Indian fintech firms and stakeholders are welcoming the Government’s steps towards addressing issues around time-consuming Know Your Customer (KYC) processes and making Permanent Account Number (PAN) the common identifier for all digital systems of specified government agencies.
“The KYC process will be simplified by adopting a ‘risk-based’ instead of ‘one size fits all’ approach. The financial sector regulators will also be encouraged to have a KYC system fully amenable to meet the needs of Digital India,” Finance Minister Nirmala Sitharaman said while presenting the Union Budget 2023 on February 1.
The steps taken to simply KYC will in turn simplify digital spending and investment processes, industry players said.
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“Budget 2023 is a great step towards supporting the long-term growth potential of India's fintech ecosystem amidst increasing global headwinds… simplified KYC processes and adoption of PAN as the common business identifier will help streamline business operations for fintech across India,” said Anirban Mukherjee, CEO, PayU India.
The trade association of the IT industry, Nasscom, also commended the move to simplify KYC.
“One big thing is also the focus on simplifying the KYC regime and making it risk-based. Really marrying the idea of Aadhaar and DigiLocker and creating an ecosystem where different ID proofs can actually be used is going to be really useful,” said Ashish Aggarwal, Head, of Public Policy, NASSCOM.
"Making PAN the common identifier for all online businesses will definitely ease the process of compliance for start-ups. Additionally, the government’s decision to facilitate the growth of the start-up community by reducing over 39,000 compliances will set the precedent for a vibrant 2023 for startups," said Harshil Mathur, CEO & CoFounder of Razorpay.
DigiLocker expansion a win for fintech industry
Fintech firms are also welcoming the move of expanding DigiLocker services to MSMEs and startups. DigiLocker is an Indian digitization online service provided by the Ministry of Electronics and Information Technology under its Digital India initiative.
“Provisions regarding boost to digital infrastructure especially towards expanding the scope of DigiLocker will help enhance credit availability to micro-segments by making credit evaluation and document verification easier for fintech and other financial institutions,” said Madhusudan Ekambaram, Co-founder & CEO, KreditBee
"Measures to increase the scope of DigiLocker services for individuals and MSMEs will certainly aid in enhancing the accessibility of financial services with higher convenience and simplified processes with robust security," said Akash Sinha, Co-founder & CEO, Cashfree Payments.
The fintech sector has been facilitated by digital services, PM Jan Dhan Yojana, Indian Stack, and UPI, Sitharaman said while presenting the Budget 2023.
“Under the National Data Governance Policy, simplification of KYC processes, expansion of DigiLocker, and proposed framework for credit infrastructure will increase access to financial services for all and foster financial stability,” said Haribandhu Patra, CFO Lentra, a digital lending cloud platform for banks and NBFCs.
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National Financial Information Registry to promote transparency
The finance minister also said that a National Financial Information Registry will be set up to serve as the central repository of financial and ancillary information.
“This will facilitate the efficient flow of credit, promote financial inclusion, and foster financial stability. A new legislative framework will govern this credit public infrastructure, and it will be designed in consultation with the RBI,” Sitharaman said.
Several fintech players and industry stakeholders found this as a boost as this will create more transparency and aid in the fast adoption of digital payments.
“The National Financial Information Registry has the potential to be a game changer in the coming months. It will facilitate the efficient flow of credit, promote financial inclusion, and foster financial stability. We await the draft legislative framework on this to get better clarity on its use cases. Also, the access to anonymized data under the national data governance strategy, will promote innovation and research by universities and startups,” said Swapnil Jambhale, Co-founder and COO, of Safexpay.
The agenda to set up a National Financial Information Registry to serve as a central repository of financial and ancillary information along with a central data processing centre comes at a time there are rising threats around data management and security in the industry.
“This secure expansion of the scope of documents will make the system more transparent and accessible for multiple groups,” Aryaman Vir, Founder and CEO, Myre Capital.
Finance Minister Nirmala Sitharaman said that the economy has become a lot more formalised as reflected in the increase in digital payment transactions to 7,400, worth Rs 126 lakh crore through UPI in 2022.
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