Budget 2019 expectations: Fintech industry wants incentives for setting up data centres, Zero MDR regime

Budget 2019 expectations: Implementation of Zero MDR regime promised in last budget and incentives for setting up data centres in India, are among other major demands of the fintech sector from Union Budget 2020.

The industry has been growing over the last few years because of a supportive environment by the RBI and government policies. Source - Reuters.

Budget 2019 expectations: Implementation of Zero MDR regime promised in last budget and incentives for setting up data centres in India, are among other major demands of the fintech sector from Union Budget 2020. The industry has been growing over the last few years because of a supportive environment by the RBI and government policies.

"The expectation for 2020 from the government is to put into effect the Zero MDR regime promised in last budget. Making payments free is imperative for wider and easier distribution of credit to small businesses which will help get economy back on track. The payment commissions are only making banks more profitable - and sucking capital away from businesses as against providing them credit. This will have higher impact than the GST waiver being proposed on digital payments," BharatPe, CEO and founder, Ashneer Grover said.

Merchant Discount Rate or MDR is the fee paid by merchants to banks for offering them infrastructure to accept digital payments. The amount is shared by the bank that offered the acceptance device (acquirer), the bank whose customer made the payment (issuer) and fintechs or card networks which facilitated the transaction.

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"It will be important to see if the upcoming budget allows uniform stamp duty on every state for Digital documents that will create ideal situation for the industry. Additionally, there is a significant opportunity to fuel the Indian economy by widening the acceptability of MSMEs by the BFSI sector. Fintechs are going to be instrumental in bringing new data analytics and solutions for this opportunity," Meghna Suryakumar, Founder & CEO, Crediwatch said.

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"Fiscal incentives for Fintechs building such solutions would be welcomed. Several fintechs providing payment solutions have asked for incentives for setting up data centres in India given the need to expand their services to Tier 3 cities and beyond. This will allow them to scale faster at an economical cost," she said.

Meghna added that the biggest challenge in the market today in India is that the setup cost is 10% higher as compared to Singapore and Japan.

"With data security, privacy and compliance coming under scrutiny, Government should encourage the private sectors to establish data centers in the country. And continue to emphasize on technologies that encourage digitization and creation of data infrastructure. Additionally, there should be no or less Dividend Distribution Tax on Fintechs and NBFCs companies," she added.

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Budget 2020 Expectations Nirmala Sitharaman