Budget 2023: From video-based KYC to expansion of DigiLocker services, positive signals for fintech

The Union Budget 2023-24 focuses on the overall holistic development of all the pillars of the economy, and resonates deeply with the Government’s vision of ‘Amrit Kaal’. The fintech sector has been seeing a meteoric rise in India over the past few years, on the back of the government’s thrust on digitisation and a bouquet of reformist initiatives such as the PM Jan Dhan Yojana, Indian Stack, and UPI.

In India, the fintech space for consumers can be largely categorized into five major pillars, all essentially powered by technology and digitization. These include payment services, lending segments, digital banking platforms, insurance platforms, and, investment platforms. There has been growing usage of technology in the form of AI and ML across this space, which has enhanced the fintech’s association with customers.

Plans to set up 75 digital banking units

Another major announcement proposed by the Government in the Budget has been the plan to set up 75 digital banking units of commercial banks (SCBs) across 75 districts in the country. Further, to boost financial inclusion and enable easy access to bank accounts through net banking, mobile banking, and ATMs, the finance minister has proposed the inclusion of all the 1.5 lakh post offices within the country’s core formal banking system. Hence, funds can be better facilitated between post offices and bank accounts from now on. This will play a decisive role in proliferating digital payments deep into the nation, thereby expanding the ambit of financial inclusion. The RBI-approved digital rupee is an important milestone that is poised to disrupt the Indian payment system by adding a whole new dimension to the existing financial ecosystem.

Expansion of DigiLocker services

Another welcome move has been the expansion of DigiLocker services that will permit fintech companies to store and share documents online, in a safe and secure manner with various authorities, regulators, banks, and other entities. This pragmatic measure will help fintech companies save their cost and simultaneously ease their course of business operations by simplifying the process of KYC.

Video-based KYC allowed

The Government has also allowed fintech to conduct video-based Know Your Customer (KYC), in tandem with its Digital India mission. The DigiLocker, being a government-verified service, will simplify the KYC process, compared to a scenario where a private service provider is paid for the technology usage.

DigiLocker for individuals, at present, can be used to create and safely store digital versions of documents that are issued by the central and state governments, banking and insurance service providers, health certificates, as well as transport documents, such as driving licenses, and vehicle RCs. The government has also proposed that the scope in terms of the types of documents that can be added to the DigiLocker for individuals will be expanded further.

This would prove to be Holy Grail for fintech firms as they would easily be able to authenticate users digitally to provide them access to financial services. Therefore, the expansion DigiLocker services will be a great measure for individuals, banks, and financial institutions to store and share data online in a secure and faster manner.

Policy interventions and tax rationalisations for individuals, startups, and MSMEs are some of the other important measures announced in this fiscal Budget.

The writer is Founder & CEO, mPokket- an app lending platform. He tweets @gaurav_jalan @mPokketOfficial. Views expressed are personal.

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