The government on Monday proposed Rs 1,500 crore-scheme to boost digital transactions in the country. This move will drive adoption of e-payments in smaller cities and spur innovation by fintech firms.
Finance Minister Nirmala Sitharaman in her Budget speech said there has been a manifold increase in digital payments in the recent past.
The government on Monday proposed Rs 1,500 crore-scheme to boost digital transactions in the country. This move will drive adoption of e-payments in smaller cities and spur innovation by fintech firms.
Finance Minister Nirmala Sitharaman in her Budget speech said there has been a manifold increase in digital payments in the recent past.
"To give a further boost to digital transactions, I earmark Rs 1,500 crore for a proposed scheme that will provide financial incentive to promote digital mode of payment," she said.
Cheering the move, Payments Council of India Chairman and Infibeam Avenues Ltd Executive Director Vishwas Patel said the announcement would incentivise digital payments.
"Hopefully, it will be used to reimburse losses suffered by payment service providers for processing RuPay debit cards and UPI transactions for free in the year 2020 as well as top up the Rs 500 crore fund set up by RBI as part PIDF," he said.
In the past, industry bodies have highlighted that the stipulations made under Budget 2019 mandating zero merchant discount rates (MDR) is "adversely affecting" the financial technology (fintech) ecosystem.
Zero MDR on RuPay debit cards and UPI is restricting digitising the MSMEs (micro, small and medium enterprises) as MDR is the primary source of revenue for the participants in the payment ecosystem, they had ruled.
Simply put, MDR is the rate charged to a merchant by a bank for providing debit and credit card services.
The year 2020 saw an 80 per cent increase in digital payments, especially from tier II and III cities, Razorpay Chief Executive Officer and co-founder Harshil Mathur said pointing out that the government has understandably focussed on capitalising on this momentum and incentivising adoption of e-payments for the year ahead.
"I'm hoping the funds will be used towards developing alternatives to zero MDR 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," he said.
He exuded confidence that the financial 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 and villages.
Shardul Amarchand Mangaldas and Co Partner Shilpa Mankar Ahluwalia said the Rs 1,500 crore allocation will "most certainly" help in wider adoption of digital payments over cash.
"Investment focus areas should be internet infrastructure in tier II and III cities, and also in financial and digital literacy initiatives," she said.
Ahluwalia noted that rationalising the zero MDR policy will also be critical to ensure that on the supply side, there is continued innovation and the providers of payment solutions are able to develop platforms that generate revenue and are economically sustainable.
Raman Roy, co-founder of Indian Angel Network, said the focus on digital transactions will enable startups to create unique solutions for Atmanirbhar India.
Incentivising digital payments will help further help fintech players grow, veteran industry leader and IAN co-founder Saurabh Srivastava said.
Vijay Mani, Partner at Deloitte India, noted that measures like these are promising and help in expanding the digital payments ecosystem.
"When it comes to financial inclusion, every step counts, and earmarking Rs 1,500 crore for incentives to boost digital payments is a welcome and promising move," he added.
Cyient President and Chief Operating Officer Karthikeyan Natarajan said allocation of funds as incentives for promoting digital payments is a step in the right direction and a significant move in enhancing ease of doing business.
With PTI Inputs