Payments fall in May, crypto self-regulation, Amazon's satellite Internet


Good evening,

The number of people using digital payments has shot up since the start of the pandemic. Despite this, the volume and value of transactions on most platforms fell from April to May, showing just how hard the second wave has hit India’s economy.

Going down

GIF Credit: Giphy

Also in this letter:

🚨 IAMAI board to oversee crypto self-regulation
🏢 Tech firms prepare for hybrid work
🛰️ Amazon to offer satellite internet in India


Almost all payment systems saw a monthly decline in May

Digital Payments

Nearly all modes of payment — digital and cash — saw a monthly decline in May as economic activity was subdued amid the second Covid wave, the latest data from the Reserve Bank of India shows.

The National Payments Corporation of India’s UPI (Unified Payments Interface), IMPS (Immediate Payment Service) and FASTag, and the RBI’s NEFT (National Electronic Fund Transfer) and RTGS (Real Time Gross Settlement System), saw sharp declines in both the volume and value of payments processed.

Why does it matter? The decline in payment volumes despite their increased adoption during the pandemic indicates the extent to which Covid has battered consumer sentiment. The drop in the number of NEFT transactions, which are primarily used by businesses for salary payments, is also an area of concern.

By the numbers: April vs May

  • NEFT transactions fell by 10.3% to 256.5 million settlements worth Rs 18.19 lakh crore.
  • RTGS saw an 18% dip to 12.3 million settlements worth Rs 83.66 lakh crore.
  • UPI saw a 5% decline in volume, logging 2.53 billion transactions worth Rs 4.9 lakh crore.
  • IMPS volumes fell by 15% while FASTag fell by as much as 41.3%.
  • The number of credit card payments at point of sale terminals dipped by 20.9%, while that of debit cards fell 55%.
Number of payments falls amid second wave

Drop in credit card spends: Last week, ET reported that credit card spends grew by only 7.8% in the year that ended March 2021, notably down from a jump of 22.5% in FY20, indicating that discretionary spending remains elusive.

  • For the quarter that ended in March, the industry saw a 10% increase in spends while incremental credit card additions rose by 8%, largely due to a low base. On a sequential basis, spends grew by only 4%.
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Silver lining: Aadhaar Enabled Payments System (AePS) and Bharat Bill Payment System (BBPS) were the only two payment modes that saw growth during the month. The value of AePS payments processed grew by 11.2% while the number of BBPS transactions rose by 11.4% from April.


IAMAI board to oversee self-regulation by crypto exchanges

Crypto bitcoin

The Blockchain and Crypto Assets Council (BACC) is setting up a formal board to oversee the implementation of a self-regulatory code of conduct for member crypto exchanges. The board will comprise eminent jurists, technical specialists and fintech compliance specialists.

Members: A part of the Internet and Mobile Association of India (IAMAI), BACC counts crypto exchanges WazirX, CoinDCX, ZebPay, CoinSwitch Kuber, PocketBits, Unocoin, Paxful and Luno among its members.

Details: The self-regulatory code, which is already in place, includes voluntary compliance with anti-money laundering, combating of financing of terrorism, and know your customer regulations, and other company and taxation laws.

  • IAMAI has also suggested that the government simultaneously regulate crypto assets through an act of parliament, a spokesperson said.

Context: The development comes a day after the RBI said that banks cannot use its April 2018 circular to caution customers about trading in cryptocurrencies. The circular — which had banned banks from dealing with crypto businesses — was struck down by the Supreme Court last year, after IAMAI and crypto exchanges filed a petition.

Yes, but: The central bank has asked banks to continue carrying out due diligence on customers prescribed under existing regulations. Several banks, including ICICI Bank, Yes Bank and IndusInd Bank, have in recent weeks pulled the plug on the business accounts of crypto exchanges, instructed payment gateways to not work with them, and blocked their ability to accept rupee deposits.

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Tweet of the day


Tech companies prepare for a future of hybrid work

office space

Tech companies are reimagining their office spaces as they prepare for a future of hybrid work in a post-pandemic world.

India’s largest stock brokerage firm Zerodha plans to retain its main office in Bengaluru. It has shuttered most of its smaller satellite offices and repurposed its sales office to house startups it has invested in through its Rainmatter fund.

IT firms such as Tata Consultancy Services, Infosys and Tech Mahindra are likely to follow a work-from-anywhere model, which will give them access to talent in towns and cities where they don’t have offices and delivery centres.

Meanwhile, several midsize to large startups are believed to be waiting for their co-working leases to run out before they negotiate future space requirements.


Amazon plans to offer satellite broadband in India

Amazon Project Kuiper

Amazon is planning to bring its high-speed satellite internet services to India. The move could kick off a three-way fight with arch-rivals OneWeb and Elon Musk’s SpaceX.

What’s happening? The tech giant is set to approach the government to discuss modalities, authorisations, permits, landing rights and satellite bandwidth leasing costs, people familiar with the matter told ET.

  • Globally, Amazon is investing over $10 billion to build a constellation of 3,236 low-earth orbit (LEO) satellites as part of its space internet initiative, called Project Kuiper.

What’s at stake? India has emerged as a critical satellite internet market for these companies, with a $500 million near-term revenue opportunity. Nearly 75% of the rural population does not have access to broadband internet.

  • While satellite internet is still expensive, falling bandwidth-leasing costs combined with Amazon’s global reach give the company a strong incentive to make inroads quickly, said Rohan Dhamija of Analysys Mason, a media and telecom consultancy firm.

In April, several satellite internet players had proposed various measures to the Telecom Regulatory Authority of India (TRAI) to reduce the cost of satellite broadband services and make them available for mass consumption. They had also sought to break up the roles of licensor, regulator and satellite operator, which is currently under the Department of Space, in favour of a model similar to the one for telecom.

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Read our recent deep dive into SpaceX’s satellite-powered internet service Starlink, its advantages and disadvantages, and the competition it faces.


China steps up crackdown on edtech firms

Betting on edtech

China is stepping up its crackdown on the online education sector, hurting the IPO plans of several high-profile startups that have raked in massive funds over the past year, reports Bloomberg.

What’s new? China’s education ministry is planning to set up a dedicated division to oversee all private education platforms, people familiar with the matter told the publication.

The development comes a month after China’s market regulator fined two online education startupsTencent-backed Yuanfudao and Alibaba-backed Zuoyebang — 2.5 million yuan ($388,754) each for misleading consumers with false pricing and advertising, respectively. Before that, four education agencies including GSX and Koolearn had been fined 500,000 yuan ($77,313.21) on similar charges.

IPO plans scuttled: Yuanfudao, Zuoyebang and other startups such as Tencent-backed VIPKid and Huohua Siwei have suspended their US IPO plans. GSX is shutting down its preschool education business and is said to be laying off 30% of its employees.

VIPKid recently pulled the plug on its online classroom business Dami Wangxiao and also merged its services Qimeng English and Math Thinking, which resulted in layoffs for half of the combined workforce, according to KrAsia.

Meanwhile, tech giant Tencent has been sued by a Chinese public-interest group over ‘inappropriate content’ in its flagship game Honor of Kings. It said that the storyline tampered with historical figures and showed a lack of respect for traditional culture, and that the clothes of some of the game’s characters were ‘too revealing’ and thus inappropriate for young users.

Today’s ETtech Top 5 was written by Vikas SN in Bengaluru and edited by Zaheer Merchant in Mumbai.





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