Tag: Unified Payments Interface

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Ashneer Grover Vs. BharatPe Controversy: Know More

The TV Show Shark Tank has taken India by storm. It has brought about a revolution in the mindset of an average Indian. While startups and valuation were a ‘sophisticated’ or ‘complex’ topic, they have become the talk of the town. One of the sharks or investors in the show is Ashneer Grover, the founding member and Managing Director of BharatPe. He has recently been in the limelight for several reasons. One of them being his friction with the Board of Investors and the CEO of BharatPe. The meme world has been talking about Ashneer’s characteristic and distinctive views on the business reality television series Shark Tank. In this piece, let us take a look into the life of Ashneer Grover.

Life Before BharatPe

  • Ashneer Grover was born in Delhi on June 14, 1982. For a ‘perfect’ academic background, Ashneer went to the Indian Institute of Technology, Delhi, and went ahead to get his business degree from the Indian Institute of Ahmedabad. 
  • Ashneer was amongst the six students selected by IIT Delhi, in a batch of 450, for the Exchange Program with the University of INSA-Lyon in 2002. The French Embassy awarded him a scholarship of €6000.
  • Ashneer worked with Kotak Investment Banking and American Express in the following years. He was the Chief Financial Officer at Grofers, where he built the company with the founders – Albinder Dhindsa and Saurabh Kumar. He then became the Head of New Business at PC Jewellers, where he led strategy and digital transformation.

BharatPe It Is!

  • Finally, it was BharatPe! In 2018, Ashneer Grover met Shashvat Nakarn, an IIT Delhi Student at a tech event where they discussed the challenges faced by the fintech industry. Three months later, they co-founded BharatPe.
  • BharatPe is a fintech company headquartered in New Delhi. It offers three business segments – 1) Interoperable QR code for UPI payments, 2) Bharat Swipe for card acceptance, and 3) loans for small merchants.
  • BharatPe recently raised USD 370 million from New York-based Tiger Global and others at a valuation of USD 2.85 billion. In partnership with Centrum Finance, the company has also obtained a Small Finance Bank License from the RBI. It plans to dive into micro financing through this licence. 
  • Ashneer is an active venture capitalist and has nearly 18 startups in his portfolio. His net worth is estimated to be around Rs 21,300 crore. 

Stirring Controversy

An audio clip surfaced on social media allegedly indicating an argument between Ashneer Grover, his wife, and an employee of Kotak Mahindra Bank. In the clip, Ashneer is allegedly heard using expletives against a bank employee for failing to obtain an allotment of Nykaa shares during its IPO. Ashneer has claimed on social media that the clip is fake,  

There have been claims that the Board of BharatPe is investigating Ashneer Grover, his wife Madhuri Jain Grover, and many more over governance issues. Ashneer Grover then decided to take a leave of absence for the time being. “After much deliberation, I plan to take a temporary leave of absence from BharatPe till March-end. I will return on or before April 1, 2022,” he said in a statement.

According to some news sources, the board of investors wants Ahneer Grover to leave BharatPe. On the other hand, Ashneer Grover called for the removal of BharatPe CEO, Suhail Sameer. He believes that the Suhail manipulated Ashneer into going on a leave of absence and thereby sided with the investors. Ashneer Grover has said that he wouldn’t mind leaving BharatPe, provided the board of investors buys his share in the company for nearly Rs 4000 crore. 

Ashneer Grover has been an entrepreneur par excellence. His peculiar style of communication has taken the meme world by storm. While his presence was well established in the startup world, his appearance on Shark Tank made him a household name. Grover’s brainchild, BharatPe, has revolutionized digital payments for small merchants in India. BharatPe has indeed created a positive social impact, something which we might find at our corner grocery shop or even a fruit seller with a basket. 

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Editorial

VISA vs Rupay. Who will the Indian Government Support?

According to a recent Reuters report, American multinational VISA has complained to the United States government that the Indian government is ‘promoting’ domestic rival RuPay, making it an uneven playing field for other foreign rivals. VISA believes that India’s formal and informal policies favour the National Payments Corporation of India (NPCI) against other payment networks. NPCI is a not-for-profit organisation that manages both UPI and RuPay Networks. Rupay is an Indian multinational financial services and payment service system, launched by NPCI on 26 March 2012. It matched with the Reserve Bank of India’s vision of having a domestic, transparent, and multilateral payment network.

In this piece, we explore the growth of domestic payment networks and how it concerns foreign payment giants like VISA, MasterCard, American Express, etc. 

The Background

  • Debit Cards, Credit Cards, and Unified Payments Interface (UPI) are the in-thing when it comes to payments. You can find a UPI QR code even at the remotest locations in India. Payment Networks are the intermediaries that process these payments. A Payment Network processes digital payments and ensures that money reaches from one point to another. 
  • We are well aware of the payment networks like American MasterCard, VISA, American Express, BHIM UPI, RuPay. While VISA, American Express, and MasterCard are based in the United States, payment networks like UPI, RuPay, IMPS, NEFT are India-based payment networks. The American payment networks command global dominance over global transactions, while the Indian payment networks haven’t paved the way outside India.
  • NPCI is a not-for-profit organisation that aims to promote financial inclusion, faster and safer payments. On the other hand, companies like VISA, MasterCard, American Express are private organisations that completely dominate the global payments market. Many people, entities, and organisations have vested interests in these card companies. 
  • NPCI has intensively promoted digital payments in India and set an example for the world. Even an unregistered fruit seller can accept digital payments to a large extent. UPI Payments are free. So far, the burden of charges lies with the bank and the merchant, not the customer. The scenario might change soon, where customers might pay a small transaction fee for making payments across UPI. 

Why Is VISA Complaining?

VISA executives, including CEO Alfred Kelly, met US Trade Representative (USTR) Katherine Tai, and raised concerns about a level playing field. According to a Reuters report, a memo prepared for USTR Katherine Tai read as follows,  “Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India (NPCI), the non-profit that runs RuPay.”

In 2018, MasterCard had made a similar complaint in the US about Prime Minister Narendra Modi, stating that he associated the use of RuPay cards with nationalism, claiming it serves as a ‘kind of national service”.

India has indeed been pushing for domestic payment networks with a tinge of ‘nationalism’, encouraging citizens to use the local card RuPay. The Pradhan Mantri Jan Dhan Yojana (PM-JDY), a scheme to make banking available to all, offers RuPay with all bank accounts by default. Almost 50% of all RuPay cards are linked to PM-JDY. In November 2020, Finance Minister Nirmala Sitharaman pushed banks to issue only RuPay cards as the first alternative to customers.  

Furthermore, the Reserve Bank of India (RBI) had restricted MasterCard, American Express, and Diners Club International from issuing credit cards over violation of local data-storage rules. Domestic banks and card companies would eventually benefit since they would better penetrate their cards in the market while competition stays away.

The Way Ahead

While the government policies might be unfair for foreign payment networks favouring domestic networks, both serve different interests. VISA, MasterCard, and American Express generally cater to the wealthy or privileged class. These companies entered India when owning debit or credit cards exhibited financial status. These companies work for profit serving the interests of those working for or holding a stake in the company. 

UPI and RuPay were developed to serve the interests of the commoner. A decade ago, smartphones weren’t everywhere; India lacked financial literacy and coverage. The situation now is different. Financial literacy and access to technology have improved multi-fold. NPCI is a not-for-profit organisation; whatever it earns can be channelised for the welfare of the Indian citizens. India is not the first country trying to break the monopoly of specific payment networks. Russia had Mir, Europe has European Payments Initiative (EPI), etc. 

Do you think India is doing right by pushing for domestic payment gateways over foreign ones? You can let us know in the comment section available in the marketfeed app. 

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Editorial

What is e-RUPI: The Future Of Payments in India?

e-RUPI has been in the news for a while now. PM Narendra Modi officially announced the launch of e-RUPI on August 2, 2021. It is an initiative by the National Payments Corporation of India (NPCI) in association with the Department of Financial Services (DFS), National Health Authority (NHA), and the Ministry of Health and Family Welfare (MoHFW). NPCI is the very same organization that looks after UPI or Unified Payment Interface. 

Let us dig deeper into e-RUPI and analyze its possible impacts on the way Indians pay for goods and services. 

The Concept

The basis of e-RUPI is similar to that of gift vouchers or coupons that you redeem at restaurants, e-commerce websites, or fashion stores. e-RUPI is a one-time contactless payment mechanism where a person can redeem a payment voucher without a card, app, or internet banking access at the merchants accepting e-RUPI. The merchants can be hospitals, seed banks, hospitals, stores, retailers, wholesalers, etc. Customers would be able to redeem e-RUPI vouchers of a certain value to buy goods or avail of a service.

A question arises here: who would issue these e-RUPI vouchers? NPCI has tied up with 11 banks that would facilitate the transaction. These banks would issue the vouchers on behalf of the government, a company, or a person. 

Case Study: How can E-RUPI Benefit Farmers?

Before E-RUPI

Farmers have been on the receiving end of a lot of government schemes and benefits. Indian farmers haven’t been the most financially literate or technologically savvy. Let us take the example of fertilizer subsidies. Before the early 2010s, many farmers didn’t even own a bank account. Before that, the only way to avail subsidies or benefits was to stand at a government office for hours, bribe a few officials, or buy cheap-quality subsidized fertilizer or seeds.

Things changed a little after the PM-Jan Dhan Yojna (PMJDY). The scheme aimed at facilitating financial inclusion, where anyone could open a savings bank account without any limits, conditions, or bottlenecks. Government agencies started directly transferring subsidy money into the bank accounts of farmers. This is called Direct Benefit Transfer (DBT). 

The problem with the current DBT system was information asymmetry. There were administrative issues, glitches, privacy issues, fraud, etc. Moreover, not all farmers were able to open bank accounts. e-RUPI could change things completely for farmers. 

After e-RUPI

Through e-RUPI, after registering for a particular subsidy, the farmer would get a text message that would contain a QR code or other encrypted details. The farmer can now go to the merchant and show the QR code to get the fertilizer at a subsidized price. On the other hand, the merchant would get the payment in full and there will not be any impact on their business. Thus, e-RUPI will benefit the farmer as well as the merchant.  

Advantages of e-RUPI

  • There would be a two-step contactless transaction. 
  • No app, card, or bank account is required to facilitate the transaction.
  • More payments can be facilitated since even those individuals without a bank account can transact using e-RUPI.
  • Safe and Secure – No personal details are shared throughout the transaction. Hence, privacy is maintained.

Application of e-RUPI

e-RUPI can be used to facilitate direct benefit transfers and subsidies, such as mother-child welfare schemes, electricity and water subsidy, healthcare subsidy, fertilizer subsidy, and many more

A private sector company can also avail of e-RUPI solutions for employee welfare and Corporate Social Responsibility (CSR) programs. Currently, there are more than 10 partnering banks (both public and private banks) that facilitate the use of e-RUPI.

Is it a new digital currency?

There has been some buzz in the market where people are calling e-RUPI a cryptocurrency. e-RUPI is NOT a cryptocurrency. Even its working principle does not come close to that of a cryptocurrency. While cryptocurrencies are decentralised, e-RUPI will be regulated by the Indian government and derives its value from the Indian Rupee.

Another misconception is of e-RPUI being a Central Bank Digital Currency (CBDC). This is not the case since e-RUPI isn’t a currency at all. Not to forget that the RBI doesn’t control the function or flow of e-RUPI.

Yet, the e-RUPI system is a big step in paving the way for alternate sources of payment like CBDC or cryptocurrency. Do you think this is a first step in the way for cryptocurrencies in India? Do you think that e-RUPI has some inherent flaws? You can let us know in the comment section of the marketfeed app.