PWC - Expectations of The Fintech Industry From Union-Budget 2023-24
PWC - Expectations of The Fintech Industry From Union-Budget 2023-24
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Foreword
Dear readers,
It is my pleasure to bring to you the latest edition of our
newsletter.
In this edition, we have discussed our viewpoints on the
expectations of the payments and FinTech industry from
Union Budget 2023–24 and the regulatory authorities. We
have also highlighted other areas related to the FinTech
sector that could have a direct or indirect impact on
various aspects of the digital payments industry.
I hope you find this newsletter to be a useful and
insightful read.
For further details or feedback, please write to:
[email protected] or [email protected]
2 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
In this issue
01 02 03
Introduction Expectations of the FinTech Conclusion
industry for FY 2023–24
3 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
01 Introduction
Every country’s regulatory environment and government initiatives play Table 1: Highlights of the previous budget (2022–23) related to the digital
an instrumental role in the success of the country’s overall ecosystem, payments and FinTech sector
including its payments and FinTech sectors. Even in India, the development
Theme Budget announcements, recent developments and
of the nation’s digital payments and FinTech ecosystem is a continuing
actions taken in the area
priority for the Indian Government and regulatory bodies, and the same is
reflected through the various initiatives taken by them. Digital rupee In Union Budget 2022–23, the Government proposed
the roll-out of a digital currency called ‘digital rupee’.
Since the last few years, the Indian digital payments market has witnessed
Financial Financial support of INR 1,500 crore was set aside
an upsurge, both in terms of volume as well as value of transactions, owing
support for for promoting the digital payments ecosystem. It was
to the various initiatives taken by the Government of India (GoI) and Reserve
promoting expected that the amount would be used to reimburse
Bank of India (RBI) to make India a fully digitised nation. It is expected that
the digital the zero merchant discount rate (MDR) for Unified
the Government will continue to promote the digital payments ecosystem
payments Payments Interface (UPI) and RuPay debit person-to-
and allocate a sizeable budget for the payments and FinTech domain in
ecosystem merchant (P2M) transactions.
Union Budget 2023–24 to expand India’s digital footprint.
Considering the growth in UPI transactions, it is likely
that a majority of the INR 1,500 crore earmarked for
digital payments was utilised for compensating for the
losses incurred by the industry due to the zero MDR
policy.2
The remaining amount from the total was allocated
towards setting up merchant-acceptance infrastructures
for digital payments, topping up of the Payments
Infrastructure Development Fund (PIDF), and
establishing centralised processing infrastructure for
banks and payment service providers (PSPs) for UPI. In
addition, a share of the amount was also expected to
be utilised for the promotion of digital payments for toll
1 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1882883 collection.
2 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1882883#:~:text=The%20Minister%20
stated%20in%20response,the%20paper%20currency%20and%20coins.
4 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
Digital banking The Government proposed to set up 75 DBUs in 75 rural Taxation of The Government proposed that the income from VDAs
units (DBUs) districts of the country to enable all sections of society virtual digital would be taxed at 30%, while losses from the sale of
to benefit from digital payment innovations. assets (VDAs) VDAs would not be allowed to be offset against other
incomes. In FY 2022–23, the Government has been able
Anytime– The GoI proposed incorporating 1.5 lakh post offices
to collect INR 60.46 crore on account of TDS on VDAs.
anywhere post with the core banking system (CBS) in 2022.
office savings As of April 2022, around 96% of post offices have
Allocation For FY 2022–23, the Government has allocated INR
implemented the CBS under the ‘anytime–anywhere of funds for 1.85 lakh crore to the Ministry of Home Affairs, where
post office savings’ service.3 cybersecurity a substantial portion of the fund was set aside for
cybersecurity and intelligence-gathering apparatus.
Online e-bill The Government planned the introduction of a Previously, in Union Budget FY 2021–22, INR 1.66 lakh
system paperless, online e-bill system to manage payments of crore was allocated for the same.
for central all central ministries for their procurements.4
With the allocated budget, the Ministry of Home Affairs
ministries As part of the Ease of Doing Business (EoDB) and has taken several initiatives such as setting up a state-
digital India ecosystem, the finance minister unveiled of-the-art National Cyber Forensic Laboratory and
the electronic bill (e-Bill) processing system on 2 March Indian Cyber Crime Coordination Centre for dealing with
2022, in an effort to increase transparency and speed cybercrimes in the country, launching Citizen Financial
up the payment process. Cyber Fraud Reporting and Management System for
immediate reporting of financial frauds and to stop
Gujarat The Government has extended support in developing a siphoning off funds by the fraudsters.
International FinTech hub in Gujarat (GIFT city) to provide small digital
Having discussed the key initiatives in Union Budget 2022–23, we shall now
FinTech payments technology firms with a platform to explore
cover the expectations of the payments and FinTech industry from Union
(GIFT) city and innovate more cost-efficient and easily adaptable
Budget 2023–24.
– payments financial products.5
business set- So far, there have been multiple developments in the
up GIFT City, including MoUs with banks and FinTech
associations.
3 https://static.pib.gov.in/WriteReadData/specificdocs/documents/2022/oct/doc20221012116701.pdf
4 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1802347
5 h
ttps://www.business-standard.com/article/economy-policy/govt-receives-rs-60-46-crore-tax-from-
tds-on-virtual-digital-assets-122121300699_1.html
5 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
02 Expectations of the FinTech industry for FY 2023–24
Expectations from Union Budget 2023–24
In our view, the FinTech industry’s expectations can be broadly divided into four key areas:
01 02
• Increasing financial support for digital payments ecosystem • Increasing allocation towards the PIDF
from INR 1,500 crore to INR 8,000 crore
• Introducing additional use cases for CBDC
• Providing financial support to promote ONDC
• Providing FinTech training programmes by foreign
• Incentivising FinTech entities to expand in rural areas universities
Policy measures (governance and technology) Adoption of payments and FinTech products
03 04
infrastructure costs to accept digital payments to
• Introduction of digital banking regulatory framework
PTOs
• Accelerating financial inclusion through 5G
• Granting permission to fit-for-purpose NBFCs to
• Support for NBFCs independently issue credit cards
Expectations of the FinTech industry from Union Budget 2023–24 (PwC’s point of view)
Source: PwC analysis
6 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
I. Expectations around incentives/tax breaks Further, more financial support is expected to increase the accessibility of
digital payments methods.
1. Increase in financial support for digital payments ecosystem
from INR 1,500 crore to INR 8,000 crore 2. F
inancial support to promote the Online Network of Digital
Commerce (ONDC)
Background:
Background:
The previous two budgets (Union Budget 2021–22 and 2022–23) had
allocated INR 1,500 crore as financial support to promote the digital The emergence of the ONDC is democratising e-commerce in the Indian
payments ecosystem. These funds were primarily allocated to compensate market. FinTech companies are empowering local retailers to help them
the payments industry for the revenue loss due to the elimination of the adapt to the digital wave cost effectively. Small businesses can, thereby,
MDR on UPI and RuPay debit person-to-merchant (P2M) transactions. gain greater discoverability and visibility previously unattainable on
established e-commerce platforms due to high fees and commissions.
PwC expectations:
PwC expectations:
In Union Budget 2023–24, we expect the GoI to increase this financial
support by increasing the amount to INR 6,000 crore for UPI P2M In order to promote the ONDC platform, it is expected that the Government
transactions and allocate an additional amount of INR 2,000 crore towards will introduce incentives to encourage FinTechs to onboard sellers on the
the compensation of losses on RuPay debit card transactions. ONDC and help them connect with buyers. Further, a budget allocation
towards the marketing and advertising of the ONDC platform and for
This higher support is expected considering the immense growth in volume educating different stakeholders to get onboarded on the platform is
and value of UPI transactions in recent times. Current trends show that new- anticipated.
age FinTech and payment services are investing in building UPI and quick
response (QR)-based platforms. According to the data sourced from the
National Payments Corporation of India (NPCI), in 2022, UPI processed over
74 billion transactions, amounting to INR 125.94 trillion.6 The total number
of UPI transactions jumped to 91.11% year on year (YoY). In our view, UPI
transactions may cross 100 billion transactions in 2023–24, out of which at
least 50 billion transactions are expected to be P2M transactions.
Considering the projected numbers, the current financial support of INR
1,500 crore would not be sufficient to fully compensate the banks for the
MDR loss. As a result, an increase in financial support would be necessary.
6 https://www.npci.org.in/what-we-do/upi/product-statistics
7 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
3. Incentivising FinTech entities to expand in rural areas II. E
xpectations around infrastructure
Background: development
So far, the digital payments adoption in India has been concentrated in 1. Increase in allocation towards the PIDF
urban areas. This is mainly due to the lack of adequate infrastructure in Background:
rural areas. As a result, the GoI is utilising the Payments Infrastructure
The RBI operationalised the PIDF scheme in January 2021 to encourage the
Development Fund (PIDF) for developing digital payments infrastructure
installation of point-of-sale (PoS), mPoS (mobile PoS) and QR codes in Tier
and promoting innovations in Tier 3 and beyond cities. Considering the
3 to Tier 6 cities and the north-eastern states. Initially established with a INR
technological innovations introduced by various FinTech entities, it is
345-crore corpus – with INR 250 crore from the RBI and INR 95 crore from
expected that they can play an important role in developing the required
major authorised networks – the corpus now stands at INR 811.4 crore.
infrastructure for promoting the digital payments ecosystem in rural areas.
Today, over 1.1 crore new touchpoints have been deployed in Tier 3+ cities,
PwC expectations:
surpassing the initial 90-lakh target by 2023.7
The FinTech sector wants the Government to implement policies that
would promote them and help them extend their reach. The Government is Table 2: Payments acceptance devices deployed under the PIDF scheme
expected to provide support to the FinTechs, which are targeting customers as of April 2022
in Tier 2, 3 and 4 cities and integrating the rural population into the formal
banking system. Location Physical devices Digital devices
Providing incentives to FinTechs that aim to empower underprivileged Tier 3 and 4 centres 1,65,356 42,93,988
small and medium enterprises (SMEs) through financial and technical
Tier 5 and 6 centres 1,40,421 61,01,464
interventions would be a significant push by the Government.
North-eastern states 30,994 4,96,271
Source: RBI
7 https://www.rbi.org.in/scripts/FS_PressRelease.aspx?prid=53843&fn=9
8 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
PwC expectations: Additionally, CBDC can be used for Government disbursements under direct
benefit transfer (DBT). Further, CBDCs could help in achieving a variety
Although over a crore new touchpoints have been deployed in rural areas,
of systemic goals, such as enabling financial inclusion, minimising fraud
there is still potential to establish more touchpoints in Tier 3 to Tier 6 cities.
and money laundering, ensuring sovereign options for digital payments,
This can be attributed to the digitisation of rural areas in recent years and
encouraging local payments innovation, and developing new monetary
a strong push by the Government towards digital adoption in rural areas in
policy tools.
the form of various schemes (e.g. Pradhan Mantri Gramin Digital Saksharta
Abhiyaan [PMGDISHA]).
3. FinTech training programmes to be offered by foreign
To increase the infrastructure development further, it is expected that the universities
Government should enhance the allocation of funds towards PIDF by INR
Background:
500 crore. This increase in funds is expected to encourage more merchants
to set up merchant-acquiring services like PoS and QR, with particular The University Grants Commission (UGC) has allowed foreign universities
emphasis on rural areas. to set up campuses in India. The New Education Policy 2020 has called for
developing a legal framework to assist the establishment and operation of
2. Introduction of additional use cases for CBDC the top 100 universities in India.9 The intent is to open up higher education
Background: in India to top-tier international colleges.
The introduction of CBDC gives businesses and citizens direct access to a PwC expectations:
digital currency backed by the assets held by central banks. The adoption With Government initiatives such as GIFT City and the development of
of CBDCs is, therefore, expected to transform the current global monetary International Financial Services Centre (IFSC), it is expected that the FinTech
system. On 7 October 2022, the RBI released a concept note on CBDC.8 sector in India will grow considerably.
PwC expectations: Presently, there are a limited number of institutes (including universities and
It is expected that Union Budget 2023–24 will have a detailed roadmap private institutes) offering FinTech courses/training in India. This has resulted
and framework for CBDC adoption in the Indian context. The roadmap is in a dearth of skilled and employable resources in the FinTech sector in
expected to help the relevant stakeholders get clarity on the use case of the country, leading to a demand–supply gap for skilled resources. It is
CBDC and help them strategise for the future. expected that the Government will enable the supply of skilled resources in
the FinTech sector in the country through training and upskilling initiatives,
and by providing incentives (regulatory/monetary) to foreign universities to
offer FinTech training programmes in the country.
8 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1882883
9 https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Final_English_0.pdf
9 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
III. Expectations around policy measures commercial banks to set up DBUs. In July 2022, NITI Aayog presented a
(governance and technology) proposal and roadmap for licensing and regulatory regime for digital banks
in India.11
1. Credit card on UPI
PwC expectations:
Background:
The Government/regulatory bodies should consider introducing the
India has more than 75 million active credit card users, out of which RuPay regulatory framework for digital banking licences.
cards account for 2.34 million of the credit card market in India.10 The RBI
has recently announced the linkage of RuPay credit cards on UPI. This 3. Accelerating financial inclusion through 5G
enables the RuPay credit card holders to pay merchants via QR codes
Background:
through BHIM UPI. As of September 2022, three banks have been granted
approval for linkage with BHIM UPI. The telecommunications sector is one of the major sectors playing a pivotal
role in the development of any country. In the coming years, 5G is expected
PwC expectations:
to become the standard for mobile communications technology and usher in
In order to create a level playing field and increase the outreach and ease of a new age of improved connectivity, better transfer speeds and usage, low
payments, it is expected that the Government/central bank shall formulate latency and affordable services.
a policy to extend the usage of the credit card on UPI for all the other
PwC expectations:
ecosystem players as well. This move will enable the remaining 70 million+
credit card users to make payments via BHIM UPI. Additionally, it will boost The introduction of 5G in the country will have a substantial impact on the
the payments infrastructure and pave the way for merchants and retailers to banking industry due to the high speed, low latency and higher bandwidth
use credit through the instant payment channel. of 5G. Moreover, 5G will enable banks and financial institutions to provide
a superior, user-centric digital experience to consumers. It will also ensure
2. Introduction of digital banking regulatory framework better connectivity and affordable services, helping increase the reach of
payments digitisation to rural areas.
Background:
Union Budget 2022–23 has set the tone of optimism for the
Currently, India does not have a regulatory framework for digital banking. telecommunication sector. Providing incentives to the telecommunication
The RBI circular on DBUs was a key step to enable the larger population sector will ensure a better success rate of digital transactions and reduce
of the country to avail of such digital offerings by allowing scheduled the number of failed transactions, thus enhancing the digital ecosystem in
the country.
10 RBI publication report and PwC newsletter on decoding India’s credit card market
11 https://www.pwc.com/gx/en/industries/financial-services/fintech-survey/crypto-services.html
10 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
4. Support for NBFCs
Background:
Non-banking financial companies (NBFCs) in India have played an important
role in promoting faster economic growth. FinTech NBFCs have led the
charge in digital loan disbursements with smaller ticket sizes, customised
product offerings and faster turnarounds. It has been observed that NBFCs
have the highest share of personal and consumer durable loans. During
COVID-19, NBFCs and FinTechs were able to adapt quickly and make
changes in their existing processes and policies, and provide end-to-end
digital experience to customers, thereby increasing efficiency and ensuring
disbursement without face-to-face interactions.
However, the NBFC sector has seen a significant impact in terms of the
number of delinquent cases – especially unsecured personal loans and
consumer durables. A few reasons for this include the localised presence
of NBFCs, lack of a pan-India collection infrastructure and manual recovery
processes.12
PwC expectations:
It is expected that NBFCs will obtain relaxations in terms of reduction of the
SARFAESI applicability. This will help them to scaling up their loan portfolio
through higher disbursements and aid in easier recovery of bad loans. In
addition, the Government can provide tax incentives to NBFCs to promote
co-lending business models and also consider inclusion of FinTech NBFCs
in priority sector lending (PSL) category.
12 https://www.pwc.in/assets/pdfs/research-insights/2022/mapping-the-indian-retail-lending-
landscape-vol-2-0.pdf
11 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
IV. Expectations around the adoption of to approximately another INR 250 crore (assuming the volume and value
payments and FinTech products of transactions continue to be in a similar range for the second half of FY
2022–23) for promoting the digitisation of toll collection on state highways.
1. P
roviding incentives and reimbursements for infrastructure
costs to public transport operators (PTOs) and acquirers Further, it is expected that the Government would allocate a budget for
reimbursing costs to PTOs for setting up the digital payments infrastructure.
Background:
With increasing innovations, we have already seen how digital payments
can revolutionise public transit payments systems. Government initiatives 2. Granting permission to fit-for-purpose NBFCs to
such as the National Common Mobility Card (NCMC), Swachalit Kiraya independently issue credit cards
(SWEEKAR) (an automatic fare collection system) and Swachalit Gate Background:
(SWAGAT) are encouraging passengers to have a smooth travel experience
Due to high access barriers, particularly regarding the issuance of credit
across all public transportation modes.
cards, NBFCs have been prevented from entering the credit card market.
The digitisation of public transportation will aid in the long-term Even other cards like charge, debit and stored-value cards cannot be issued
development of society by making public transportation more appealing to by them.
users through contactless services and electronic ticketing. Account-based
PwC expectations:
ticketing (ABT) systems will also eliminate the costs of delivering paper,
smartcards and magstripe tickets, and avoid the hassle of maintaining cash. The Government is expected to permit NBFCs to offer credit cards in light of
the rising FinTech culture and BNPL practices.
PwC expectations:
Authorities might need to review the regulations, given the recent changes
The toll industry has witnessed a 2.5–3% decrease in MDR, and acquirers
and growth of credit card usage in the consumer credit sector.
have to bear the majority of the losses, with bidding as low as 0.3%.13 In the
first six months of the current FY (April to September 2022), INR 25k crore
was collected through FASTag, out of which the MDR accounted for INR
650–700 crore.14 Here, the Government can compensate the acquirers for
up to 0.5% of the toll collection for promoting FASTag adoptions, amounting
13 h
ttps://www.pwc.in/industries/financial-services/fintech/dp/union-budget-2022-23-impact-on-digital-
payments-with-a-focus-on-the-digital-rupee.html
14 https://www.npci.org.in/what-we-do/netc-fastag/product-statistics
12 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
Other expectations of the FinTech industry from The AA ecosystem is expected to see an increase in the volume of
regulators/the Government transactions in future, and it is estimated that the annual transaction volume
will reach 1 billion by 2025 and 5 billion by 2027.18 Moreover, increase in
1. Mandate for financial information providers (FIPs) for basic the number of FIUs and FIPs will result in multiple use cases of financial
financial services products like loans, lending and insurance. In order to promote the AA
Background: ecosystem, the GoI should formulate a policy/mandate for FIPs to provide
basic financial services. For example, if a third party wants to access a bank
Account aggregators (AAs) are RBI-regulated NBFCs that facilitate
balance, the bank can be mandated to have an API for sharing the bank
structured financial data-sharing from FIPs to financial institution users
balance or to pull the specified number of the latest transactions.
(FIUs), while retaining a record of the consent provided and offering the
functionality to manage and rescind consent. 2. Enabling payments banks to provide limited lending
The RBI has already approved 6 AAs and has given in-principle approval Background:
to 8 AAs.15 As of 13 December 2022, there are 27 FIPs and 116 FIUs that
are live in the country.16 The AA ecosystem boasts of 1.1 billion AA-enabled Payments banks had received a ‘differentiated’ bank licence from the RBI,
accounts and has already seen two million users.17 which restricted them from offering lending products. However, we have
seen that these banks have extended their reach to rural areas with their
PwC expectations: services and easy access to the formal banking system in recent times.
Initially, the goal of account aggregation products and services was to PwC expectations:
gather data in one place in order to produce helpful statistics, such as the
total savings amount across all the accounts of customers. FIUs, such as To increase its reach to low-income households and rural areas as a
financial advisors, will be able to use account aggregation dashboards to part of financial inclusion, the RBI is expected to enable lending to small
do much more than just provide a consolidated view of savings and current borrowers through payments banks. This move will make it convenient for
accounts, investment performance, and incoming and outgoing cashflows the customers to avail basic banking services such as deposits, payments
owing to continuous technological advancements in terms of storage, and loans from a single entity rather than depending upon different banks
computation, UI/UX etc. Instead of concentrating on just aggregating for different products/services.
accounts, the goal will be to enable thorough automation in credit lending, Payments banks might also get a licence for micro-loans. They may also be
investment advising and personal financial management, enabling financial granted higher end-of-day deposit limits.
inclusion in the country.
15 https://sahamati.org.in/account-aggregators-in-india/
16 https://sahamati.org.in/fip-fiu-in-account-aggregators-ecosystem/
17 https://sahamati.org.in/media/all-public-sector-banks-go-live-on-account-aggregator-ecosystem/
18 https://sahamati.org.in/expected-evolution-of-account-aggregator-ecosystem-2023-2027/
13 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
3. Appointing agencies/operators for other financial products • OCEN: Since it is still in its early stages, the OCEN is conducting pilot
projects all over the nation. Although there are a few guidelines issued
Background:
by the RBI to support the advancement of OCEN, it is expected that the
There are three main financial regulators in India that are responsible for Government may establish a regulatory body with the aim of facilitating
regulatory and supervisory activities – the RBI, Securities and Exchange MSME credit and fostering the development of innovative retail
board of India (SEBI) and Insurance Regulatory Development Authority of microlending goods and services.
India (IRDAI). Owing to the flourishing digital landscape, various financial
4. Allowing a free market for the pricing of digital payments
products have emerged. Although these products have been significantly
products
contributing to India’s digital growth, they currently continue to remain
unregulated. Background:
PwC expectations: Currently, there is a varied pricing structure and fee/charges levied on
different payments instruments in India. The charges are regulated by
India’s digital footprint is rapidly expanding with new-age banking products
regulatory bodies or payment system operators (PSOs). The summary of the
and an increasing customer base. Independent regulators are the need of
same is provided below. PwC has also published a newsletter in September
the hour as they help maintain market confidence, contribute to financial
2022 on the ‘analysis of charges levied on digital payments’19 which may be
stability and ensure customer protection.
referred to for further details.
Currently, there are no regulatory bodies/authorities for some of
• UPI/Immediate Payment Service (IMPS): For UPI, banks need to
the financial products introduced in the ecosystem. As a result, it is
pay the switching fees for every transaction to the NPCI and these
expected that the Government will set up regulatory bodies for the
costs need to be recovered. There are no charges to merchants
following products/areas:
(P2M transactions)/payment originators (P2P transactions) for UPI
• VDAs: In Union Budget 2022–23, the Government introduced 30% transactions. For IMPS transactions, the participating bank imposes
taxation on VDAs, thereby bring the entity under the tax net. However, charges on the originator, and the NPCI imposes transaction fees on the
there is currently no regulatory body regulating the VDAs. The participant banks to recover its cost of operations.
Government can establish a body to regulate VDAs considering the
growing adoption and acceptance of VDAs as a new and alternative
mode of investment.
19 https://www.pwc.in/assets/pdfs/consulting/financial-services/fintech/payments-transformation/
analysis-of-charges-levied-on-digital-payments.pdf
14 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
• Debit/credit cards:
- D
ebit cards: Presently, the RBI regulates the debit card MDR
charges.
- R
uPay debit cards: There is zero MDR for RuPay debit card
transactions.
- Credit cards: The interchange fees of credit cards is fixed by PSOs
(card schemes).
In addition, there may be several other charges such as convenience fees
and surcharge levied on other debit and credit card users. Presently, the RBI
regulates these charges, which are dependent upon the type of payments
modes.
PwC expectations:
It is expected that a free market for pricing of digital payments based on
demand–supply and competitive forces would be introduced.
The RBI and PSOs may choose to partially regulate these charges by
defining an upper limit, but may allow the ecosystem players to decide the
charges for offering their products/services. This move will enable the digital
payments players to offset their operational costs and push them to offer
competitive pricing to attract more customers.
15 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
03 Conclusion
Union Budget 2022–23 laid the foundation for India to take the next leap on
its digital payments journey. It is expected that the Government will continue
to diversify the support for building the digital payments infrastructure in the
country with necessary budget allocations and policies.
As next steps, the Government is expected to focus on four key areas
as part of Union Budget 2023–24, namely incentives for FinTechs and
payments ecosystem, payments infrastructure development, governance
and technology policies, and adoption of payments and FinTech products.
Developments aligned with these focus areas will enable FinTechs and the
payments industry to extend their value propositions and increase outreach,
thus contributing to financial inclusion.
The Government’s commitment towards the vision of ‘Digital India’ will
be fuelled by the adoption of a digital payments ecosystem as well as
favourable policy measures. Union Budget 2023–24 is anticipated to
advance the acceptance of digital payments and promote growth in terms
of innovations.
16 PwC | Expectations of the FinTech industry from Union Budget 2023–24 and regulatory authorities
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Vivek Belgavi Mihir Gandhi Amit Jain Zubin Tafti Geetika Raheja
FinTech and Alliances Leader Partner and Leader, Partner, Regulatory Executive Director, Payments Executive Director, Payments
PwC India Payments Transformation PwC India Transformation Transformation
[email protected] PwC India [email protected] PwC India PwC India
[email protected] [email protected] [email protected]
Authors
Neha Dharurkar, Aditya Vyas and Chaitanayam
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