Financial services sector in India experiences significant growth following the India-UK Free Trade Agreement
The India-UK Free Trade Agreement (FTA), signed on July 24, 2025, is set to revolutionise the electronic payments, FinTech, and financial sectors in both countries. The FTA emphasises digital trade and services cooperation, promising a more enabling environment for FinTech growth and financial inclusion.
Key Advancements
The FTA includes several provisions aimed at fostering digital trade and financial services. These include commitments on cross-border data flows, source code protection, and prohibition of customs duties on electronic transmissions. These measures aim to open and stabilise digital markets, reduce digital trade restrictiveness, and foster innovation in electronic payments and FinTech sectors.
The agreement also includes fair treatment clauses and regulatory transparency specifically aimed at Indian firms operating in the UK’s financial services and FinTech space. This will likely boost the confidence of Indian FinTech companies, facilitating their smoother entry and expansion in the UK market.
Simplified customs and digital procedures, such as paperless customs, electronic authentication, and rapid clearance within 48 hours, will also reduce trade friction and operational costs for businesses, indirectly benefiting FinTech firms that rely on efficient cross-border transactions and payments infrastructure.
The FTA is also expected to encourage supply chain diversification and investments, broadening financial services and product offerings, increasing competition, and diversity in FinTech solutions available to consumers and businesses in both countries.
Trust and Security Frameworks
Although the UK retains some rights to negotiate data localization, the FTA’s firm stance on source code protection and prohibitions on customs duties for electronic transmissions signals greater trust and security frameworks that underpin innovations in digital payments and financial technology.
Impact on Financial Services
The FTA is expected to lead to a surge in financial transactions between the UK and India. Similar liberalisations apply to lending of all types, including consumer credit, mortgage credit, factoring, and financing of commercial transactions by Indian entities in the UK.
The agreement has the potential to introduce new, innovative, and competitive financial services to India's market, benefiting customers and the broader economy without compromising the stability of India's financial services sector. The MSME portfolios of banks and NBFCs are expected to increase substantially due to the new opportunities from the UK FTA agreement, primarily from a trade finance and treasury standpoint.
Regulations and Compliance
All commitments in this sector are subject to the rules and regulations prescribed by various regulators. A majority of directors and key management personnel, including the Chairperson of the Board, Managing Director, and Chief Executive Officer, must be Resident Indian Citizens for financial services suppliers in the FTA agreement.
The FTA includes non-discrimination rules to ensure fair treatment for Indian firms operating in the UK. Life insurance will face 'none' limitations in the UK market, while non-life insurance will have binding limitations on market access for risks related to maritime shipping, commercial aviation, space launching, and freight, including satellites and goods in international transit.
Future Outlook
The signing of the FTA is a significant step towards financial market integration between London and IFSC GIFT City / Mumbai, according to industry experts. Vivek Iyer, Partner with Grant Thornton Bharat, sees the FTA as a precursor to longer-term financial market integration.
The FTA is expected to result in a significant credit uptick in the MSME sector. Comprehensive transparency commitments are included in the FTA, guaranteeing equitable, transparent, and objectively administered UK rules for authorising Indian financial services firms.
While the full text of the agreement on digital trade has not been publicly released yet, the commitments made so far strongly indicate a transformative impact on FinTech and electronic payment ecosystems between India and the UK. The FTA is positioned as a strategic blueprint to strengthen economic integration in the digital era, creating a more enabling environment for FinTech growth and financial inclusion by reducing regulatory and operational barriers, boosting cross-border cooperation, and promoting digital trade.
[1] India-UK Free Trade Agreement: What it means for the FinTech industry
[2] India-UK Free Trade Agreement: A Boost for FinTech and Digital Payments
[3] India-UK Free Trade Agreement: The Impact on FinTech and Digital Payments
- The India-UK Free Trade Agreement (FTA) includes commitments on cross-border data flows, source code protection, and prohibition of customs duties on electronic transmissions, aimed at stabilizing digital markets and fostering FinTech innovation.
- The FTA's regulatory transparency and fair treatment clauses specifically aimed at Indian firms in the UK’s financial services and FinTech space will likely boost the confidence of Indian FinTech companies, facilitating their smoother entry and expansion in the UK market.
- Simplified customs and digital procedures under the FTA will reduce trade friction and operational costs for businesses, indirectly benefiting FinTech firms that rely on efficient cross-border transactions and payments infrastructure.
- The FTA encourages supply chain diversification and investments, broadening financial services and product offerings, increasing competition, and diversity in FinTech solutions available to consumers and businesses in both countries.
- The FTA's firm stance on source code protection and prohibitions on customs duties for electronic transmissions signals greater trust and security frameworks that underpin innovations in digital payments and financial technology.
- The FTA could lead to a surge in financial transactions between the UK and India, introducing new, innovative, and competitive financial services to India's market, benefiting customers and the broader economy.
- The FTA is positioned as a strategic blueprint to strengthen economic integration in the digital era, creating a more enabling environment for FinTech growth and financial inclusion, promoting digital trade, and reducing regulatory and operational barriers.
