E-wallets are back. Or are they? India’s central bank’s move to give it a boost may have come a little too late for its resuscitation.
Meanwhile, Indonesia is banking on the private sector to save its satellite programme for internet connectivity.
It’s getting tough to keep up with AstraZeneca’s trials and tribulations with its Covid-19 vaccine—revised efficacy results, blood clots, a pause on vaccine trials for children and all that.
And China’s experiment with a central bank digital currency will have a lot of other central banks watching and learning.
China’s digital currency experiment will be a lesson for other central banks
Here’s the opening paragraph from an article in the Wall Street Journal announcing China’s digital currency:
Forget shaking the pillar of American power for a moment. China has strict controls over its capital flows. And while the yuan has the status of being a reserve currency in the eyes of the International Monetary Fund (IMF), its use in trade isn’t topping the charts anytime soon. So, the dollar can be comfortable with where it is for now.
You might argue that the world is digital anyway, with electronic payments trumping cards and e-wallets. But this is a CBDC or a central bank digital currency. This means people will soon have a bank account with the central bank, the People’s Bank of China. If you’re an Indian, imagine having an account with the Reserve Bank of India, instead of any of the commercial banks. And transactions can be conducted freely, or rather encouraged, from that account. That’s important because, now, the central bank can run different experiments and tinker with its policy directly instead of routing it through banks.
Expiration dates. The stick that comes with the carrot of free money. Remember when India announced its form of expiring money in October 2020 to promote consumption (BFO #141)? The finance ministry had said that instead of Leave Travel Concessions (that weird component in your salary), they would give vouchers instead, which would have to be spent digitally by 31 March 2021 (I wonder what came of that experiment).
So, if the government can control such handouts, it can also be more nimble in its policy actions without waiting on reports from banks and other policy think-tanks. And that can change the face of monetary policy actions, if designed well and marketed for specific use cases.
But as more things go digital, privacy will be a thing of the past (one can argue that it already is).
It’ll soon be next to impossible to escape the ‘eye in the sky’, which in this case will be the government monitoring everyone’s spending behaviour. And the unintended consequence of it will be a return of cash transactions (if people really care about things like privacy anymore).
And there will be lessons for the world’s central banks, including India, to learn from these experiments. After all, India is hell-bent on being a cashless/digital economy, and it’s toying with the idea of managing its own digital currency too.
It’s too late to save the wallets
Yesterday, India’s central bank, the Reserve Bank of India, in an unexpected largesse, moved to resuscitate prepaid instruments like wallets. It said PPIs can now do three things.
- Wallets can hold as much as Rs 2 lakh (US$2,700) compared to Rs 1 lakh (US$1,350) earlier
- Cash withdrawals from even the non-bank prepaid instruments via point of sale (PoS) terminals and ATMs
- Interoperability, or the transfer of money from one wallet to another
The idea of these measures was to make PPIs more user-friendly and improve the payments infrastructure in tier-3 towns and beyond.
All these measures, though, do little to bring back wallets. For one, RBI has not addressed the one thing that really hurts wallets—KYC (Know Your Customer) norms. About three years ago, the RBI kneecapped wallets, saying all of them need to be KYC-ed. And that only KYC-ed wallets could store as much as Rs 1 lakh. With that, a product that was growing at about 50% month-on-month in 2017 has slumped to about 3% month-on-month currently, according to RBI data.
So, just increasing the limit to Rs 2 lakh is not going to increase the volume of transactions.
As for allowing cash withdrawals, it’s the ultimate nightmare of every wallet company. Digital payments companies like Paytm* make money only when people spend it within its ecosystem. In fact, Paytm traditionally charged a 5% convenience fee to transfer money from the wallet back into your bank account. So, it’s a move that further hits the wallets where it hurts. When the time comes for wallets to comply with this move, expect the companies to do their best to disincentivise withdrawal from the wallet.
As for interoperability, with people having shifted lock, stock, and barrel to the instant payments system of Unified Payments Interface (UPI) for peer-to-peer payments, does it even matter now for wallets?
It’s all a bit too little, too late now isn’t it, RBI?
*Paytm founder Vijay Shekhar Sharma is an investor in The Ken
Indonesia’s space race struggles to reach orbit
Covid-19 is delaying the launch of Indonesia’s Satria satellite, a US$550 million project. Once in orbit, Satria will be the country’s biggest satellite with a throughput capacity of 150 gbps.
Putting the satellite into space is crucial to Indonesia’s connectivity inclusion plans. It’s meant to provide internet to 150,000 public facilities, including schools, regional government offices, and health facilities.
The original launch date was March 2023, but production delays forced the Indonesian government to ask the International Telecommunication Union (ITU) for an extension. Originally hoping to get an extra 14 months, the ITU recently approved only a seven-month extension.
Satria will need to launch in October 2023, or else Indonesia risks losing the orbit spot, which is somewhere over the island of Papua. The ITU can reassign the spot to another country if Indonesia fails to claim it on time.
“Force majeure” was responsible for the delays, Indonesia’s Minister of Communications and Information, Johnny G. Plate, told the media. He assured that the financing and production plan for the project was still intact.
But Indonesia has a complicated history with satellite projects.
For instance, the Papua orbit isn’t even the only slot Indonesia is struggling to fill on time. There’s another one over the island of Sulawesi. This orbit was previously filled by the Garuda-1 satellite, launched in 2000. By 2015, it had lost functionality and was moved to a graveyard orbit.
Ever since then, the government and private sector have come up with various schemes to reclaim the spot before it can be reassigned by the ITU in 2024. One stop-gap solution included leasing a British satellite, Artemis, to temporarily fill the slot. But Indonesia fell behind with payments. A new private-sector initiative that has been underway since 2018 is also behind schedule.
Luckily for Indonesia and the Satria project, private companies like SpaceX have made launches cheaper and more frequent. So, Satria still has a chance to make it with just a few months of delay. If all goes to plan, it will be hoisted into space by SpaceX’s Falcon 9 Rocket—in October 2023.
AstraZeneca caught a break, and then it didn’t, but what about AEFI?
On 18 March, the head of the European Medicines Agency (EMA), the EU’s drug regulator, announced in a press conference that the Covid-19 shot developed by AstraZeneca and Oxford University was not associated with unusual blood clots reported by vaccine recipients in some countries.
On 6 April, the World Health Organization (WHO) put its weight behind the vaccine as well, saying that the benefits far outweigh the risks.
But then, on the same day, Marco Cavaleri, chair of the vaccine evaluation team at the EMA, told Italian daily Il Messaggero, “In my opinion we can now say it, it is clear that there is an association with the vaccine. However, we still do not know what causes this reaction.” Which was soon followed by a denial from the EMA, saying that it hadn’t established a causal relationship, and that the investigation was still on. And last evening, the EMA held a press conference and listed blood clots as a ‘very rare side effect’ of the vaccine.
With all the “yes, it’s safe. No, it’s not” debate, it’s easy to understand why countries in Europe—Ireland, Bulgaria, Sweden, Latvia, Germany, Italy, France, Spain, Denmark, Norway, and The Netherlands—have had a start-stop relationship with the vaccine.
The UK has even paused the pediatric trial aimed at testing the AstraZeneca vaccine in more than 200 young people aged six to 17 years, according to the Wall Street Journal.
And even though the incidence of blood clots is extremely rare, how countries treat it depends on their mechanism for reporting and dealing with adverse events following immunisation (AEFIs).
On the other hand, in India, where the AstraZeneca vaccine is one of the only two approved vaccines,
We’ve written about India’s handling of AEFI or the lack of it before (BFO #239). The German approach to pausing the rollout even though the incidence of blood clots was only in seven cases out of 1.6 million recipients just makes it even starker as to why India needs to be more transparent about the AEFI, communicate better or risk increasing vaccine hesitancy. Especially when the country is in the middle of a surge in cases.
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.