RBI's plan to tackle fraud; How Rupay Credit cards are planning to scale; Funding this week and more; Fintech News 1-7 June

RBI has been very active this week with several new launches and initiatives, While BoK believes CBDCs won't serve the economic upliftment. And JP Morgan doesn't feel Ethereum ETF will make a splash.

P.s.: Wanna catch up with the Fintech Chronicler, with hot off the press news? Check out my Substack.

INDIA

1. Do you know how much of our hard earned money gets lost to frauds every year? As per a report by RBI Governor Shaktikanta Das, in FY 24, there were 36,075 bank frauds, mostly thanks to the proliferation of digital payments. In a bold move to confront this challenge head-on, the Reserve Bank of India (RBI) has announced plans to establish a dedicated Digital Payments Intelligence Platform. This initiative promises to be a game-changer, fostering a system-wide approach to prevent and mitigate digital payment frauds, which have been on a concerning rise in recent times.

RBI Governor Shaktikanta Das acknowledged the gravity of the situation, stating, "Growing instances of digital payment frauds highlight the need for a system-wide approach to prevent and mitigate such frauds." His words resonated with a sense of urgency, underscoring the pivotal role this platform will play in restoring consumer confidence and bolstering the integrity of the digital payments ecosystem.

But this is no ordinary endeavor. The RBI has assembled a formidable team, a veritable brain trust, to spearhead this initiative. Chaired by the esteemed Abhaya Hota, former MD and CEO of the National Payments Corporation of India (NPCI), the committee boasts a diverse array of expertise, drawing from the ranks of industry titans such as NPCI, State Bank of India, HDFC Bank, ICICI Bank, Visa, Razorpay, and Jupiter.

2. Whats driving the adoption of Rupay Credit cards? As per NPCI’s data, RUpay Credit cards saw a surge of 10% marketshare from 3%, on the back of Credit cards on UPI. Currently, there are about 32 crore merchant acceptance touchpoints for UPI payments, far more than the 90 lakh PoS terminals available for credit card payments. For several users, credit card-linked UPI payments have become the primary mode of payment, with average monthly user spends of over ₹22,000. The average number of transactions is 21 -- four times higher than traditional physical credit card payments, whereas the average transaction size is ₹1,125, lower than the traditional average card ticket of around ₹4,000.

Grocery and Kirana stores led the adoption of ‘credit cards on UPI’, comprising 33 per cent of total usage, followed by apparel and electronics accounting for 15 per cent, and food and dining for 7 per cent. The remaining 45 per cent expenses are spread across e-commerce, travel, government services, fuel, pharmacies, etc. This signifies the growing reliance on digital payment solutions for not only discretionary expenses but also daily expenses.

3. What happens to your bank deposits, if you forget about the account in which you held the money? Or if something untoward were to happen to you, and your account details didn’t carry its nominee?

As per the RBI, since 2020, banks have seen a rise in unclaimed deposits, surging to ₹39,000 crore, with Public sector banks taking the cake with ₹33,000 crore. What should one do in such a situation? Well, prudent financial advise would be to ensure you have added your nominee details in every financial asset of yours. The next step would be check out RBI’s Udgam portal, for all the accounts where your details are present. And if unclaimed, well you know what to do.

4. RBI and the reserve bank innovation hub have been really active this week, with 3 new product launches. First was the introduction of Pravaah – an online portal that will make it convenient for any individual or entity to apply online for various regulatory approvals and enhance the efficiency of various processes related to granting of regulatory approvals and clearances by the RBI. Next was a Retail Direct Mobile App, a seamless and convenient way for retail investors to invest in government securities. And finally, Fintech Repository that will contain information on rich repository of data on Indian FinTech and EmTech firms for a better understanding of the sector from a regulatory perspective and facilitate in designing appropriate policy approaches. EmTech is RBI’s term for all emerging technologies that can potentially be applied to financial services like, AI, ML, Cloud Computing, DLT, Quantum and so on.

5. Gautam Adani, one of the richest Indian, has his eyes set on your smartphone. What do I mean? According to a recent report, the Adani Group is apparently in talks with banks to launch a co-branded credit card. But that's not all – word on the street is that they're also looking to dive into India's Unified Payments Interface (UPI) network. Imagine being able to pay for your samosas and chai using an Adani digital wallet!

But wait, there's more! Rumor has it that the conglomerate is negotiating to offer online shopping through the government's Open Network for Digital Commerce (ONDC) platform. That's right, folks – soon you might be able to buy your favorite gadgets, clothes, and more with just a few taps on an Adani e-commerce app.

Now, why is this such a big deal, you ask? Well, it's a major move for the Adani Group to expand their reach into the rapidly growing consumer markets of digital payments and e-commerce. It's like they're trying to become the one-stop shop for all your financial and shopping needs!

Of course, these are just rumors and speculations for now, but if they turn out to be true, it could be a game-changer for the digital landscape in India. Imagine the convenience of having your bank, credit card, and online shopping all under one big Adani umbrella. It's like having your very own personal digital assistant, but way cooler (and probably richer)!

6. In April 2024, the fintech space in India witnessed a seemingly modest influx of $29 million in investments. But wait, there's more to this story than meets the eye. According to data compiled by the BFSI consulting firm, The Digital Fifth, a significant portion of this funding was directed towards companies specializing in payment services, particularly in the cross-border payments sector. It's like the fintech world is saying, "Hey, we're not just thinking locally anymore!"

Now, let's talk about the real stars of the show – the startups that caught investors' eyes. Loan marketplace platforms were among the lucky ones to secure funding during this period. And when it comes to the epicenter of fintech innovation, Gurgaon emerged as the champion, accounting for a whopping 33% of funded companies in April.

But here's where things get really interesting. BankBazaar, the financial marketplace giant, secured the top spot by raising a cool $9.6 million. Insuretech startup Claimbuddy, cross-border payments company Briskpe, and PayTech enabler Innoviti were among the other players that joined the funding party.

Now, you might be thinking, "Okay, so some startups got funded. Big deal." But here's the kicker: this influx of capital sets the stage for accelerated product development, market expansion, and the potential for strategic partnerships or acquisitions. It's like these companies just got a power-up in the game of fintech domination.

And let's not forget the real reason behind investors' interest – innovation. The cross-border payments sector, for instance, has long been plagued by complexities, high costs, manual processes, lack of transparency, and major reconciliation issues. But startups like BriskPe are leveraging the OPGSP framework to simplify recurring small-value cross-border payments for MSMEs, making them faster, more transparent, and, well, just better.

In the grand scheme of things, companies like Perfios, IDfy, and Mswipe have secured the highest funding in the Indian fintech space so far in CY2024. But who's to say that the landscape won't shift in the coming months? After all, in the world of fintech, innovation is the name of the game, and those who dare to think outside the box might just become the next big thing.

So, what do you think? Is India's fintech scene set for a revolution, or are these merely ripples in the vast ocean of financial technology?

7. Health and Health insurance have often been overlooked in India. Something National Health Authority and Union Ministry of Health and Family Welfare are trying to change, with NHCX. NHCX is a platform developed under the Ayushman Bharat Digital Mission, and aims to bring everything Health insurance related under one platform. Here is a sneak peak into how it would work: 1. Policyholder (digital KYC with Ayushman Bharat Health Account) forwards cashless claim to hospital. No manual feeding; standardised digital claim form. 2. Hospital uses standard claim format on NHCX; Single gateway, no separate insurer portal access required. 3. NHCX validates the claim data and routes to the required insurer/TPA; Automatic checking of policyholder details. 4. Insurer/ TPA digitally verifies submitted forms and auto-adjudicates (in some cases manually) the claim; No digitisation of forms by insurer; automatic adjudication. 5. H ospital contacts policyholder for balance payment, if any; Waiting time cut to 1-2 hours, fast approval, cost reduction expected.

8. NPCI goes to Peru. Big win for digital payments in Peru! They're the first in South America to adopt UPI, India's popular instant payment system. This is a big deal because it means faster, easier money transfers between people and businesses. This partnership between Peru's central bank and the folks at NPCI behind UPI is a game-changer for Peru's digital economy.

9. InsuranceDekho is now Eyeing Credit products too (pun Intended). It seems InsuranceDekho, the online insurance platform, is nearing the finish line in their pursuit of a game-changing acquisition. They've set their sights on BankSathi, a Bengaluru-based wealthtech startup that's been making waves in the fintech space. By acquiring a majority stake in BankSathi, InsuranceDekho is poised to expand their horizons beyond insurance products and venture into the realm of credit offerings. Imagine the possibilities. This acquisition isn't a mere cash transaction; it's a share swap deal, which means BankSathi's shareholders will become part of the InsuranceDekho family. It's a win-win situation – BankSathi gets the backing of a larger player, while InsuranceDekho gains access to their cutting-edge technology and expertise.

10. BharatPe and PhonePe reached an “Amicable” settlement this week, over their legal dispute of the trademark “PE” in their name. Though given the bitter battle that has been going on since 2021, when phonePe filed an injunction, I don’t know if one would call it amicable.

11. Meanwhile PayTM saw its share going up 10% this week, although from their 52 week high, it is still about at a 65% discount. PayTM was severely hit this year by the RBI ban on the Payment’s Bank, after which PayTM had to scurry to get more banks on as partners for their payments business.

As per the latest NPCI UPI stats, I believe PayTM still commands a 8.2% marketshare by volume of trnasactions. And many experts peg their share of merchant transactions at 40%.

Asia

1. ORO Bank, a cloud-first financial institution, has launched in Bhutan with a mission to foster sustainable growth. Teaming up with Finastra, it leveraged Essence's SaaS tech to go live globally within just six months. This digital bank aspires to be the preferred choice for startups and innovative businesses, providing an ecosystem of traditional and future finance services. Aligned with Bhutan's Gross National Happiness philosophy, ORO Bank aims to enable economic growth while preserving cultural and environmental values, serving the visionary Gelephu Mindfulness City SAR initiative. A thought-provoking blend of finance and sustainability in the digital age.

2. Bank of Korea believes that CBDCs, or central bank digital currencies, will have little to no effect on real economy. The reason?

Because of the way CBDCs are designed, to be non interest bearing demand deposits. While it is really interest-bearing time and savings deposits that act as household assets. This potentially throughs a huge wedge into the narrative many countries are having, about how they would use CBDC for economic welfare.

Europe:

1. AI in Banking is getting more serious, with Dutch neobank Bunq foraying into it too, with a dual partnership with MasterCard and Nvidia. Bunq's collaboration with Mastercard marks a significant stride in the realm of open banking and AI integration. By leveraging Mastercard's Open Banking platform, Bunq customers can now consolidate accounts from various banks within the Bunq app, gaining a comprehensive overview of their finances and spending patterns. This seamless integration is further elevated by Finn, Bunq's personal AI assistant, which enriches these insights by analyzing transaction data across multiple banks, making Bunq Europe's first bank to harness AI in open banking.

The impact of this initiative is palpable, with Bunq reporting a surge in user engagement, as approximately 40% of surveyed users experienced a significant increase in app usage after the introduction of open banking features. Additionally, Bunq's partnership with NVIDIA to leverage generative AI (GenAI) demonstrates their commitment to enhancing fraud and money laundering detection capabilities, accelerating data processing pipelines, and training fraud-detection models nearly 100 times faster through Nvidia's open-source Rapids suite. This fusion of open banking, AI, and cutting-edge technology paints an intriguing picture of the future of finance, where personalization, security, and seamless experiences converge.

US:

1. Have you ever stopped to think about the immense potential that lies within the software industry? It's a world where innovation knows no bounds, and the fusion of technology and finance promises to redefine the game entirely. Enter Forward, a Texas-based paytech company that's turning heads and challenging the status quo, with their bold vision bold vision to collaborate with SaaS companies and increase their revenue by a staggering two to three times through seamless payment integration.

But Forward isn't just about the numbers; it's about crafting a seamless experience that feels like an extension of your brand, not a disjointed afterthought. And they're not just talking the talk; Forward has secured an impressive $16 million in seed funding, co-led by heavyweights like Elefund, Commerce Ventures, and Fiserv. This influx of capital will not only allow them to expand their customer base but also fuel their relentless pursuit of technological advancement, integrating machine learning and AI into their solutions.

2. Spend management is touted as one of the fastest growing sectors in Fintech, with an annual growth rate of 10.3% till 2030. Saudi Arabia-based Simplified Financial Solutions Company (SiFi), one such spend management platform in the MENA region, has now raised $10 million in a seed funding round to double down on its growth plans in its home market. The round was led by Sanabil Investments, a member of Saudi’s Public Investment Fund, and early-stage MENA VC, RAED Ventures. SiFi’s product lets its customers control their corporate cards’ usage and limit expenditures at the merchant or geographic levels. The platform also enables employees, especially those who don’t use corporate cards, to submit reimbursement requests, their expenses and invoices.

LATAM:

1. Nubank, the Brazilian fintech giant, is upping their crypto game! In a power move to meet customer needs and simplify the crypto experience, Nubank has introduced a game-changing cryptocurrency transfer feature with top-notch security. Imagine being able to send and receive Bitcoin, Ethereum, and Solana directly from your wallet without breaking a sweat. And that's just the beginning – more cryptocurrencies and networks are on the way.

But wait, there's more. Between March 2023 and March 2024, Nubank's crypto transaction volume skyrocketed, cementing its position as a major crypto player in Brazil. Talk about a crypto renaissance!

Here's the kicker: Nubank has teamed up with Chainalysis, a blockchain data platform, to ensure that your crypto transactions are not only efficient but also secure. This partnership monitors blockchain addresses and sniffs out any suspicious or illicit activities, giving you the peace of mind you deserve when dealing with your digital assets.

And if that's not enough, Nubank is leveraging blockchain technology to the fullest, offering asset tokenization, smart contract execution, and lightning-fast transfers – all in a secure and efficient environment.

This crypto move comes hot on the heels of Nubank's recent launches – NuBank+, a cashback-based savings account, and NuInvest, a portfolio management service. Clearly, Nubank is on a mission to become your one-stop shop for all things finance.

Crypto:

1. Have you been keeping an eye on the latest developments in the world of cryptocurrencies and exchange-traded funds (ETFs)? While the United States Securities and Exchange Commission (SEC) has recently approved key regulatory filings from ETF applicants, one prominent player in the financial industry is taking a contrarian stance. JPMorgan, the banking behemoth, has cast a skeptical eye on the potential demand for spot Ethereum ETFs, predicting that it will pale in comparison to their Bitcoin counterparts.

Now, this isn't just a mere assertion; JPMorgan's analysts have delved deep into the underlying factors that underpin their pessimistic outlook. According to their analysis, the April Bitcoin halving event acted as a powerful catalyst, further fueling the demand for spot Bitcoin ETFs. However, the same cannot be said for Ethereum, as there is no comparable impetus on the horizon.

But the banking giant's assessment doesn't stop there. In their research report, JPMorgan forecasts that spot Ethereum ETFs will attract a relatively modest $3 billion in net inflows for the remainder of the year. However, they also acknowledge that this figure could potentially double to a more respectable $6 billion if staking – the process of holding and earning rewards for validating transactions on the Ethereum network – is permitted.

Now, this prediction begs the question: what is the fundamental difference between Bitcoin and Ethereum that could account for such a disparity in investor demand? Well, according to JPMorgan, the answer lies in their intrinsic value propositions. While Bitcoin is viewed as a digital asset with broader appeal, competing with gold as a portfolio diversifier, Ethereum is primarily seen as an "application token," serving a different purpose within the cryptocurrency ecosystem.

This distinction raises intriguing questions about the role of cryptocurrencies in the broader financial landscape. Are investors primarily drawn to Bitcoin as a store of value, akin to digital gold? Or do they perceive Ethereum's utility in powering decentralized applications and smart contracts as its primary draw? Perhaps the answer lies somewhere in between, reflecting the diverse motivations and perspectives of investors navigating this rapidly evolving space.

2. The Bitcoin network is currently grappling with a sharp spike in network fees, driven by a staggering 332,000 unconfirmed transactions. This surge has pushed fees to astronomical levels, with high-priority transactions costing around $50-$52 per transaction earlier in the day. While the reasons behind this backlog are still under speculation, with some attributing it to centralized exchange OKX, the impact on miners has been significant.

The recent halving event, which slashed the block reward from 6.25 to 3.125 Bitcoin, has dealt a severe blow to miner profitability. Bitfarms, a prominent Bitcoin mining company, reported a staggering 42% drop in mining revenue for the month of May, the first full month after the halving. Compounding this challenge were unusually low temperatures in Argentina, forcing the company's Rio Cuarto facility to shut down for eight days, further impacting their mining output.

But the ripple effects extend far beyond individual mining companies. Since the start of 2024, U.S. Bitcoin miners have spent a colossal $2.7 billion on electricity, with analyst Paul Hoffman highlighting that the energy consumed by miners alone could power 1.5% of U.S. households for an entire year. Moreover, the cost to mine a single Bitcoin has more than doubled, skyrocketing from an average of $52,000 in April to a staggering $110,000 post-halving.

Fintech Funding this week

This week, without the US, Funding in the fintech sector was almost non existent, with $332 Million across 21 deals. The US alone was responsible for eight FinTech deals, including five of the biggest funding rounds. In total, US-based FinTech companies pulled in $138m.

A handful of European countries also recorded deals this week. These were Germany (re:cap), France (Continuity), the UK (WealthOS) and Switzerland (Kaspar&). Only one country outside of the US and Europe recorded a deal this week, with India recording one deal (Vegapay).

Coming to the sector wise split, we saw Insurtech with 3 mega deals, WealthTech with 2 and Cybertech with 2 deals, this week, followed by PayTech, Lending marketplaces and Data&Analytics.