Just enter your email address registered with The Ken
Reset Password
Email Sent to:
Check your inbox for instructions to reset your password.
The dawn of a new payments era
Goodbye debit cards, the Reliance-Netmeds deal, all about that BaaS, and more
This is edition 103 of Beyond The First Order, a premium daily newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia
Goodbye debit cards, the Reliance-Netmeds deal, all about that BaaS, and more
A 🔒 paid newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia. Someone sent you this? Subscribe to BFO
Good morning,
I recently watched the 1999 cult classic The Matrix for the first time (...two-second reaction time for audible gasps…), and I’m quite taken by the idea of stark choices. For today’s edition, let me introduce the pieces in a similar fashion:
If you had to buy medicines online, would you choose Amazon or Reliance Retail?
If you can choose to, would you like to swipe or tap your card to withdraw cash?
If you were buying your first car, would you make it electric?
If the entry barrier to invest in a government-backed retail bond was halved, would you pull the trigger?
Fun fact: You can take a real poll for option 3. Just scroll down.
Now onto Matrix Reloaded. Thank god it’s almost Friday.
The dawn of a new payments era
Arundhati
Imagine a world where you can send money from India to anyone in the world over WhatsApp. Or withdraw cash by scanning the QR code flashing on the ATM. Or link your credit card to WhatsApp to make all your payments instead of making payments out of your savings bank account.
Goodbye debit cards.
I'm going on about WhatsApp over other payments apps, because it’s the one payments app that is yet to launch in India. It was cleared for launch multiple times by different authorities from the retail payments body National Payments Corporation of India (NPCI) to the central bank. But WhatsApp is still stuck where it was three years ago. In 2017, it rolled out payments in a limited manner using Unified Payments Interface or UPI—a mobile-based real-time payment system—to 1 million users out of the 400 million users it has in India.
After all the false starts, WhatsApp has a real chance. One where it could compete with NPCI. Facebook-owned WhatsApp invested US$5.7 billion in Jio Platforms for a ~10% stake. And payments is key for all services Jio Platforms covers from retail to commerce to content.
Enter, stage right, the Reserve Bank of India (RBI).
India's central bank is paving the way for entirely new payment systems to emerge. It is inviting applications for entities to envision an entirely new retail payment body that will introduce newer payment methods, standards, and technologies. It must also improve retail payments using ATMs, point of sale terminals; Aadhaar (India’s 12-digit unique ID for those living in the country) based payments, and remittance services.
The last four years in fintech have been dominated by digital payments like UPI thanks to retail payments body NPCI’s efforts. NPCI runs UPI, but it runs the ATM infrastructure and also issues Rupay credit and debit cards. But being the only such entity that runs retail payments, it is a monopoly whose rulemaking is opaque.
Depending on the time and context, NPCI is a competitor. It is a platform. It is a regulator. It is an industry association. It is a profitable non-profit. It is a rule maker. It is a judge. It is a bystander.
The thing to note here is that NPCI is also a nonprofit company.
So even if WhatsApp doesn’t launch, there is no stakeholder really hauling NPCI over the coals for missing revenue targets. Also, because NPCI operates as a not-for-profit entity, the government can afford to reduce all fees associated with payments, as the infrastructure is maintained by NPCI.
But the new guidelines allow those applying to operate for profit.
So there will be a new payments entity that will be driven to make sure all payments systems it runs have a meaningful business model. This entity will compete with NPCI, which operates on the premise that there is no money in payments. So, which of the two entities will companies gravitate to then?
Exit, stage left, NPCI.
Entrackrreported yesterday that NPCI has floated an entity to test global markets for UPI.
Jio Platforms should have acquired Netmeds. Instead, its sibling did
Rohin
Last week, tech giant Amazon soft-launched its online pharmacy in India. It was greeted by a letter from the All India Organization of Chemists & Druggists, an industry group comprising retail pharmacies and distributors, claiming that its entry was illegal.
"We are writing to you as we came to know that www.amazon.com has decided to enter 'Online Pharmacy' space, probably oblivious to the fact that the E-Pharmacies are illegal and not recognized by the laws under Drug & Cosmetic Act & Rules there under," the letter dated August 14 reads. "This space has been marred by extreme controversies, court cases and legal issues in the last few years."
They’re right, at least technically.
But that didn’t stop Reliance Industries, increasingly Amazon’s arch-nemesis in India, from announcing the acquisition of a majority stake in Netmeds, an online pharmacy, for approximately US$80 million in cash.
Morgan Stanley reported that Netmeds’ annual revenue last year was around US$1 million while its losses were US$8 million. But India’s online pharmacy space is ripe for take-off, with a massive market, outdated regulations, and increasing consumer willingness to order medicines online.
Online pharmacies would fit well into Reliance’s ambitious bet to turn its subsidiary, Jio Platforms, into the Amazon+Apple+Tencent+Verizon of India.
But Jio Platforms wasn’t the company that acquired Netmeds. Instead, it was Reliance Retail, its sibling from the same parent.
Regardless of where Netmeds sits on a balance sheet, it is inevitable, and its products will eventually find their way to one or more Jio apps.
Which will make the regulatory treatment of online pharmacies over the next year interesting to observe. Will these two be treated the same? Will both be equally illegal?
(a) An online pharmacy owned and run by an Indian retail company?
(b) An online pharmacy run by a foreign e-commerce company?
All about that BaaS
Nithin
(Source: CGTN)
When electric vehicle (EV) manufacturer Tesla introduced battery swapping for its electric cars, it looked cool but people weren’t interested. Auto analysts believed that development of faster charging stations was a more compelling solution.
In 2017, when India’s Minister for Road Transport and Highways, Nitin Gadkari said, “The swapping [battery] policy I feel is not appropriate for [India]”, Tesla’s failure could have been on his mind.
Now, India wants manufacturers to sell EVs even without pre-fitted batteries. Why? Batteries make up ~40% of the upfront cost of an EV. This makes its pricing unattractive compared to the regular vehicles. To become a 100% EV nation by 2030, the government wants to chip away at this pricing hurdle.
But even by de-linking the battery from the EV, the cost reduction for the customer could be insignificant. They will still have to source the battery from the EV or a battery manufacturer.
That’s where the battery swapping model could make a dent. With a pay-as-you-go model, the up-front battery cost will be spread over the lifetime of use.
Will the move invite companies that develop standardised electric car batteries for swapping? Not yet, because standardised EV batteries aren't in car makers’ interests. Here’s what a senior executive at a vehicle manufacturer told Mint:
“Anyone with proprietary design of an EV, including the battery, will disagree with standardization of the batteries as their R&D teams have worked to achieve certain high-performance and output, and this involves manufacturing, machining, design, casing and cooling system, among other critical areas.”
There’s precedent. Better Place, an Israeli company that set out to revolutionise battery swapping crashed rather spectacularly in 2013. It assumed other automakers would build vehicles compatible with its technology. No one did.
But instead of just writing off battery swapping, Indian EV manufacturers should pay attention to Asian countries where battery swapping as a model is working. It’s been adopted by Nio, the Chinese electric car company and Gogoro, the Taiwanese electric two-wheeler company. They work differently from Better Place—these companies design swappable battery packs and also set up their own automated swapping stations; but to serve their own EVs, not others. Since the batteries are not standardised across manufacturers, it gives them complete control over their user experience.
The Indian government should also pay attention to the generous subsidies that these countries have doled out to build the EV infrastructure. In 2019, the Indian government approved plans to spend US$1.4 billion over a three-year period as EV incentives. It had cut the goods and services tax (GST) rates, a form of indirect taxes, on EVs from 12% to 5% and even offered additional tax exemptions to individuals on the interest on loans taken to pay for EVs. Despite this, sales of EVs are muted which suggest that more subsidies and tax breaks may be needed.
As the most expensive part of EVs could become shareable, battery swapping or the concept of BaaS or Battery-as-a-Service is best adopted by car manufacturers themselves. Their in-house research and development (R&D) with custom batteries can give a better user experience than with a standardised off-the-shelf battery.
The first one to do so will create a “walled garden” for battery standards, and stand to gain. Just like Nio and Gogoro did. But it might still cost the customer a pretty penny.
What's holding you back from buying an EV? Tell us. Take the poll below. We'll reveal the collected responses in one of our upcoming editions.
What's holding you back from buying an Electric Vehicle?
Thanks to the Malaysian government, Sukuk or an Islamic bond, has found a new way to penetrate deeper into the retail investor market. As part of Malaysia’s national economic recovery plan, the government has launched a RM500 million (US$119.8 million) Sukuk with a two-year maturity period.
It also offers a 2% interest per annum that will be paid quarterly. Here comes the interesting part: it can only be subscribed through online banking channels.
Traditionally, bonds, Islamic or not, were available only through brokerages, banks and licensed investment platforms. Besides, the entry price for retail investors to invest in bonds generally starts from RM1,000 (US$240), but with this particular Islamic bond called Sukuk Prihatin, investors are able to start as low as RM500 (US$119.8).
Any average Malaysian with an online banking account can now park their money with Sukuk Prihatin and reap the quarterly profits. This opens up a huge new set of retail investors for the Sukuk market because no middlemen are needed to invest in Sukuk Prihatin. It is also guaranteed by the government, so the risks are incredibly low. And since the Sukuk is in Malaysian Ringgit, there is zero currency risk.
In a low interest rate environment, which causes the returns for 24-month fixed deposit rates at banks to go down to an average 1.85%, a 2% annual return makes an attractive deal for investors looking to diversify their investments.
And for those that are looking for a noble cause to invest in Sukuk Prihatin, the proceeds of this Islamic bond will be used to finance measures to help address the Covid-19 crisis—from medical expenditure to financing for micro-enterprises and enhancing connectivity of rural schools.
It’s an incredibly smart way for the Malaysian government to fundraise from the public, and I won’t be surprised if another issuance of Sukuk Prihatin is already on the cards.
The Oracle’s glittering bet
Nithin
"If you bought gold at the time of Christ and you figured the compound rate on it, it may be a couple tenths of 1%," said Warren Buffet in 2018.
Yet, the company he’s CEO of, Berkshire Hathaway (NYSE: BRK.A) has just bought gold.
“Never bet against America,” said Warren Buffet in May 2020.
Yet, by buying gold and selling shares of American Banks, Berkshire did that.
“Be fearful when others are greedy, and greedy when they are fearful,” says Warren Buffet always.
Now, Berkshire isn’t being fearful since everyone else is greedy for gold too.
Berkshire has had a poor run of late, especially with its investment in airline stocks. Its stock has also underperformed at the US S&P 500 index, a broad based index of stocks.
So, is it time for investors to bet on someone other than the Oracle of Omaha?
The mega back up
Olina
China is worried about its Cobalt reserves. The powdery blue metal, mined in droves in the Democratic Republic of Congo (DRC), forms an integral part of the cathodes that go into lithium-ion batteries. Which, in turn, power new-age industries like EVs.
Guess who owns eight of the 14 Cobalt mines in the DRC? The same entity that has the largest global capacity to pump out li-ion batteries, and manufacture EVs.
So, China is very worried about its Cobalt reserves.
“China’s state stockpiling agency has drawn up plans to buy 2,000 tons of cobalt after the coronavirus pandemic highlighted the fragility of supplies of the strategic mineral...The move is in response to supply disruptions from top producer, the Democratic Republic of Congo, and is in line with China’s future economic and strategic needs.”
China Plans to Boost Cobalt Reserves as Virus Spurs Supply Risks, Bloomberg
That’s a wrap for today.
Don't forget to write in with your thoughts and observations on how this pandemic is reshaping businesses, societies and economies. We will be back tomorrow.
Beyond The First Order is a paid daily newsletter that demystifies the hidden models, incentives and consequences of the most significant events across India and Southeast Asia. This newsletter is published by The Ken—a digital, subscription-driven publication focussing on technology, business, science and healthcare
Unrivaled analysis and powerful stories about businesses in India and Southeast Asia from award-winning journalists. Includes access to longform articles, premium newsletters across a range of topics depending on your interest and our top-ranked podcast. For those who want to be prepared for what comes next.
Others tell you what. We tell you the ‘So What?’
Decode the most significant shifts happening around business, technology, startups and healthcare. All told through a combination of original reporting, beautifully visualised data and infographics, and delivered as a compelling narrative story.
Trusted and loved by 300,000+ subscribers
Our subscribers include executives and leaders from the world’s most successful companies, students at top post-graduate campuses, and smart, curious people who want to understand how business is shaping the future of India and Southeast Asia.
So much journalism in India is superficial.
Articles are generic, almost cookie-cutter in their approach. And they don’t provide enough context on the issues they cover. The Ken is different. I don’t always agree with everything they say but I appreciate their commitment to publishing deeply reported narratives and investigations. Their reporters find new ways to analyze tech among other industries. And that’s always worth a read.
Sid Talwar / Co-Founder and Partner / Lightbox Venture Capital
As entrepreneurs, we thrive on being in the know at all times.
A personal subscription to The Ken was a no brainer. But as startup founders, this isn't enough. Team members also need to be in the know, for everyone handles customer-facing responsibilities and an ecosystem change that impacts customers also impacts us
Kiran Jonnalagadda / Co-founder / HasGeek and Internet Freedom Foundation
This is a brilliant piece. Very well researched and explained.
The policy & execution is in quite a mess. the flip flops on KYC, the insidious use (& abuse) of consent, the hopeless competition with zero-balance Jan Dhan accounts - all brought out starkly. Congratulations!
Ajit Ranade / Chief Economist / Aditya Birla Group
Thanks to The Ken, we have articulate, original & relevant stories
that shape our understanding of businesses around us. With placements around the corner, Ken is a great resource to prepare and ace our interviews.
Sandeep Ganesh / Student Body President / ISB 2018
An article from The Ken has become an intrinsic part of my daily news diet.
Nandan Nilekani / Former Chairman / UIDAI
I look forward to Ken's incisive reporting, rigorous research, and contrarian but always logical viewpoints
Deep Kalra / Group CEO / MakeMyTrip
The Ken is my daily guide to intelligent business journalism like never before.
Kapil Chopra / Former President / Oberoi Hotels
Unlock a world of subscriber privileges. Subscribe now
Narrative stories
Read insightful, deeply-reported business stories everyday. Over 1500 stories published till date
Newsletters
Access exclusive newsletters based on your interest from award-winning journalists
Community
Join and engage with 300,000+ other career-minded subscribers across Asia
Audio
Listen to our top-ranked business podcast to understand the stories that matter
Questions?
What kind of subscription plans do you offer?
We have three types of subscriptions
- Premium which gives you access to either the India or the Southeast Asia edition.
- Borderless which gives you complete access to The Ken across both editions
- Echelon which gives you complete access to The Ken across both editions along with a bonus gift subscription
What do I get if I subscribe?
The Premium edition gives you access to stories in that edition along with any five subscriber-only newsletters of your choice.
The Borderless and Echelon subscription gives you complete access to The Ken across editions and unlimited access to as many newsletters as you like.
What topics do you usually write about?
We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics. We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.
Our specialised subscriber-only newsletters are written by our expert, award-winning journalists and cover a range of topics across finance, retail, clean energy, cryptocurrency, ed-tech and many more.
How many newsletters do you have?
We are constantly adding specialised subscriber-only newsletters all the time. All of these are written by our team of award-winning journalists on a specialised topic.
You can see the list of newsletters that we publish over here.
Does a Premium subscription to your Indian edition get me access to the Southeast Asia edition? Or vice-versa?
Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.
We recommend the Borderless or the Echelon Plan which will give you access to stories across both editions.
Do you have a mobile app?
Yes! We have a top-rated mobile app on both iOS and Android which allows you to read on-the-go and has some amazing features like the ability to bookmark stories, save on your device, dark mode, and much more. It’s really the best way to read The Ken.
Is there a free trial?
You can sign up for a free account to experience The Ken and understand our products better. We’ll send you some free stories and newsletters occasionally, and you can access our archive of previously published free stories. You can stay on the free account as long as you’d like.
The vast majority of our stories, articles and newsletters can be accessed only by a paid subscription.
Do you offer any discounts?
Sorry, no. Our journalism is funded completely by our subscribers. We believe that quality journalism comes at a price, and readers trust and pay us so that we can remain independent.
Do you offer refunds?
No. We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.
I am facing some trouble purchasing a subscription. What can I do?
Just write to us at [email protected] with details. We’ll help you out.
I have a few more questions. How can I reach out to you?
Enter the email address that you’d like us to send this payment link to. This could be your HR, finance representative, or anyone from your organization. A copy of this email will be sent to the team’s admin as well.
Email Sent Successfully
Corporate pricing applies to teams of 5 or more members only.
Thank you. We have received your request to post comments. You’ll hear from us soon.
Are you sure? Your subscription will expire at the end of your current subscription period.
The Ken has added you as a partner. Read The Ken as a couple. Sign in to get started.
T
The Ken has added you as a partner. Read The Ken as a couple. Sign up to get started.
Having your name allows us to address you personally in emails and on our website. That’s all, nothing else.
T
The Ken has added you as a partner. Read The Ken as a couple.
The Ken’s stories are available only for paid subscribers. As a partner, you can now access The Ken subscription. For free. Just activate your account to get started.
T
The Ken has added you as a partner. Read The Ken as a couple.
The Ken’s stories are available only for paid subscribers. As a partner, you can now access The Ken subscription. For free. Just activate your account to get started.
By registering, you will be signed-up for a free account with The Ken
Sharp, original, insightful, analytical
Alert
Our anti-piracy system has flagged your account for suspicious activity and has temporarily paused your account. This may happen due to a number of reasons.
If you think that this was done in error, please get in touch with us at [email protected].
Are you sure?
You will be changing your registered email address to access your account. All email newsletters will be delivered to the new email ID.
As a part of the Learning and Development program at Myntra-Jabong, you have complete access to 300+ original daily stories over the next year, 500+ previously published stories and our comment sections. Also, do keep an eye out for our exclusive subscriber-only iOS and Android apps which will be rolled out for you shortly.
Happy Reading!
By continuing to browse our site you agree to our use of cookies to improve our performance and enhance your user experience.
