Nicely laid out, Arundhati. In consonance with your views, and as I said in an ET article on Mar 20, there are three fundamental problems with this market design. First, interoperability is either absolute or it isn't (this is not a thought experiment like Schrodinger's cat). And interoperability without a neutral ombudsman is not realistic. This is why Visa and Mastercard and UPI work. There is no conflict of interest. Secondly, for it to be a truly level playing field, UPI and Rupay should be allowed to charge fees. If that happens, what incentive is there for member issuers to switch? If they hold to zero MDR, what incentive is there for the other side of this two-sided market - merchants - to switch? Thirdly, why would a corporation join a network whose shareholder/ s compete with it directly for merchants and/ or consumers?

Ateesh Tankha

Nice article Arundhati. "Inditrade’s Bandyopadhyay claimed he had no knowledge of the various third-party services used by the apps it partnered with. There was no legal requirement that stopped the company from working with foreign entities, he told The Ken." I think the quote above says it all, though it's amazing that the head of a firm is so willing to abdicate responsibility. The problem begins with the lack of oversight: lenders of their vendors, and RBI of the unregulated financial system. It's the lack of a robust and enforceable auditing system that enables fly-by-night Chinese apps to proliferate and endure. From a data breach and fraud perspective, even more worrying may be what are essentially Chinese-backed companies - like Paytm - which are now systemically embedded.

Ateesh Tankha

Hi Sumanth, Nice article. Though I must say (from experience) because of non-existent or unenforceable reporting standards, crypto really is more vulnerable to (and attractive for) money laundering than other forms of financial transactions. However, I'm curious about your comment below: "There is no reason UPI can’t win in international markets by providing a modern replacement for SWIFT—a digital rupee can serve as an important peg to take these systems from domestic shores to global markets. It could help settle cross-border transactions, taking the place of currencies like the US dollar. Done right, it carries the potential to change the way the Indian rupee is perceived and utilised globally." How exactly would it bypass the US dollar off-ramp? Or were you thinking that one need not buy dollars upfront for an international transaction? If so, to my mind, there would still be the need to convert to dollars on the seller side to offload the digital currency.

Ateesh Tankha

Arundhati This is a great article that serves to show the complete lack of thinking on the part of RBI. I am still trying to understand the purpose of NUEs - entities that will operate a payments network without being neutral ombudsmen, but who must preserve interoperability, and are meant to be for-profit enterprises that will compete with a "FREE" public utility (with which many of these NUE aspirants are associated either through part ownership or extensive usage). And all to expand the government's dream of a fully digital India ? Seriously? Only in India! You are very right in drawing the conclusion that the resulting chaos may undo any digital gains the country has enjoyed so far.

Ateesh Tankha

"The future of BNPL, therefore, may look more like traditional lending than the disruption it started as." But wasn't it part of the same ecosystem, in th first place? Payday Lending in the US is simply an adjacency to short term personal loans. BNPL as defined here is much like a credit card purchase for a transactor (one who pays on time in full at the end of his or her billing cycle). And the moment someone offers you a 0% EMI loan for 6-18 months (depending on the-ticket size) it's pretty much the same - maybe even better than traditional BNPL schemes where you are expected to clear the entire outstanding within a stipulated timeframe. If Amazon or Flipkart make a real success of getting people to defer payments on big ticket purchases and maybe even revolve the loan thereafter, they are more than likely to launch digital private label cards for regular customers. It makes more money for the company (reduced fees, revenue share on the interest income). Banks and NBFCs aside, whether Paytm and the other fintechs can be as successful or profitable is more questionable. Without a clear tie-in to repeat purchase behaviour, or the ability to flip a 0% EMI loan or short term deferment scheme into an interest bearing relationship, there's really no money to be made.

Ateesh Tankha

Great article, Arundhati. And different, given that the papers are agog with the news of failing banks on the one hand, and the disbursement of corporate bank licences on the other. In regards to collections, I think another thing to consider is the poor risk modelling that is deployed universally across banks - to say nothing of NBFCs - who overcompensate for this by charging usurious rates of interest. If this were more in line with reality in the first place (those with sterling credit scores in India are still offered credit card rates which approximate to periodic defaulter rates in the US), the pain of collecting lower EMIs and Min Dues may be somewhat alleviated. But if its an unsecured loan, the strong-arm tactics of collections agents should be prohibited. Unsecured implies that the lender needs to carry the risk.

Ateesh Tankha

Pranav Thanks for sharing. A zero MDR regimes is silly. Card payments are part of a two-sided market. Simply driving merchant acceptance without building credit penetration amongst consumers is counter-productive. It's like giving away nothing for free. But I have long ago given up trying to understand the mind of GOI. Much better to cap interchange for all issuers and let the market regulate itself thereafter. An even better solution that the GOI could consider would be to mandate double-badged (2 network) credit cards. One could be MasterCard or Visa while one would have to be Rupay. The choice of network steering could be left to the merchant. Assuming Rupay would be processed at a lower (but not zero) cost, the merchant would always prefer it. There is a critical lesson to be learnt from Russia in 2014. An over-dependence on MasterCard or Visa could severely impact the payment channels if India were ever to be in conflict with the US. So Rupay in one form or another (and not just UPI) is critical. Naturally, fraud and processing systems, etc. will need to be made world class.

Ateesh Tankha

Really great story. And it makes you wonder how things will pan out when Jio in a not so distant future (ably aided and abetted by WhatsApp and Google) tries to stifle grouse and complaint.

Ateesh Tankha

Great analysis, Arundhati. From what you say it may very well be the end of the road for Paytm unless a regulatory miracle enables an easier mode of doing business. But at the same time, I sometimes hope that the RBI and SEBI maintain a strong culture of regulatory oversight. Recent instances of banking and mutual fund debacles (with large existing Indian FIs) do not give one much confidence in the existing system, let alone in one that is more liberal. There's a very good reason why so many wallets and payment service providers abroad either have no banking licences or stay away from them altogether. And yet, by focusing on their core businesses, they are still able to make money.

Ateesh Tankha

Arundhati Thanks for sharing this interesting story. But I'm sorry to ask if this is like a storm in a teacup. The way I see it there are three grouses being expressed by Mr. Mishra: 1. The grouse in regards to NPCI: this is a legal quibble. Are they authorised to pass and amend rules? In any case, allowing multi-bank relationships is both safe and necessary. Whatever. 2. The grouse against RBI allowing payment companies and quasi-banks to operate in ways that are either in violation of or outside the purview of current regulation. I agree. There needs to be clear guidelines and a level playing field to enable both growth and safety. 3. The grouse against the likes of Google Pay and how it has diddled the banks out of $132.2B. Without looking at his calculations, it's tough to opine. But I will say that a "pass-through" wallet never diddles either payor or payee. (Sure, Google could be manipulating payments data, but again, having worked with Google in the past to try and use Payments data to prove attribution, this is not easy or possible without the banks agreeing to share data in the first place). If his accusation is related to payments related fees, he may be mistaken. If you ask me, it's the likes of Paytm and PayPal who act as merchants of record and charge one end or the other service/ transaction fees, that should be scrutinised - if at all.

Ateesh Tankha

Vandana While it is commendable that the Hero Group has deep tech ambitions, I must point out that IoT "deep tech" (especially that which is linked to AI and real-time actions) has three fundamental components: 1. One or more smart devices that can, by design, be operated and programmed remotely 2. A sensor nest for efficient bandwidth, data transmission and energy use 3. Edge computing ability After reading your article I did look up the Qubo camera. Despite its aspirations, it is still a basic IP Camera which is integrated with Alexa. If this is the fundamental promise, a Chinese competitor will easily undercut it in price and match it in quality and features. The real differentiators in IoT product design come into play when a product achieves a level of excellence in regard to the 2nd and 3rd components. In fact, the real magic lies in the firmware. India's ability to write cutting edge firmware for AI and real-time decision making will see us succeed or fail in an arena that is quickly defining the smart process of tomorrow. Else, we may, at best, like the Qubo camera produce "integrated tech."

Ateesh Tankha

Thanks Pranav, the article captured a lot of interesting facts and figures in regard to News Aggregation. It paints a comprehensive picture. But, for all that, your conclusion (voiced by Mr. Bansal) boils down to same thing we hear time and again. As long as a startup (though Daily Hunt is somewhat longer in the tooth) has used its investments to subsidise the cost of its services or acquire a subscriber base - no matter that they are not paid subscribers and that they are shared with everyone else - you can magically pivot this asset into selling your base of subscribers something else. Just because I come to you to read an amalgam of news does not mean that I will be so receptive to viewing an ad. Many years ago, Google saw its display ad revenues crash because it could not prove attribution. Page views and clickthroughs were not the most effective measures of advertising effctivenss. The willingness to consume or purchase something else from a news aggregator may be a whole other challenge.

Ateesh Tankha