Budget 2019: Incentivize Digital Payments in the Rural India, Says Industry

The industry is expected to touch $1 trillion by 2023

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Ever since the horrors of demonisation hit India, the payments industry in India is blooming. In fact, according to a Credit Suisse, the digital payments industry is pegged at $200m and is expected to grow fivefold to $1 trillion by 2023.


Even the likes of Google and Facebook-owned Whatsapp couldn't resist entering the Indian payments industry using the NCPI's BHIM UPI platforms.

Additionally, time and now the Reserve Bank of India (RBI) reviewed its policy related to the industry not just to regulate the segment but also to promote innovation.

Last October, the RBI issued directions for interoperability which allowed users to transfer money from one wallet company to another and even bank.

Nonetheless, with the interim budget just around the corners, leading payments companies share the wish list with Entrepreneur India on government achieve its goal of cashless economy.

Push Digital India

Apart from the interoperability, in the last few years, the regulator has supported initiatives like direct connectivity to IMPS along with non-bank participation in the payment system.

Now, it is time that government looks at strengthening the payment infrastructure and push more people towards it.

As cash continues to be the preferred mode for transactions, especially in semi-rural & rural areas, Abhishek Ray, Head- Legal and Compliance, ePayLater says it becomes imperative to encourage this large section of the population to become a part of the fintech revolution.

"Concessions can be provided for the adoption of digital payments to reduce the dependency on cash transactions, which will lead to more transparency and higher tax collections. A sustained push towards a digital-first economy and digital literacy would be the best vehicle to increase and build awareness for digital transactions," he added.

Upgrade Infrastructure

The mobile penetration in the country is increasing and per estimates, there are more than 350 million smartphone users in the country. In the coming months, these numbers are set to improve.

While on the other hand, internet penetration in the rural region is a little more than 30 per cent in the country.

Upasana Taku, Co-Founder, MobiKwik hopes that "there will be a more specific plan and budgets for connecting remote areas and villages through high-speed optic fibre networks and building Wi-Fi spots in tier-1/2 towns and cities."

Support to Existing Network

Additionally, the government can also look at bolstering or digitalising last miles financial institutions like primary agricultural societies and urban credit societies.

"Financial support for PACs to undertake total computerization which in turn will facilitate the implementation of digital payment solutions," said Mandar Agashe - Founder and Vice Chairman, Sarvatra Technologies while adding that, "Urban credit societies should be allowed to be part of sub-member program of RBI and should be rendered financial support in the budget to launch Rupay debit cards and other digital payment products like micro ATMs such that they are capable of operating."

Tax Incentives

While on the other side, the government can also look at tax sops to promote digital payments in the lower tier cities.

Giving an example how the government can do this Anand Kumar Bajaj, Founder & CEO PayNearby and Chair BCFI Communications Committee says for digital-savvy customers, government has spent INR 600 Crore on DigiDhan Yojna and waived Merchant Fee for debit card transactions. Similar simple and clear waiver of GST can be made without need of Reverse Charge Mechanism (RCM) to help the assisted service model that we follow for mass India.

"Increase of GST exemption from 20 lakh to 40 lakh will not benefit anyone since there is RCM applied, which means collect GST from everyone irrespective of amount. Further, a weighted tax benefit of 125 per cent on all expenses incurred by us would help in growth of industry and the pie for us will become larger. We will be able to bring small deposits from almirah to the banks to build big projects for the country," he noted.