Fintech should be given infrastructure industry and priority status
Representative image. Money control
In the upcoming Union Budget, I hope the government gives the fintech sector an “infrastructure industry” status which will open up a space for fintech players to raise money from various sources, including government infrastructure schemes, banks and other international lenders, to be a priority sector.
Why fintech requires large investments
Fintech sounds like it only involves technology, and thus it can be an asset-light business. Yes, it is in a way a light business compared to other traditional sectors. Fintech, however, requires large investments in human capital (intellect) and innovation.
Building long-term digital infrastructure requires continuous development of new fintech solutions, maintenance, improvisation and innovation, for which high-risk capital is required. Therefore, future investments are a must.
If you look at other developed countries, the payments vertical in the fintech space has become a mainstream infra framework. It is not just a payment gateway; there are many more services built on top of it. So you basically make a big highway and build it to let the country participate in it.
For example, you may have witnessed the success of Unified Payments Interface (UPI) and many other fintech services built on top of UPI, allowing financial inclusion to penetrate to the bottom of the pyramid through the digital revolution.
Similarly, another innovative digital payment technology, Central Bank Digital Currency (CBDC), is expected to repeat the success of UPI, as there is a high probability that there will be many private sector entrepreneurs and fintech startups participating in the growth of CBDC and increasing its popularity and mass adoption in the years to come.
Fintech is not just a set of features
From my perspective, it is high time we define fintech as an infrastructure industry because it is not just a set of functionality; rather, it is laying the pipeline to build out a large fintech infrastructure for the next 5 to 20 years. This is the need of the hour as the nation moves towards a cashless and digital economy.
This fintech business model requires a good amount of investment, and by defining it as an infrastructure and priority sector, I think there can be a great potential for innovation and more sustainable business in the long term. An increase in funding also increases the appetite to invest in innovative futuristic fintech products, thus increasing the fintech space.
PLI status turns the sector’s fortunes around
Let me share an illustration to demonstrate how government support can turn around the fortunes of a sector. Last year, currently, the government extended a Production Linked Incentive (PLI) scheme for semiconductor manufacturing; now the country expects at least $25 billion in investments in semiconductor space in India. Now, companies from technologically advanced countries such as Israel, Japan and Taiwan are exploring opportunities and in some cases have already seized opportunities to invest in the semiconductor space in India.
If you see, whatever sector has been classified as a priority industry or has been incentivized, many investments have flown into this area, by large companies, via government incentives and schemes, as well as by multinational institutional investors as well as MNCs -companies.
If fintech is classified as an infrastructure business, then it gives fintech players much more appetite to tap into funding sources that potentially have a much longer-term impact, as it is a multi-year investment that will pay off in the long run. term.
Fintech should be considered new-age infra
Financial technology should be considered the next new ‘infrastructure’, which a nation should build vigorously if it wants to succeed in the new global order. The way UPI has been built and promoted and adopted on foreign shores is just one visible example of “Digital Infrastructure” in the fintech space. The country needs to build more such financial technologies that need to be expanded to have a cashless or cashless digital economy in the coming decades.
With the status of “infrastructure industry”, the necessary boost and the treatment of being a priority sector will help many private players to innovate, develop and build futuristic yet secured payment, e-commerce and other fintech solutions for the country.
The author is Managing Director, Infibeam Avenues Ltd. He tweets @VishalMehta_ @InfibeamAvenues. Views expressed are personal.
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