DISCOVER – Dutch Uncles

Russia and Ukraine : The Impact of Two Warring Nations on India’s MSME Exports

Shalmoli Sarkar — Thu, 10 Mar 2022 12:31:21 +0000

The sight of Covid-19 infections nearing its end with business activities returning to normalcy remained shortlived for Indian MSMEs with the recent breakout of the Russia and Ukraine war. According to a survey conducted by Khatabook, the MSMEs have experienced an average dip of 11 percent decline in business volume due to lockdowns in 2021 as compared to 46 percent during the 2020 nationwide lockdown.
India’s MSME sector which forms the bedrock of the country’s GDP seems to have been impacted by ongoing military conflict since a majority of exports to these two warring nations have been led by the Indian MSMEs. India’s bilateral trade with Russia and Ukraine stood at $11.9 billion and $3.1 billion in 2021 and makes Russia India’s 25th largest trading partner with a projected value of $2.5 billion exports and $6.9 billion imports during the April-December period of FY2022.

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India’s bilateral trade with Russia and Ukraine stood at $11.9 billion and $3.1 billion in 2021 and makes Russia India’s 25th largest trading partner with a projected value of $2.5 billion exports and $6.9 billion imports during the April-December period of FY2022.

What Indian MSMEs are expected to lose from this war?

Hit on the pharma sector: According to the r Pharmaceuticals Export Promotion Council (Pharmexcil) under the commerce department, India had exported pharmaceuticals worth $591 million to Russia and worth $182 million to Ukraine in 2020-21, which is 12 percent of India’s overall pharma exports to the world. A prolonged war and sanctions imposed on Russian central banks may impact the remittances of outstanding trade receivables. Indian pharma exporters ship consignments every quarter, and if the war continues beyond March the exports will largely be hampered.

Seafood exports are stuck: Seafood exports from India in the past few years have recently gained ground in the global markets. Russia is India’s biggest customer of shrimp as well as cephalopods such as squid, cuttlefish, and octopus. Ukraine currently imports $10 million of seafood from India. Exporters are now staring at losing a market that is developed over the past few years. In 2022, the projection of seafood exports is to be worth $180 million against $150 million from last year. The recent war has caused worth Rs 500 crore of seafood stuck in transit.

The apparel business is hurt: The pandemic laid a rough patch for India’s textile and apparel industry since the weavers went to their hometown for preventing themselves from getting infected by the virus. With the ongoing war, the textile owners are unlikely to get paid on time since the dollar rouble has plummeted to historical lows. In addition to this, the air space restrictions have blocked the trade routes and the EU members have asked Indian exports to put the shipment on hold. This is resulting in a stock pile-up with trade routes getting expensive.

What might be the possible gains from Russia and Ukraine?

Russia and Ukraine together account for almost a quarter of the global wheat supply. Their wheat crop will mature in August and September this year. However, the ongoing war and imposition of sanctions, present an opportunity for Indian wheat exports to fill in the supply void. The total shipment from the country has touched a record of 6.6 million tonnes during the current fiscal. India’s new wheat crop will be available from 15th March as compared to global wheat producers. According to Agriculture Ministry’s second advance estimate, India’s wheat production is projected to touch a new record of 111.32 million tonnes in 2021-22 against 109.59 million tonnes in 2020-21.

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Artificial Intelligence : Providing Guidance to Indians to Effectively Manage their Wealth

Shalmoli Sarkar — Fri, 11 Feb 2022 12:35:11 +0000

In the past few years, Indian banks have grown fond of adopting artificial intelligence (AI) in their processes to provide a swifter and better banking experience to their customers. Today’s digitally-savvy customers have less patience and are firm believers of technology who expect fast, personalised, and meaningful interactions with banks and have less tolerance for the long trail of paperwork and queues. That said, AI adoption in banks has helped to boost revenues and retain customers by offering personalised services, quick and improved customer care through chatbots, risk monitoring, reduced errors rates, and better resource utilisation. In addition to this, AI has been aiding banks to entrust belief in customers as a safe place to keep money by detecting frauds, mitigating uncertain risks, and managing regulatory compliance.

Besides, bringing in operational excellence in banks, there exists a need to guide Indians about financial planning and investment that is yet to be unlocked through artificial intelligence.

But why do Indians need guidance in investment and wealth planning? Some statistics will tell you.

A dearth of knowledge in wealth management

The statistical figures shown in a survey by Scripbox, an online mutual funds platform showed the dearth of knowledge existing in Indians about financial planning. The survey found that around 72 percent of Indians of the 26-45 years age bracket are unaware of the amount of money to be invested or to be saved. 76 percent believe that there is a need for more education in the financial planning space. 56 percent lack the knowledge to handle personal finances effectively, resulting in difficulty in clearing loans. This mismanagement of personal finance is arising majorly among millennials as they lack the knowledge and initiative to earmark a portion of their income towards savings and not to forget their increasing lifestyle expenses. Another survey from Groww finds 30.7 percent of millennials lack investment awareness.

The prejudice about finance not being a women’s domain has also pushed them behind in financial planning, as only one in five women exhibit confidence in their knowledge of financial planning and are not aware how much to put aside to achieve financial freedom. This is where AI can step in to guide people about handling their finances. But how?

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A survey from Groww finds that 30.7 percent of millennials lack investment awareness.

Artificial intelligence ( AI ) for financial planning

There are multiple ways through which an average person can make money transactions. The modes of payment include cash, wallet, UPI, Credit Card, Debit Card, Gift Card, Net Banking, etc. In investment, they can invest money in Fixed Deposits, Recurring Deposits, Stock Trading, Crypto Currency, Mutual Funds, etc. With the trail of transactions being done artificial intelligence can understand the consumer behaviour specific to an individual based on the transactions made. It provides detailed information to the consumer regarding his/her expenditure depending on which one can chart out an investment strategy.

Artificial intelligence analyses the following data points to help consumers with financial planning:

Analyse the spending pattern
Determine income/debt ratio
on the above two data points, individuals can work on their credit score
Plan your investment by decreasing expenses based on the data.

Artificial intelligence for financial guidance – a gamechanger

Artificial intelligence for wealth management offered by banks to help consumers understand their savings and expenses can be a gamechanger that can improve their financial literacy. The same data can be utilised by banks to develop customised products that will help in retaining as well as gathering new customers.

Offering artificial intelligence by banks to analyse their spending, will not only help to save money but also offer guidance in investing at the right places and be creditworthy to seek home loans, car loans, and personal loans from banks and other financial institutions.

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One Class One Channel to Erase the Lines of Digital Divide

Shalmoli Sarkar — Thu, 10 Feb 2022 08:30:15 +0000

The pandemic has been a fillip to the edtech industry. Edtech platforms getting on in an acquisition conquest, fund flows, and increase in enrollment of online programmes are major indicators of the industry reaping profits and have made education more accessible and quality-oriented. But, has the edtech wave reached the lower socio-economic strata? The glaring statistics can precisely answer the above question. A national sample survey by ICRIER and LIRNEasia, a think tank focusing on digital policy finds that only 20 percent of school children in India had access to remote education during the pandemic, of whom only half participated in live online lessons.
Lack of internet access, gadgets, and unfamiliarity with virtual tools has created the divide of digital education in India. According to a study by Azim Premji Foundation, approximately 60 percent of the school children’s education in India is affected due to no access to online learning. Lack of access to online learning has further led to an increase in dropout of children from school. A report by Unified District Information System for Education finds that around 15 crore children are currently out of the education system. The numbers for school girls dropping out are even more distressing as 10 million girls are on the verge of dropping out as found by the National Right to Education Forum.

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According to a study by Azim Premji Foundation, approximately 60 percent of the school children’s education in India is affected due to no access to online learning.

One Class One Channel: Making education accessible to all

Factors such as poor connectivity, unavailability of gadgets, and lack of digital learning in vernacular have kept students away from formal learning in times of pandemic. In the union budget 2022, the government has taken some concrete measures to provide quality education to students through multiple platforms. The measures include fibre-based internet connection to every village by 2022 and expand the One Class, One Channel’ programme to cover 200 DTH channels and grades 1-12. In addition to this, the government wants to open digital university to provide quality education to students from weaker socio-economic backgrounds to pursue higher studies without incurring huge costs or hardship.

What edtech platforms should relook?

Providing educational content in vernacular languages is a highly untapped market for edtech. The medium of teaching on edtech platforms being English has prevented the edtech players from serving the students of rural India. With the government now taking steps for a robust internet network edtech platforms should develop and provide educational content in vernacular language. Further, with the development of the digital university and channel programmes the edtech players with their vernacular education content can partner with several state governments and India’s largest socially responsible corporations.

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Taskforce for the Animation and Gaming Sector : How Will it Benefit?

Shalmoli Sarkar — Fri, 04 Feb 2022 14:58:43 +0000

After all these years being largely neglected, the union budget 2022 has surprised the animation, visual effects, gaming, and comic (AVGC) sector with its announcement of setting up a promotion task force to recommend ways to employ youth and build the domestic capacity of the AVGC for serving Indian markets and the global demand. This move is highly lauded by the gaming and the animation fraternity. It might seem that the move came all of a sudden, but this space was largely under the government’s growth radar that led The Ministry of Information and Broadcasting (MIB) in 2020 to announce that it will establish AVGC Centre of Excellence (CoE) to make gamification and animation industry a major export for the country and a wealth generator. Currently, as per the joint report of the confederation of Indian Industry (CII) and the BCG, India has less than 10 percent of the global market share in VFX and animation.

Animation and gaming – a wealth generator

China is the undisputed leader of the gaming world, but we cannot deny the booming Indian market as well. Over the past few years, global game publishers have gone beyond the Chinese market to outsource animation technology from the Indian game development firms to reduce costs and meet the game launch deadlines. The global game projects have been driving the demand for skilled professionals for game development in India, not forgetting the contribution of lockdowns and mobility restrictions.
Besides, low labour cost what makes India an excellent market for outsourcing animation technology is its vast base of English-speaking workforce. Understanding the English language is a prerequisite in the industry to lip-sync the animated media to the audio dialogue. It is a skill that the Indian workforce possesses in abundance. Karnataka, especially Bangalore the startup capital of India has witnessed the entry of many global gaming majors who have tapped into India’s talent pool for offshore production. The Karnataka AVGC Policy 2017-2022 aims to develop Karnataka into a leading global AVGC hub in terms of export revenues, projects, and employment by strengthening the ecosystem.

To talk about the demand in the domestic market, India is showing a high level of appetite in animation and VFX content to power immersive experiences such as augmented reality and virtual reality especially in edtech. Films, web series, and gamers are enthusiastic about creating immersive and engaging visual effects, and realistic animation. The opening theme of Hansal Mehta’s ‘The Scam 1992’ makes it quite evident about the creativity the animation and VFX industry has added. Besides, the availability of low-cost internet access, penetration of mobile devices along the growing popularity of streaming video and playing games is giving impetus to the development of animation and VFX content.

India is a young country with two-thirds of it under the age of 35 which makes the country adequate with millennial consumption and therefore is poised to become the world’s leading market for gaming. A study from BCG says that there are around 300 million people who play games on mobile. According to the BCG-Sequoia India report, 2021the Indian gaming industry is generating $1.5 billion in revenue and is expected to become triple by $5 billion by 2025.

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According to the BCG-Sequoia India report, 2021the Indian gaming industry is generating $1.5 billion in revenue and is expected to become triple by $5 billion by 2025.

Gaming will become mainstream in 2022

Online gaming is soon to become a mainstream form of entertainment, with more gamers birthing from tier-II and III cities. According to a study by Mobile Premier League, small towns have more than 100% to up to 200% growth in online gamers, which talks about its booming market in India. With the task force announcement by the union budget, the gaming ecosystem will open new avenues of employment for gamers, IT, and computer engineers. In addition to this, the online gaming ecosystem will evolve into various business models, Non-fungible token (NFT) virtual avatars, in-game items/rewards, etc, and expect more online gamers to shift from free-to-play to paying-to-play, in-game purchases, and skill gaming. This will drive industry players to develop new games for users based on traditional games and Indian themes and establish a strong presence with a foothold in the domestic and global market.

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Union Budget 2022: How Much has it Favoured the Startups

Shalmoli Sarkar — Thu, 03 Feb 2022 09:37:18 +0000

1st February is a significant day where the eyes of every business owner are glued to the screens, to understand how the union budget favours them. On 1st February 2022, Finance Minister Nirmala Sitharaman presented the nation’s second paperless union budget. As India is on the cusp of technological advancement, this year’s union budget proves this further. Let us understand the startup-friendly new initiatives and policies brought by the union budget 2022 for India’s startup ecosystem.

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According to a KPMG report, the gaming sector in India will become $ 3.9 billion by 2025.

New initiatives and policies introduced by the union budget 2022

Drone Shakti: The union budget has welcomed the usage of drones particularly in agriculture where the drones will play a role in crop assessment, digitisation of land records, spraying of insecticides, and nutrients. The startups will be promoted to facilitate drone-as-a-service through varied applications. In ITIs across India, the required courses for drone skilling will be undertaken. The government recognises geospatial systems and drones as the sunshine sector as they have immense potential to assist sustainable development at scale and modernise the industry and will simultaneously create employment opportunities for youth.

A boost to gaming and animation: A pause on outdoor activities in the pandemic has made individuals especially the GenZ inclination towards gaming. According to a KPMG report, the gaming sector in India will become $ 3.9 billion by 2025. The union budget this year has realised the potential in animation, visual effects, gaming, and comic sector to an open task force to build domestic capacity for serving both national and global markets.

Prioritising mental health: Recognising mental health a priority, the Finance Minister has announced a National Tele Mental Health programme to give better access to quality mental health counselling and care services. This initiative will include a network of 23 tele-mental health centres of excellence, with NIMHANS being the nodal centre and the International Institute of Information Technology-Bangalore (IIITB) providing technical support. The platform will provide counselling and care using standard, evidence-based, culturally appropriate tools and will enhance access to quality, standardised and free 24 X 7 mental health services to people. It will help to connect various mental health care services, the health, and wellness centres under Ayushman Bharat as well as with the e-Sanjeevani system.

The battery swapping policy for EV: Finance Minister has announced to roll out a new EV policy on battery swapping with interoperability standards. With this new battery swapping policy owners of electric vehicles will be able to exchange their drained batteries with charged ones at designated stations easing the use of such vehicles and reducing the time to charge. Due to the space constraints in urban areas for setting up charging stations, a battery swapping policy is introduced that will encourage several businesses and startups in the private sector to come up with innovative business models for ‘ battery or energy as a service. This policy will help in managing the space for the expansion of EV charging infrastructure.

This year the union budget has focused on sunrise sectors and has introduced supportive policies for AI, Geospatial Systems and Drones, Genomics and Pharmaceuticals, etc. which will aid in sustainable development at a larger scale. Also, a tax holiday for a year will be helpful for upcoming startups and will provide a much-needed boost.

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What Does a Young Indian Startup Want from the Union Budget 2022

Shalmoli Sarkar — Wed, 02 Feb 2022 08:50:03 +0000

Home to more than 61400 startups and 14,000 startups recognised alone in 2021 by the Department for Promotion of Industry and Internal Trade (DPIIT), India stands right next to US and China to become the world’s third-largest startup hub. As technology and internet access becomes available to the masses, more businesses and startups are birthing intending to disrupt conventional practices and make our lives simpler. The past two years of the pandemic have laid a rough patch for the homegrown businesses and startups, and to make these businesses afloat the government had announced a slew of measures to support them. The parliamentary standing committee’s announcement of the stimulus package to revive the startup industry fell inadequate as the measures adopted were more of loan offering that proved to be beneficial for the long term and did not contribute to improving the cash flow for immediate relief. The second covid wave has left the startup industry bleeding, therefore, the industry from the current budget is expecting startup-friendly policies, tax relaxations to enable spending on innovation and ease of doing business. Here is a list of expectations that the young Indian startups want from the union budget 2022.

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14,000 startups were recognised in 2021 by the Department for Promotion of Industry and Internal Trade (DPIIT).

Expectation of young entrepreneurs from the union budget 2022

Here are some of them

Alternative MDR or Reintroduce MDR: To democratise digital payment for the masses, the government has abolished MDR which is a fee for fintech and banks for using their platforms for the transaction. But, this is seeming a hard pill to swallow for entrepreneurs, since the abolishment is said to hurt the revenues of homegrown payment service providers. It either expects the union budget to reintroduce MDR or bring an alternative to it.
Easy and fast processes: Startup founders are expecting hassle-free loan disbursements, automation of tax and compliance, paperless approvals, and incentives to adopt digital banking practices.
Alleviate taxes: For startups and businesses in the manufacturing space, many businesses face weekly power shutdowns. With the price of diesel shooting cost of energy consumption is becoming expensive thereby, increasing the cost of manufacturing. The entrepreneurs are expecting the government to relook at the state level and central taxes.
Simplifying GST compliance: Startups want GST compliance to be hassle-free and more simplified which will enable more online sellers and small businesses to leverage the potential of e-commerce and contribute to India’s digital economy.
EV startups want tax reduction: As the government is increasingly emphasising electric vehicles and building green energy solutions. The EV startup founders are optimistic that the government will announce new initiatives to encourage local EV manufacturing, facilitate easy finance, and develop an innovative EV ecosystem. For consumers to smoothly adapt to EV, the startups want the GST of 5 percent applied on EV to be reduced to 2 percent.

The above are the expectations that India’s startup ecosystem is expecting from the union budget 2022. Simplifying the compliances and relaxation of taxes and reducing the tax slab etc, will create a conducive environment for doing business for startups.

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On-Demand Fuel Delivery : A Lifesaver for Small Manufacturing Businesses

Shalmoli Sarkar — Fri, 28 Jan 2022 09:10:05 +0000

The concept of on-demand delivery through apps and websites has become inseparable from our lives especially in the times of Covid. Today the gambit of doorstep delivery in India is not just limited to food, grocery, medicines, apparel, jewellery but has expanded to fuel as well.

Amid mobility restrictions in the pandemic, the doorstep fuel delivery or on-demand fuel delivery emerged as a lifesaver for businesses that depended heavily on diesel for their day-to-day operations. For a business say mining or textile that owns giant industrial equipment consumes large volumes of diesel and lacks a fuel storage facility to run operations. The hurdle in their business operations arises when the machines run out of fuel and they have no other option but to procure fuel from the retail outlets using private vehicles compromising heavily on safety. The staff kept for procuring fuel is neither trained nor adequately equipped to manage the procedures for which fuel delivery handling necessitates.

The emergence of fuel delivery apps appears to be beneficial to the small manufacturing business as they need not need to face the challenges of procuring and storing diesel in bulk and optimising inventory.

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The doorstep fuel delivery or on-demand fuel delivery emerged as a lifesaver for businesses that depended heavily on diesel for their day-to-day operations.

How on-demand fuel delivery will favour small manufacturing businesses?

Cost saver: Businesses can save money on acquiring fuel and consumption. With fuel prices already surpassing the century mark businesses will certainly try to bring down the operating cost. The on-demand fuel delivery will mean reduced manpower, zero pilferage, zero wastage, and no over-billing. It will eliminate the additional infrastructure required for a small manufacturing business for bulk storage of fuel.
Quality and quantity: The on-demand fuel providers employ technologies such as geofencing and digital billing to ensure there is no pilferage and the business pays for what they have ordered.
No compromise on safety: Safety is paramount while handling inflammable liquids. Fuel is transported through safety compliant browsers that are resistant to fire thereby reducing accidents.
24X7 fuel availability: The machines of small manufacturing businesses can run out of fuel anytime. The 24X7 availability of fuel will empower small businesses to avail fuel anytime, anywhere, and avoid investing in storage facilities. Quick delivery times will ensure the hassle-free process of fuel acquisition.

Reduced Carbon Footprints: On-demand fuel delivery allows reduced carbon emissions by lessening the trips to local fuel stations.

What lies ahead for the on-demand fuel delivery startups?

The on-demand fuel delivery startups contributing to zero carbon emissions align with PM Narendra Modi’s pledge to achieve zero carbon emissions by 2070, at COP 26 held at Glasgow. The government of India aims to encourage those businesses and startups whose digitisation can transform conventional practices. Moreover, as more hyperlocal delivery and D2C startups emerge, the on-demand fuel startups can strike partnerships to be their fuel partner. Also, the opportunity lies in hospitality, healthcare, construction & development, corporate office, parks, institutions, etc.

For oil companies, the on-demand fuel startup opens new business avenues to expand their offerings and develop services for the end-users that were restricted to petrol pumps. With the government‘s increased focus on EVs, on-demand delivery startups can also foray into developing electronic charging stations. Hamsafar, a fuel delivery startup is looking forward to developing charging stations at its tech platform and creating manufacturing consortia for standardized EV components such as batteries, powertrain, and charging equipment.

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Accepting Payments through Cryptocurrency, A Reality Anytime Soon?

Shalmoli Sarkar — Tue, 25 Jan 2022 08:35:13 +0000

Cryptocurrency or digital currency- a word that gained immense buzz globally and has invited enough pessimism from sceptics about the possibility of fraud, is now being considered by global small businesses as a mode of accepting payment. In 2022, small businesses across nine countries namely Brazil, Canada, Germany, Hong Kong, Ireland, Russia, Singapore, United Arab Emirates, and the United States will be exploring cryptocurrency for payment. According to a study by card company Visa on taking a sample size of 2250 small businesses, it found that 24 percent i.e. 540 small businesses have plans to embrace payments through bitcoins.
The acceptance of cryptocurrency as a payment mode by global businesses can be attributed to no involvement of banks giving less complications that will also aid businesses to scale internationally. The benefit of accepting payment in cryptocurrencies might increase the sale of a business as it will attract crypto investors who prefer such payments. The small business can ace the first-mover advantage with cryptocurrency payment to attract more customers and have hassle-free transactions.

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According to a study by card company Visa on taking a sample size of 2250 small businesses, it found that 24 percent i.e. 540 small businesses have plans to embrace payments through bitcoins.

Getting paid in cryptocurrency

There is an increasing trend to accept payments in crypto for work. Several young engineers and freelancers are working with global companies where their salaries are paid in cryptocurrency. This eliminates the need for a company to pay transaction costs for bank transfers but it has a flipside. Accepting salaries in digital currency can attract legal implications as it violates Foreign Exchange Management Act (FEMA) as these constitute cross-border payments in a currency not recognised by the Reserve Bank of India.
The market for accepting crypto payment has potential since India is a developing economy, where much emphasis is laid on digitisation, making young Indians early adopters of digital currencies. According to a study by Chainalysis, India has close to 15 million crypto investors and is the world’s second-largest country for crypto adoption.

Cryptocurrency transactions in Indian businesses anytime soon?

Indian businesses embracing payments in cryptocurrency seems to be a distant possibility as the government plans to regulate resulting in a ban on private digital currencies.
In addition to the above, the challenge to accepting crypto payment lies in its price volatility which makes its value unpredictable. For instance, when Bitcoin was introduced in 2009 its value was in pennies, and in 2017 its value ballooned up to $19,172 per coin.
Indian businesses are already vulnerable to cyberattacks since its pivot to remote working and digitisation. Although crypto transactions can evade threats such as stolen credit card numbers, they cannot be said as safe and can get hold of users’ wallets. This is dangerous for use in transactions unless it is a fiat currency. A fiat currency is a government-issued currency that is not backed by a commodity such as gold. Such currencies are existing in American and European economies, whereas India is yet working to introduce a basic central bank digital currency ( CBDC).

Lastly, even if the Indian government launches its digital currency, the adoption of it by the businesses would depend on technical capabilities, awareness about new age-deep technologies including blockchain and crypto other than artificial intelligence, machine learning, and the internet of things.

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RBI’s New Fintech Department and Regulations- A Good News for the Indian Fintech?

Shalmoli Sarkar — Fri, 14 Jan 2022 08:57:34 +0000

Demonetisation and contactless payments as a preventive measure in the pandemic has been a fillip to the fintech sector in India especially in digital payments and loans. As of June 2021, India has been home to 16 fintech unicorns, which speaks of its massive growth. The Indian market has also been a breeding ground for investors willing to invest in NFTs and cryptocurrency which is yet unregulated and holds much of a debate regarding it being a safe investment option.

According to a joint report by BCG and FICCI, India’s fintech industry is expected to reach $150-$160 billion by 2025. As the fintech landscape evolves and more players enter to serve various demographics, there is a need for the sector to be regulated especially those offering liquidity services which is the exclusive domain of banks.

RBI’s new fintech department to push innovation

The RBI has set up a separate internal department for fintech on 4th January 2022. This department aims to promote innovation and also identify the challenges and opportunities associated with fintech companies and address them promptly.

All matters related to the facilitation of constructive innovations and incubations in the fintech which might affect the financial sector/ markets and fall under the purview of the bank will be dealt by the internal fintech department including matters of inter-regulatory coordination and internal coordination.

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According to a joint report by BCG and FICCI, India’s fintech industry is expected to reach $150-$160 billion by 2025.

Widening the gates of credit data access for fintech

The RBI has already taken the first step to promote innovation in the Indian fintech companies by allowing them to directly access data from credit information bureau. Earlier access to data from credit information bureau was a privilege that could be enjoyed by specified users and regulated entities like telecom companies, insurance providers, rating agencies, and registered brokers. For assessing the credit profiles of customers, the fintech companies earlier used alternative data from social media footprints and from the bills of telephone and electricity to judge creditworthiness making the process cumbersome. This direct credit data access to millions of Indians will benefit the firms in the below way:

Take better credit decisions.
Several banks collaborate with fintech firms for the disbursal of loans digitally, therefore access to data will help banks make informed decisions while underwriting the credit.
Access to credit data will help these firms to develop tailor-made products for customers that require less documentation and lower interest rates.

New criteria is a challenge

RBI’s decision of widening the doors for data access might benefit a few fintech companies. Only those firms will be eligible to have access to data that are Indian-owned with diversified ownership. It is a major hurdle since the majority of the fintech firms in India are foreign VC/ PE funded and may not match the ownership criteria. The other criteria involves only those fintech firms to be eligible to process information to support regulated lending entities such as banks and financial institutions, whose net worth is Rs 2 crore. The reason to favour Indian-owned companies is to follow local data governance and compliance.

Cybersecurity is mandatory

With increasing data leaks, platform downtimes, and information theft, RBI has mandated the firms to have a certification from CISA ( Cybersecurity and Infrastructure Security Agency) and to have robust data protection in place, since data is the backbone for this industry. It is necessary to develop a strong mechanism to protect data and invest more in such mechanisms to evade cyberattacks in the future and cement people’s beliefs in financial technology processes.

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Community Group Buying Model in the Grocery Vertical for the ‘Bharat’- A Profitable Move ?

Shalmoli Sarkar — Wed, 12 Jan 2022 08:35:17 +0000

The value-conscious behaviour of Indian consumers has largely been capitalised by retail apps like Meesho, Udaan, and DealShare, etc. that has fuelled the growth of community group buying or loosely known as social commerce India.
These community group buying apps have tasted success by expanding the ambit of online shopping to the consumers of tier-II cities and beyond and providing affordable products. Witnessing the immense popularity, the food aggregator app Swiggy is introducing the community group buying model in the grocery vertical by the name Swiggy Bazaar. Following the same suit, online grocery platform BigBasket has recently revealed the ongoing testing of a group buying model for delivering groceries in Tier-IV towns.
This puts a question if this community group-buying model is a profitable move in the grocery vertical for the food businesses, although it is poised to become a $16-20 billion opportunity by 2025 and $60-70 billion by 2030 according to a joint report by Bain and Company and Sequoia India.

The two models of community group-buying

Presently, in India, there are two kinds of community buying models being implemented namely: reseller-led and the Pinduoduo model. Let us analyse if these models in grocery have remained profitable.

The Pinduoduo model: Pinduoduo is China’s largest online grocer that has pioneered the community buying model. In this model, a buyer can initiate a team purchase and invite friends and relatives through social networks to enjoy lower prices. The buyer is eligible for attractive discounts after a purchasing team of certain members is formed with the size decided by the merchant. Pinduoduo’s model has been emulated by DealShare in India, whose revenue according to Fintrackr had grown over 18 times in 2020 to become Rs 58.71 crore from Rs 2.96 crore in 2019. Towns from tier-II and tier-III cities have embraced online grocery shopping through its platform like never before.

The reseller-led model: The majority of community buying in India is based on a reseller-led model where the resellers act as middlemen between the app and the end-user and with every sale they earn a margin. The orders are then delivered to community leaders or resellers who then distribute them among the network.

This reseller-led model has been profitable for Otipy- a social commerce platform for fresh groceries that clocks daily orders of more than 5000 from over 1lakh consumers, since its launch in 2020. Its resellers consist of women and small neighbourhood stores that sell fruits and vegetables from farmers to their communities through WhatsApp groups.

Lower customer acquisition costs-appealing to investors

The low cost of customer acquisition is luring investors to invest in community group buying business models. The use of social media platforms having a significant user base and trust-based influencers brings down the cost. These businesses spend a minimum of Rs 50 to acquire a single customer as compared to Rs 300 to Rs 400 in conventional e-commerce. This reduces the expenses of a business to a huge extent and appears to be a lucrative opportunity giving a good return of investment for investors.
According to Fintrackr, DealShare’s total expenses in 2020 stood at a negligible Rs 4.3 lakh against a revenue of Rs 58.75 crore.

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Community group-buying is poised to become a $16-20 billion opportunity by 2025 and $60-70 billion by 2030 according to a joint report by Bain and Company and Sequoia India.

What lies ahead for the community group buying model in grocery?

Not just limited to low prices and heavy discounts, the community buying model can be a good revenue churner for resellers in the small cities who are looking for alternate sources of income in turn bringing in more customers. The resellers on the Otipy platform on average earn a commission of Rs 2500-3000 and the top 20 percent of them make more than Rs 15000 per month. Besides, increasing smartphone usage and cheaper data plans, the community buying model in India will thrive on trust and establish a quick and direct interaction between buyers and sellers replicating the experience of traditional offline commerce also open to negotiation.

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