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

Very nice recap of current behaviour. I'm just not sure any of this will translate into long term habits once the epidemic abates. In my experience (and by the logic you have cited at the beginning of the article) no long-term habit is ever formed voluntarily under sufferance. It is formed through the reinforcing effect of a rewarding experience. A case in point in Singapore. After about 8 weeks of a partial lockdown (in which malls and restaurants were closed), there is frenetic activity today on the streets. Shopping and eating out are back with a vengeance! (But then the citizens of Singapore never really do anything else anyway). You may find, as India passes it peak and the real fear of Covid disappears, that people will revert to their old ways.

Ateesh Tankha

"The core takeaway is that once you own demand, these food delivery startups can bolt on additional services on the supply side and patch together a business model that makes sense from an overall perspective. " So any food delivery company can start cross-selling or up-selling other products (based on a very loosely-held captive group of customers) and make the overall business profitable? It may be instructive to look at Amazon's model abroad. My knowledge is dated no doubt (at least 5 years old), but for Amazon to make money off the average Prime customer, they would need to sell a minimum $1700 worth of goods a year to cover free shipping, returns, et al (all the aspects linked to deliveries, but not including discounts and incentives paid for by Amazon). In India, this is not easy, especially if you are restricted to food delivery, grocery delivery and a few others. This problem is compounded further if customers do not restrict their purchases in these categories to one or two e-tailers. This is one of the reasons why none of the companies mentioned above, including Amazon in India, are anywhere close to turning a profit.

Ateesh Tankha

Pranav While what you share does not come as a shock, it was interesting to see the figures and understand the magnitude of the problem. Again, it begs the question whether Mr. Aggarwal ever intended to make this a going business in the first place. Or was Ola originally created to be sold to the likes of Uber? If the former, I would dearly like to see a sample P&L (even a simple waterfall will do), that shows how a gypsy cab service model - with its incentives and overheads - can turn profitable. I am unable to do so. A supply side economic model only ever works - if it ever does - when the supplier controls all the means of production (which Ola certainly does not), and the market regulators are predisposed to the supplier (as when Grab, after its merger with Uber in Singapore, was able to have a field day as a monopolist charging whatever it felt was reasonable, until Gojek came along).

Ateesh Tankha