BUDGET 2020 – Interpreting the Fine-print for FinTech India & Its Stakeholders

The incumbent Finance Minister Nirmala Sitharaman announced in her address of the Union Budget 2020 on February 1 (2020) the ambitious plan to transform India into a $5-trillion economy by 2024. The primary focus is inclined towards reinvigorating investments and consumption demand to achieve this target – restoration of common man’s confidence and also that of market entities is the key. The FinTech industry was expecting from the budget a revision of (personal) tax slabs to smoothen financial burden on the middle-income groups (while even reduced GST was voiced as an expectation coupled with appropriate tax incentives plus easing access to credit) –, so as to boost spending, thereby enhance instant loan and credit demand and supply dynamics.

The concerns were reasonably dealt with in the Union Budget 2020 pronouncement as the government introduced new personal income tax slabs and rates set to elevate disposable incomes and consumer spending. As also for the startups, the abolition of Dividend Distribution Tax (DDT) is poised to spur investments; further, the postponement of tax payment on ESOPs is a welcome move as is also an increase in the turnover limit to Rs. 100 Cr for accessing tax benefits. But, that’s not all; to boost business activities in India, the corporate tax is now set at 22% (amongst the lowest in the world).

However, per the Economic Times BFSI’s conversation with Venture Catalysts’ Anuj Golecha, the FinTech industry doesn’t stand much to gain from the Union Budget 2020 apart from getting NBFCs into the system of TReDS (Trade Receivables Discounting System – a liquidity boosting mechanism that FinTechs can utilise). Mr. Golecha clarifies that the ESOP relief isn’t made accessible to FinTechs, since the thin details of the budget document mention that only such startups are eligible for the ESOP benefits (and the tax relief that are extended for 10 years and the Rs. 100 crore turnover limits) which are recognised by the Inter-Ministerial Board (IMB) and which also qualify u/s 80-IAC of the Income-Tax Act, 1961, i.e., mere 221 startups in India. This figure for income tax exemption seeking entities was 94 out of 15,798 government-registered startups, as of February 7, 2019, as reported by Indian Express. This means that neither then (27,000 startups – as of 2019), nor now (30,000 startups – as of 2020), are all the startups registered with the DPIIT (Department for Promotion of Industry and Internal Trade) made eligible for claiming ESOP benefits of a 5-year (proposed) deferment of tax payments by startup employees.

Another development worth mentioning is that the zero-MDR (Merchant Discount Rate) is now getting implemented in UPI and RuPay (following the promise made in the Union Budget 2019). MDR is essentially the amount that the merchants pay to banks for accessing the infrastructure that facilitates digital payments. While FinTech startups offering merchant payment services can rejoice, the Payments Council of India (PCI) has a deviating opinion on this development. The PCI Chairman Vishwas Patel states that the zero-MDR move is poised to limit innovation and investment – capable of rendering the business model unviable. He also opines that if the government is aiming to boost payment digitisation, then it should instead be done via a controlled and lower MDR coupled with added tax benefits to merchants. Lastly, he conveys that if MDR isn’t going to be charged to merchants, it’s the government who should bear the cost, reports Economic Times.

However, with even the government anticipating India’s digital economy to contribute $1 trillion to the goal of achieving the $5 trillion economy target, it’s motivating to note that UPI transactions have registered over a billion transactions and the domestic RuPay card has garnered a positive response (of acceptance) in a number of Asian and Middle East countries. With this, if the government can assist in increasing liquidity, inculcating transparency and easing the burden of compliance on the FinTech sector, the future will have promising prospects for the FinTech, its stakeholders, and the economy of India.

RBI Commences Low-KYC for FinTech Customer Retention

The Reserve Bank of India (RBI), on February 5, introduced ‘low-KYC’ to let non-compliant know-your-customer accounts continue paying via mobile wallets. Prior to this, the RBI had recommended payment companies to conform to ‘full-KYC’ by February 29, 2020. As a result, approximately over 200 million mobile wallets were under the risk of getting cancelled by the regulators, owing to the approaching deadline of upgrading the non-compliant accounts to ‘full KYC’ account. Apart from this, RBI has also recommended video-KYC as an alternative to establish customer identity.

Therefore, now, mobile wallet firms such as Paytm, PhonePe, Amazon Pay, etc. and their user-base running into millions would be able to continue their association per the permission from the RBI allowing wallet service providers to continue operating their millions of non-compliant KYC accounts without any transnational limits.

With this new alternative of the RBI, a mechanism will be offered to customers wherein they will be able to convert their ‘minimum KYC’ accounts to the RBI’s ‘low-KYC’ PPI (Prepaid Payment Instrument – a semi-closed retail payment instrument introduced by the RBI in December 2019, having a monthly rechargeable limit of Rs. 10,000 or of Rs. 1, 20,000 in a Financial Year, and which is issued based on the sourcing of essential minimum details from the customer –) accounts.

This comes as a sigh of relief for FinTech firms as they were finding it difficult to onboard fresh customers and retain them following the barring imposed by the Supreme Court on telecom companies and NBFCs concerning the usage by them of Aadhaar-based KYC in 2018. Now onwards, companies will seek customer consent prior to performing ‘low-KYC’ of their accounts. However, it should also be noted that while KYC formalities were already done before, these were rendered null and void following the earlier pronouncement of the restrictions of the Aadhaar KYC method by the Supreme Court.

Following this, in February (2019), the Union Cabinet had considered promulgating an ordinance to permit voluntary use of Aadhaar number as a proof of identity for bank account opening and also for obtaining a new mobile phone connection. While the payment firms had also sought from the regulator an alternative to eKYC for onboarding and verification, the Payments Council of India (PCI) also requested the regulator to postpone the conversion of minimum-KYC accounts to full-KYC accounts deadline till February 28, 2020, owing to Aadhaar restrictions pertaining to eKYC process.

Other proposed formats of KYC in the pipeline include live video customer verification and XML internet format. It has also been reported that Amazon Pay had considered doorstep KYC for its mobile wallet subscribers.

Gig Economy of India – Issues & Solutions in 2020

Project-to-project basis work is soon gaining momentum even in India, as the gig economy is entering its second phase of organised development (with market-wide acceptance and adoption). The application-based platforms offering services like cab booking, house renting, food (doorstep) delivery are estimated to employ over 2 lakh people in companies such as Ola, Zomato, Swiggy, UBER, etc. While profitability has soared for such companies, employee exploitation has also increased resultant to which the government has exhibited mindfulness towards ensuring employee welfare by developing the required legal framework.

The gig economy is here to stay in India, as is evident by the recent initiative taken by the prestigious National Law School of India University (NLSIU), Bengaluru, of submitting draft guidelines for the gig economy. NLSIU is set to submit the draft guidelines to the government in February 2020, thereafter; the Karnataka government would either table a bill in the assembly or frame suitable guidelines under the purview of the incumbent laws meant to protect the rights of employees. Notably, the Karnataka state legislature’s upcoming budget session might see the draft getting tabled, reports Times of India. It has also been clarified that upon the draft being prepared by NLSIU, it might get debated in an open forum.

However, it’s a fair question to ask that has our labour market matched the pace with the incoming of the gig nature of work? Assuming a full-time gig work summons constant development of certain innate skills that are vital for gig workers, these are: entrepreneurship, networking, financials, and a knack of deciphering human psyche. While in India, at present there isn’t any regulation to standardise rates paid to gig workers. This makes mastering the art of negotiation a prerequisite to a thriving gig work career. Soaring tech usage in India has escalated those who have previously worked in the unorganised sector to be able to obtain better employment. However, even then, the jobs created in the gig economy mostly still get developed in the informal space, wherein some red flags do exist when attempting to apply this model in reality.

Essentially, new concepts like the formation of a Universal Basic Income (UBI), skill development programmes, ensuring availability of secured gig-based employment and freelance opportunities, and workplace protection, among others, is necessary to be looked upon. Hopefully the draft guidelines for the gig economy initiative underway at the NLSIU is received well by the Karnataka government and the state legislature, and upon implementation of the same, other states and governments also show active interest in inculcating the same spirit and safety in their respective regional gig workforce. The flexible work economy isn’t going anywhere, with increased adoption of technology and the availability of seamless payment avenues all that is remaining to be dealt with to make the gig economy a thriving market for the workforce is safety, security, and assurance of reasonable remuneration.

The BCG 2019 Report: The New Freelancers, states, “As per a survey of 6500 senior executives worldwide, 40% of respondents said they expected freelance workers to account for an increased share of their organization’s workforce over the coming five years.” (FlexingIT Project Trend Data: 2018-2019.

FlexingIT research also states that, “over a 3rd of companies in India estimate up to 50% reliance on flexible talent in the next 5 years.” Per a study conducted by McKinsey, estimations indicate that up to 20%-30% of the workforce in developed markets is engaged in independent work.Also, as reported by ASSOCHAM recently, the Gig Economy of India is definitely marching towards becoming a strong component of India Inc’s strategy as the sheer size of the gig economy is projected to grow at a CAGR of 17%, whereas it is likely to hit a gross volume of $455 billion by 2023.

FinTech India – Mobile Phones, FinTech & the Incoming of New Players

The economic challenges presented in 2019 coupled with protectionist regulatory measures didn’t actually hinder the development of the FinTech ecosystem of India as the startups in this domain managed raising over USD 365 million in July 2019, while the total investments entering in this sector being USD 1.16 billion, per the research conducted by IBS Intelligence. 

The FinTech sector is poised to witness established firms entering with much optimism. These include companies such as PhonePe and PineLabs (both having raised 100 million), BharatPe (raising USD 75 million), PayMate (raising USD 25 million), and Niyo (raising USD 35 million). As reported by Tracxn, the total investments entering in India’s FinTech sector stood at USD 800 million in the 1st half of CY 2019 (up 14% from the USD 688 million raised in 1st half of CY 2018. Whereas in 2019, FinTech startups raised over $3.2 billion.

However, that’s not all; a couple of top smartphone vendors are also making their presence felt in the FinTech startups space of India. Xiaomi launches MiCredit, in association with domestic startups such as CreditVidya, ZestMoney, Aditya Birla Finance Limited, Early Salary and Money View (to determine credit worthiness and financing eligibility). Xiaomi is intending to offer digital lending (credit in the range of Rs. 1000 and Rs. 100,000 at reasonable interest rates). In March 2019, Xiaomi started Mi Pay (a payments app powered by UPI) in India as a unit of its Mi Finance ecosystem (having around 20 million registered users).

Following the trend of entering the FinTech domain are other popular mobile phone brands, viz. RealMe, OnePlus and lately OPPO, as well. OPPO Kash by OPPO, is scheduled to be launched in June 2020 in India, to offer 1-click micro-loans coupled with flexible repayment features. Realme India started its payments service, Realme Paysa in December 2019, with the aim of being top-5 new financial services offering entity in 3 years.

As reported by AsianAge, mobile wallet transactions in India soared by 40 times in the preceding 5 years. Much of this momentum can be attributed to the mobile phone-based financial services global standard of FinTech, the Unified Payment Interface (UPI – enabling secure, real-time transfers even without a bank account). Mobile wallet transactions in India have increased 40 times in the preceding 5 years. Compared to traditional financial models, mobile finance gives distinct advantages, as follows: 1. Digital transactions generally don’t cost when initiated. 2. In-person services and cash transactions are now innate elements of routine banking expenses. 3. In the case of mobile finance, clients maintain their balance money in digital format. 4. In the absence of transaction costs, sending and receiving money from individual banks or mobile service providers is easy. 5. Mobile communication leads to high-volume of data, usable by banks and service providers to develop optimally profitable services. 6. Traditional credit scores get done away with as the subscribers without financial credit history also obtain the necessary credit to run their small businesses. 7. Mobile platforms have bank accounts linked to their clients on a real-time basis, thereby, banks can process account information. 8. Microfinance is also made accessible to those no credit risk proofs.

As per Financial Express, smartphone users in India are poised to double to reach 829 million by 2022 (growing at a CAGR of 15.5%). Coupled with this, there is also the influx of mobile form factor in the Point of Sale (PoS) devices to accept device-based payments (the growth numbers have been forecasted at a CAGR of 54.2% in the period 2019-23, per the Mobile PoS Payments, Statista, 2019

The Code on Social Security, 2019 – What’s in it for Gig Workers?

The Code on Social Security (“the Code”), having the capacity of impacting over 50 crore workers in India, now stands approved by the Union Cabinet. The Code, introduced by the Labour Minister Santosh Kumar Gangwar on Wednesday (December 11, 2019) in Lok Sabha, swaps 9 laws associated with social security; noteworthy among these is the Unorganised Workers’ Social Security Act, 2008. Social security generally signifies various measures initiated to make sure reasonable access to healthcare and the provision of income security to workers if offered. Establishing a social security fund with the help of the corpus available under corporate social responsibility is advised, so as to offer welfare benefits to all workers. Why this proposal is special is since it also includes gig workers under its purview.

Gig workers

The Code indicates that as for the schemes for gig workers, platform workers, and unorganised workers, the financing of these is planned to be done via a mixture of contributions from the employer, employee, and the appropriate government. However, there is more to it than this; the central or state governments could also, under the purview of the Code, notify specific schemes for gig workers, platform workers, and unorganised workers, say in the form of offering such service professionals with various reimbursed benefits, viz. life and disability cover. The Code identifies Gig workers as those workers who work outside of the traditional employer-employee relationship (e.g., freelancers or independent contractors). Platform workers, for instance, are such workers who access other organisations or individuals via online platforms and earn money by offering them with specific services. Unorganised workers also comprise of home-based and self-employed workers.

Talking about home-based unorganised (gig) workers, it should be mentioned that even though the third-largest economy in the world is amidst a slowdown (per the International Monetary Fund), the skillful housewives of India are joining the promising trend of “cloud kitchens” to feed today’s hungry urbanites (millennials), that also too late in their (ripe for retirement) lives. Various app-based startups such as Curryful (dubbed to be the UBER of home-cooked food), Homefoodi, etc., have started offering a platform to housewives for offering home-cooked meals to the modern millennials. What this means is that the demography of the gig workforce is innovating with each passing month in India as various forms of service professionals are joining the market that erstwhile were expecting retirement in their lives. With such a robust presence of demand and supply matchup in the gig workforce and the startup markets, it certainly makes sense for the government to ensure timely social security measures for its unorganised, independent, young, adult, middle-aged, and also ageing elderly (still zealous) workforce.

This is because in stressed times (as the ones currently being experienced by our nation in the form of unrests), it gets difficult for gig workers who are discharging their duties in the middle of the road as food delivery-agents or cab drivers or e-commerce delivery agents to comfortably and safely fulfill their service obligations. In such uncertain times, it surely makes sense to have social security benefits of the required nature in place to make such vulnerable gig workers be able to protect themselves and safeguard the future of their dependent family members (via referring the code on occupational safety, health, and working conditions). The same goes for elderly home-cooking housewives who juggle with multiple duties, more so in their later years. Where in the western countries the trend of platform (app) economy jobs have been received negatively for having destroyed stable industries – the reasoning being the absence of the following: (i) workplace benefits. (ii) labor unions –, in India, the government has exhibited the necessary mindfulness towards initiating proactive steps (such as the Code on Social Security, 2019) in the direction of addressing these warranted concerns of the gig workers, their families, and various stakeholders.

GSTN for Gig Workers on Government’s Agenda

The Gig Economy service professionals in India are soon likely to officially fall under the purview of the Goods & Services Tax (GST) Network, per the Department for Promotion of Industry and Internal Trade (DPIIT). Doing so would entail placing online platforms such as UrbanClap, UBER, Ola, Zomato, BigBasket, etc. under the obligation to employ only such service professionals (gig workers) who have acquired a GST Number or GSTIN.

Intending to maintain a database of gig economy professionals in an organised format, the government is addressing much larger concerns that committed gig economy service professionals and the stakeholders have been voicing since long all over the nation (even internationally) – i.e., accessing the provisions of availing gratuity perks, consumer safety (ensured via gig workers’ tracing, and credential and qualification database), safeguarding workers’ rights, health and maternity benefits for gig workers, life and disability cover, old age protection, and the extension of Employees’ State Insurance Corporation (ESIC) workers’ benefits to gig workers.

This promising initiative is formulated under the auspices of the Social Security Code Bill (“the Bill”) that received approval from the Union Cabinet in December 2019. The Bill recommends formation of a social security fund via a corpus presented under the corporate social responsibility (CSR) framework.

The government, in its efforts to legitimise the gig economy and protect its workforce, is following the footsteps of other developed nations having already introduced GST liabilities to their independent workers. These include, for example, Canada and Australia, wherein, the former makes it mandatory for independent contractors to have to pay GST/HST (Goods and Services Tax / Harmonised Sales Tax) if earning above $30,000 per year; in the case of the latter, earning over $75,000 attracts the liability to pay GST. Apart from this, in Australia, those offering ride-sharing services are required to acquire an ABN and also register for GST irrespective of their income, per the mandate given by the Australian Taxation Office (ATO).

Formalisation of the gig economy in itself has also emerged as a promising forte as startups like HelloVerify now offer artificial intelligence and machine learning (AI & ML) powered gig workers’ screening services. Here, it’s worth noting that the nature of services offered by HelloVerify, complement the objective that the government of India is striving to achieve in its efforts to maintain a central database of gig workers’ credentials and informational particulars.

Decoding FASTag: How National Electronic Toll Collection (NETC) Works?

The National Payments Corporation of India (NPCI) has built the RFID-enabled National Electronic Toll Collection (NETC) program poised to fulfil the electronic tolling needs of the transport market of India. For the same objective, NPCI now offers a national interoperable toll-payment solution that also inculcates within its scope the offering of clearinghouse services for settlement of disputes. Within its spectrum of offering ‘Interoperability’ (applied to NETC system), it includes a common set of procedures, business rules and technical specifications allowing a customer to utilise their FASTag as a payment mode on either of the toll plazas, regardless of the specifics of the acquirer of the toll plaza.

The various objectives of NETC FASTag are: i. creating a compatible and interoperable toll-collection ecosystem to use nationally. ii. through a simple and robust framework, increase transparency and efficiency in transaction processing. iii. achieving the sub-goals of the Government of India of electronification of retail payments, reducing air pollution via decreased toll plaza congestion, plummeting fuel consumption and promoting cashless transactions, enhancing audit control via user account centralisation

NETC – the technical ecosystem on which the FASTag is based – supports multiple issuers and acquirers authorised for the NETC program. The transaction request from the Toll Plaza is sent to the Acquiring System for transactional validation, and it then moves further so as to finally reach the NETC Switch. The NPCI routes these transactions to the relevant Issuer Bank for debiting the tag-holder account. During the entire process, a particular transaction travels through an 8-step (LEGs) process.

The NETC transaction process flow emanates at the Toll Plaza System (capturing the FASTag data, viz. Tag ID, TID, Vehicle Class, etc.) and travels through the Acquirer Bank for processing, which then sends a request to the Online Switch & Mapper (i.e., the NETC validation mechanism that responds with such details as Vehicle class, VRN, Tag Status, etc. – upon an absence of the Tag ID in NETC Mapper, a response is issued stating that the Tag ID isn’t registered). Following the receipt of a Tag ID validation from the NETC Mapper, the acquirer host calculates the relevant toll fare and emanates a debit request to the NETC system. Then the NETC system switches the debit request to the relevant issuer bank for debiting the customer account.

The Issuer host then debits the linked tag holder account and sends an SMS alert to the tag holder. It also sends the response message to the NETC system. Upon failing to send the response within the defined TAT (Turn-Around-Time), the transaction is considered as Deemed Accepted. The response is then notified to the acquirer host for notifying the respective toll plaza system.

FASTag is LIVE! Buy, Activate, Recharge, & More Info

FASTag

Introduction: The Policy Brief

The National Payments Corporation of India (NPCI) and National Highways Authority of India (NHAI)-introduced National Electronic Toll Collection (NETC) mechanism, FASTag – having an embedded chip and antenna – is now live. Operational at 604 toll plazas across national and state highways (click here for the full list), w.e.f. 15 Dec. ’19 (although initially the roll-out of FASTag was scheduled for 1st Dec. ’19 – per the letter sent by the Ministry of Road Transport and Highways to the NHAI), FASTag enables automatic collection of toll charges. The government then decided to provide enough time for vehicle owners to switch to FASTags – hence the deferred extension.

Dubbed to be the leading disruptor on India’s national highways, FASTag was first envisioned in 2014. All cars, jeeps, vans, buses, trucks and, commercial and private off-road vehicles that pass the toll booths on national highways will now pay FASTag-enabled toll. The FASTag payments at national highways are incentivised with a cash-back scheme of 2.5% – for eligible customers – until March 31, 2020. FASTag is also poised to facilitate seamless traffic monitoring and fitting policy revisions.

Previously, only a single hybrid lane was to be allotted at every toll plaza having FASTag and other modes of payment – facilitating passage and monitoring of over-dimensional or over-sized vehicles. Depending on the traffic situation at high-traffic volume fee plazas, not over 25% ‘FASTag lane of fee plaza’ were planned to be temporarily converted to hybrid lanes – per the instructions given earlier by the ministry to the NHAI.

At this stage, it was to be ensured that the minimum number of the declared FASTag lanes be converted into hybrid lanes for the time being. Further, a minimum of 75% lanes of every fee plaza were to remain declared and operational as FASTag lanes so as to incentivise the vehicles carrying FASTag.

The One Nation One Tag – FASTag ensures interoperability via cashless electronic processes at toll booths. According to the Memorandum of Understandings (MoUs) that the states and the highways authority signed, the states’ are poised to receive 50% of the capital expenditure (capex) for the toll infrastructure construction.

Buying FASTag

Buying FASTag is possible by visiting any of the Point-of-Sale (PoS) locations at Toll Plazas or PoS outlets of the NETC Member Banks or their distribution agents or their Sales offices. Otherwise, FASTag can also be availed by applying online at the respective issuer bank’s website or by visiting this NHAI portal link. If you have bought FASTag from Amazon, you will need to download the MyFASTag App and link it to your bank account.

Activating FASTag

  1. Do-It-Yourself Activation: FASTags don’t have banks assigned in advance as they are (bank) neutral at the time of buying from a POS terminal or online platform. The online FASTag can be activated by yourself when you enter vehicle details in the ‘My FASTag’ mobile app. There also exists the flexibility to link the FASTag with any of your current bank accounts via the My FASTag Mobile app. The NHAI Prepaid wallet facility is also offered in My FASTag mobile app for you to load money and get your toll fee debited from the prepaid wallet as against getting it debited from your bank account directly.
  2. Activation by Certified Bank Branch: Alternatively, you can also buy FASTag at the closest certified bank branch and can then link the FASTag with your current bank account.

Document Submission for FASTag

A customer is required to submit the following documents along with the application form for FASTag:

  1. Signed FASTag application form, given by issuer bank that customers must fill and submit to the bank.
  2. Registration Certificate (RC) of the vehicle.
  3. Passport size photograph of the vehicle owner.
  4. KYC (Know Your Customer) documents as per the category of the vehicle owner.
  5. A valid driving license.
  6. Vehicle image (optional).

Recharging the FASTag

Recharging the FASTag account is possible in the denomination of Rs. 100. The maximum amount of recharge is decided depending on the type of vehicle and account link to FASTag. In case the FASTag has previously been linked with your bank account, loading money individually in a prepaid wallet will not be necessary. Although, maintaining enough balance in your FASTag-linked bank account to allow for toll payments is necessary. NHAI prepaid wallet can be recharged via different channels, viz. payment via cheque or via UPI or debit card or credit card or NEFT or Net Banking.

  1. Limited KYC FASTag account holders can’t have a balance of over Rs. 20,000 in their FASTag prepaid wallet. The monthly reload limit is Rs 20,000.
  2. In full KYC FASTag account holders aren’t permitted to have over Rs. 1 lakh in their FASTag prepaid wallet (no monthly reload cap exists).

Recharging a FASTag via the BHIM UPI app is also possible – although, buying FASTag via the BHIM UPI app isn’t possible.

FinTech Valley: The Vizag Agenda

FinTech Valley Vizag (launched in Visakhapatnam on 17 December 2016) is a global FinTech Ecosystem focusing on converging finance and technology for generating massive growth prospects via industry facilitators, exceptional infrastructure, and innovative entrepreneurship. It is an ambitious initiative of the Government of Andhra Pradesh (India) to endorse business infrastructure, and draw investors and MNCs to open offices in the state. In September 2016, the Chief Minister of Andhra Pradesh released the ambitious document titled ‘Sunrise Andhra Pradesh Vision 2029’ carrying the blueprint of the growth trajectory for the state.

Endeavouring to be a “happy and globally-competitive society” by 2029, the Andhra Pradesh state, as stated in the vision statement, envisages transforming into an inclusive, accountable, and competitively innovative society. Initiating structural transformations and committing to sustain high economic growth, the state government of Andhra Pradesh placed FinTech as the epicentre of focus to create an ecosystem of digital banking, financial analytics, cybersecurity, and blockchain (database) technology. Among the various promising initiatives taken under the auspices of the FinTech Valley Vizag, the two initiatives pertaining to the FinTech ecosystem are: 1. The Andhra Pradesh – Purse mobile wallet offering 13 mobile banking and 10 mobile wallets for transactions. 2. The Marpu Nestam—an incentivised setting of agents for educating people on digital financial literacy.

Following the FinTech Spring Conference (March 2017) and Blockchain Business Conference (October 2017), the successful 5-day Vizag FinTech Festival (22—26 October 2018) directed towards GovTech (technological advances fostering invisible government, visible governance), BankTech (future of banking, investments and payments), InsurTech (technology enablers in insurance), EmergeTech (emerging technologies: AI, Cybersecurity, Blockchain, IoT, & Big Data), and Financial Inclusion (increased access to financial services for the underserved) was organised to set the good governance and inclusive growth agenda right for 2022. According to J.A. Chowdary, Special Chief Secretary & IT Adviser to the Andhra Pradesh government, under the auspices of the Vizag FinTech Festival, 25 out of a total of 40 startups were shortlisted for participating in the finale of $1-million FinTech Challenge.

Notably, the Andhra Pradesh government’s accord with FinTech Association of Hong Kong is aimed at utilising Hong Kong’s FinTech ecosystem and developing an Andhra Pradesh—Hong Kong entrée for FinTech startups and knowledge transfer.

Given the incumbent and future ambience of FinTech ecosystem in India—with 1 billion smartphone users by 2020, FinTech market projected to reach $2.4 billion, 600+ operational FinTech startups, massive growth potential in digital banking, government support (Startup India initiative), and a CAGR of 22%—such promising initiatives like the FinTech Valley Vizag should also be modelled in other promising IT & Financial hub states such as Karnataka, Maharashtra, and Gujarat. An entire ecosystem of such promising initiatives can lead to winningly achieve the aspired financial inclusion objectives. This milieu can make the dream of India ideally transforming into a digitally smart nation a resounding reality.

FinTech Adoption, Financial Inclusion, & The Next Regulatory Challenges

Introduction to FinTech

Investopedia defines FinTech as: “new tech that seeks to improve and automate the delivery and use of financial services. At its core, FinTech is utilised to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilising specialised software and algorithms that are used on computers and, increasingly, smartphones.”

Ernst & Young’s (EY) definition of FinTech is as follows: “FinTech: organizations combining innovative business models and technology to enable, enhance and disrupt financial services.” EY also states that its FinTech definition also encompasses, apart from early-stage start-ups and new entrants, a reference also to scaling firms, growth-stage firms, and non-financial services firms. The uniqueness of FinTech stems from the nature of its characterisation and the market conduct regulation (of the firms), collectively to which it’s (the FinTech industry) subjected owing to the fact that it manages assets, incomes, wealth, retirement funds, and salaries of people subscribing from all walks of life (for this reason, FinTech’s mass-adoption-rate and financial inclusion matters, to ensure a holistic growth of the financial services industry and its stakeholders).

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