 startups working on FinTech. The software service FinTech market stands at $8 billion and it would be $14 billion by 2020,” Mr. Kant added.

According to CII National Committee on Telecom and Broadband Chairman Kiran Karnik, India provides a unique opportunity for FinTech firms to establish itself as a global hub with a large market. “However, India needs to address some important challenges such as lack of financial transaction infrastructure, especially for the rural population. India has to come up with a coherent, future-focused policy framework that will sustain the momentum and protect the consumer interests,” he noted.

“Lots of innovation is happening in financial technology sector. There is a tremendous amount of energy in startups, lots of interesting ideas are coming; but the question is how can we make India a financial technology hub. It is really beginning to happen at the ground, enabling climate is there but also there are certain risks and uncertainties involved. Regulations are one aspect which needs to be addressed. India is a global FinTech hub having a market of $32 billion in 2015. It is estimated that by 2030, it would be almost $45 billion market,” Mr. Karnik added.

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