Visa and Mastercard could win access to India’s payments market via UPI

The Reserve Bank of India (RBI) is reportedly drawing up plans to link credit cards issued by Visa and Mastercard to the Unified Payments Interface (UPI), the country's popular online payments protocol.

According to news portal The Morning Context, two industry executives have said that the central bank will decide before April. A decision in favour of the two US companies would mark a distinct change in; as Bloomberg comments: “India’s dealings with American card networks has been frosty. Visa and Mastercard have grumbled to Washington about the lack of a level playing field as New Delhi has cajoled banks to shift to a homegrown alternative.”

Connecting to the UPI would be a huge opportunity for Visa and Mastercard. Since its 2016 launch, India’s mobile bank-to-bank instant payments system has established itself as one of the country’s most popular payment methods and has helped spur strong digital payments growth.

In December 2022 the UPI reached a record 7.829 billion payments totalling rupees (INR) 12.82 trillion (US$163.1 billion), up 71% year-on-year, according to the National Payments Corporation of India (NPCI).

However, only debit cards and select credit cards powered by RuPay, the NPCI’s multinational financial services and payments system, can use the UPI. RuPay has issued more than 700 million cards in India and dominates the country’s debit card market, although it lags Visa and Mastercard as an issuer of credit cards.

Visa and Mastercard collectively account for 90% of India’s credit card market, but the country of 1.4 billion people has only 7.3 million point of sale (PoS) terminals, according to Bloomberg. Gaining access to the UPI would give the two US companies access to a network of 230 million quick response (QR) codes used by shopping mall stores to roadside shacks to receive money.

It would also provide a boost in increasing their presence in India's digital payments market, which is set to grow from US$3 trillion in 2022 to US$10 trillion by 2026, according to projections from Boston Consulting Group and PhonePe.

Visa and Mastercard have previously faced regulatory challenges in India over issues such as payment fees and data sharing, so linking to the UPI would offer “a thaw in the relationship”.

As reported by Industry Roundup on 16 January, Innoviti Technologies recently enabled credit card transactions on UPI, creating India’s first software-as-a-service (SaaS) omnichannel platform to operate credit transactions for both offline and online UPI payments.

Bank of America CEO: World needs ESG rules to improve capitalism

Bank of America CEO Brian Moynihan has told the World Economic Forum (WEF) in Davos that official global standards on sustainability and climate are needed to “align capitalism with what society wants from it.”

“An investment manager, a consumer, society, others can sit there and say, here’s a line that is acceptable and you’re either above it or below it,” Moynihan said. “If you’re below it we shouldn’t do business with you.”

Asked by CNBC’s Karen Tso whether stakeholder capitalism needed a reboot through creating common standards for corporate disclosures, Moynihan said he was converted to the idea in 2017 when hundreds of companies signed up to the UN’s Sustainable Development Goals, followed by ongoing debate over what concepts like sustainability actually mean, and accusations of greenwashing.

“Without that definition, without that convergence, what you had is everybody defined it their own way. Somebody would think this issue’s important or this way to talk about it is important,” he said.

Moynihan’s remarks come as environmental, social, and corporate governance (ESG) initiatives are increasingly discussed in corporate results and by senior business figures, though they have also proven controversial. Critics include those who claim they are a PR exercise and, recently, those who argue ESG investment funds provide weaker returns.

In 2020, Moynihan — who also chairs the WEF’s International Business Council — and WEF founder and chair Klaus Schwab worked with the big four accountants to create a set of common stakeholder metrics for companies to follow.

He said it was now important to “go to the official side” and that he supports the new International Sustainability Standards Board (ISSB) set up by non-profit body the International Financial Reporting Standards (IFRS).

At a Davos panel session, IFRS Chair Erkki Liikanen said that since setting up the board they had consolidated their work with that of other groups with niche expertise and were working on a final standards publication to be released in the middle of 2023.

This will comprise a set of general non-financial sustainability disclosure requirements for companies, and a set specifically on climate. Liikanen said it would then need adoption and endorsement around the world.

Moynihan also said it was crucial that sustainability and ethical standards became official and global. Informal standards-setting meant companies could hide poor sustainability practices “further down the stream” of their supply chains or divest certain assets, or else claim they are too small to carry out checks.

But with standardised, cross-jurisdiction rules that are part of companies’ annual reports and audited, he continued, “then frankly, an investment manager, a consumer, society, others can sit there and say, here’s a line that is acceptable and you’re either above it or below it.

“If you’re below it we shouldn’t do business with you, and if you’re above it, tell us how you’re making progress along these important things. Which, at the end of the day, will align capitalism with what society wants from it and get us going faster.”

Deutsche Bank raises CNY1 billion via first Panda Bond

Deutsche Bank said that it has issued its inaugural Panda bond, raising Chinese yuan (CNY) 1 billion – about US$147 million – via 3-year senior preferred notes. The transaction “enables the bank to directly tap into China’s deep onshore bond market, accessing a new investor base at attractive funding levels.”

Typically denominated in CNY, panda bonds can be a useful way for foreign entities to gain access to the Chinese market and to diversify their funding sources.

Proceeds of the transaction will be used for general group funding purposes. Deutsche Bank noted that the deal marks the first Panda bond following recent regulatory changes by the People’s Bank of China (PBoC) and State Administration of Foreign Exchange (SAFE) to facilitate foreign remittance of Panda bond proceeds.

Deutsche Bank Asia Pacific Chief Executive Officer and Member of the Management Board Alexander von zur Muehlen said, “China’s onshore bond market is the second largest in the world. Increased international investor and issuer activity is an important step in China’s capital market opening, and global financial system integration. Deutsche Bank is proud to play a driving role in broadening international participation in this important market.”

Deutsche Bank is one of only two foreign banks in China’s debt capital markets to hold a full lead underwriting (“Type A”) licence, and as one of the most active foreign banks in the Bond Connect program and has previously issued Dim Sum bonds via the South Bound Bond Connect (SBBC). The bank “is fully committed to contributing to RMB internationalisation through its active participation in both onshore and offshore markets.”

Deutsche Bank China Chief Country Officer and Chairwoman Rose Zhu said, “Deutsche Bank’s Panda bond issuance has demonstrated the value of accessing the onshore market for international issuers. China has continued to improve its regulatory framework for Panda bonds, and the market is a key focus for our franchise. Deutsche Bank China is one of the few fully licensed foreign debt capital markets (DCM) banks in the market, and we have always been one of the most active players in onshore and offshore renminbi (RMB) bond and derivative markets.”

Saudi joint venture seeks global access to strategic minerals

Saudi sovereign wealth fund Public Investment Fund (PIF) and Saudi Arabian mining company Ma’aden have signed a joint venture (JV) agreement to establish a new company specifically for investment in mining assets globally that secure strategic minerals for the country’s industrial development. PIF has a 65.44% stake in Ma’aden, whose shares are listed on Tadawul, the Saudi stock exchange.

The new company will be incorporated after obtaining approvals from the relevant authorities and satisfying certain conditions of the JV agreement, with Ma’aden owning 51% and PIF 49%. It aims to initially invest in iron ore, copper, nickel, and lithium as a non-operating partner taking minority equity positions.

This will help provide physical offtake of critical minerals to ensure supply security for domestic mineral downstream sectors, and position Saudi Arabia as a key partner in achieving global supply-chain resilience.

Yazeed Alhumied, PIF’s deputy governor and head of MENA Investments, said: “PIF and Ma’aden combine extensive investment expertise with deep sector knowledge. The new company will significantly contribute to strengthening Saudi Arabia’s strategic position as an important link in the global supply chain in line with PIF’s strategy to further grow key industries.

“As a catalyst of Vision 2030, PIF continues to drive the growth of new sectors, and companies while contributing to job creation, technology transfer and localising knowledge to build a prosperous and sustainable economy in Saudi Arabia.”

Robert Wilt, CEO of Ma’aden, said, “This is a significant step for Ma’aden as we develop the mining sector in Saudi Arabia and position the Kingdom as a key ally in securing the metals of the future.

“The global energy transition relies on the strategic minerals needed for renewable energy and battery storage, and our focus on these will give us a foothold in the global commodity value chain, where major supply constraints are combined with growing demand.”

The agreement reflects the sovereign wealth fund’s mission to build strategic economic partnerships to achieve sustainable returns and unlock the capabilities of promising sectors with significant long-term growth potential, in line with Vision 2030. It also aligns with the mining giant’s 2040 Strategy to focus on upstream mining activities and gain exposure to future minerals while building partnerships with global mining companies.

New cybercrime trends in 2023 predicted and outlined

US multinational cybersecurity specialist Fortinet has released predictions from the FortiGuard Labs global threat intelligence and research team about the cyberthreat landscape for 2023 and beyond. Highlights of the predictions and key takeaways for chief information security officers (CISOs) are as follows:

1 – Success of RaaS is a preview of what’s to come with CaaS

Given cybercriminal success with Ransomware-as-a-Service (RaaS), a growing number of additional attack vectors will be made available as-a-Service through the Dark Web to fuel a significant expansion of Cybercrime-as-a-Service (CaaS). Beyond the sale of ransomware and other Malware-as-a-Service offerings, new a la carte services will emerge. CaaS presents an attractive business model for threat actors who can easily take advantage of turnkey offerings without investing the time and resources up front to craft their own unique attack plan.

One of the most important methods to defend against these developments is cybersecurity awareness education and training.

2 – Reconnaissance-as-a-Service models could make attacks more effective

As attacks become more targeted, threat actors will likely hire ‘detectives’ on the Dark Web to gather intelligence on a particular target before launching an attack. Reconnaissance-as-a-Service offerings may serve up attack blueprints to include detailed information to help a cybercriminal carry out a highly targeted and effective attack.

3 – Money laundering gets a boost from automation to create LaaS

To grow cybercriminal organisations, leaders and affiliate programmes employ money mules who are knowingly or unknowingly used to help launder money. The money shuffling is typically done through anonymous wire transfer services or through crypto exchanges to avoid detection. Cybercriminals will soon start using Machine Learning (ML) for recruitment targeting, helping them to better identify potential mules while reducing the time it takes to find these recruits. Manual mule campaigns will be replaced with automated services. Money Laundering-as-a-Service (LaaS) could quickly become mainstream as part of the growing CaaS portfolio. And for the organisations or individuals that fall victim to this type of cybercrime, the move to automation means that money laundering will be harder to trace.

Looking outside an organisation for clues about future attack methods will be more important than ever, to help prepare before attacks take place.

4 – Virtual cities and online worlds are new attack surfaces fuelling cybercrime

The metaverse is giving rise to new, fully immersive experiences in the online world, and virtual cities are some of the first to foray into this new version of the internet driven by augmented reality technologies. While these new online destinations open a world of possibilities, they also open the door to an unprecedented increase in cybercrime. The applications, protocols and transactions within these environments are all also possible targets for adversaries.

Real-time visibility, protection and mitigation is essential with advanced endpoint detection and response (EDR) to enable real-time analysis, protection and remediation.

5 – Commoditisation of wiper malware will enable more destructive attacks

Wiper malware’s growth in prevalence is alarming because this could be the start of something more destructive. The concern going forward is the commoditisation of wiper malware for cybercriminals. Malware that may have been developed and deployed by nation-state actors could be picked up and reused by criminal groups and used throughout the CaaS model. Wiper malware could cause massive destruction in a short period of time given the organised nature of cybercrime today. This makes time to detection and the speed at which security teams can remediate paramount.

India’s GoMechanic fires 70% of workforce after due diligence

India’s GoMechanic, which operates a network of more than 1,000 car service centres, has laid off 70% of its workforce as the seven-year-old start-up faces a funding crunch after existing and prospective investors found that its founders had made ”grave errors” in its financial reporting.

According to local reports, remaining staff have been told that they must work without pay for three months.

A due diligence report carried out by EY found that more than 60 of the centres may have violated accounting norms to overstate revenue and divert funds. Gurgaon-headquartered GoMechanic is backed by Sequoia Capital and offers auto-services such as repairing and carwashing However, it has struggled to raise funds for over a year despite reaching advanced stages of deliberations with several investors.

GoMechanic was in talks a year ago to raise a round of funding led by Tiger Global at over US$1 billion valuation. However, a source said that the talks did not progress to a deal after some discrepancy was found during the due diligence process.

The company then engaged with a number of other investors, including Malaysia’s Khazanah to raise a funds. Khazanah was positioning to lead the round while SoftBank was also looking to participate. This new round has been terminated while the discrepancies found on the books are investigated. The due diligence process reportedly uncovered scores of issues including inflated revenue and that some garages were fictitious, two sources said.

The funding crunch at GoMechanic, which is fast-running out of cash in its bank and needs a new infusion soon to survive, is a further headache for Sequoia India, the most influential venture investor in the South Asian market. Zilingo, BharatPe and Trell, three other Sequoia India-backed start-ups, have had governance and auditing issues in the past year.

In a joint statement, GoMechanic investors said the start-up’s founders recently informed them of the “serious inaccuracies in the company’s financial reporting.”

“We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to the inflation of revenue, which the founders have acknowledged. All of this was kept from the investors. The investors have jointly appointed a third party firm to investigate the matter in detail, and we will be working together to determine the next steps for the company,” they added.

Citi summons unproductive remote workers in for training

Citigroup, regarded as having one of the more flexible policies on the issue of remote work, says that if a worker’s productivity dips, they can nonetheless expect to spend more time in the office.

“You can see how productive someone is or isn’t and if they’re not being productive, we bring them back to the office, or back to the site, and we give them the coaching they need until they bring the productivity back up again,” said CEO Jane Fraser at a Bloomberg event during the World Economic Forum (WEF) in Davos, Switzerland. 

Fraser has offered most staffers the ability to work remotely at least some of the time on a permanent basis, with most Citigroup employees expected to be in the office three days a week. The CEO has said parts of Wall Street’s insistence on full-time office attendance feels dated, arguing in a recent interview with Fortune magazine that workers will “vote with their feet” on such policies. 

Citi’s experience of remote work has underlined the importance of flexibility but also the value of in-person collaboration and coaching, said Fraser. But there was no need to go back to a working model from the 1980s.

“There’s an important balance here,” she added. “We’re going to have keep listening to our people and getting that balance right but if you don’t listen to them, you’re in danger of having some problems.”

Malaysia wrongfoots market, keeping rates on hold

Malaysia has unexpectedly kept its benchmark interest rate unchanged, halting its tightening cycle earlier than expected as it sees a darkening global outlook posing risks to the economy.

Bank Negara Malaysia maintained the overnight policy rate at 2.75% on Thursday, a decision predicted by just one of 18 economists polled in a Bloomberg survey. The rest had predicted a quarter-point hike to 3%, which would have returned borrowing costs to levels just before the pandemic. 

Multilateral platforms could improve cross border payments, says BIS

A new Bank for International Settlements (BIS) report, issued by its Committee on Payments and Market Infrastructures (CPMI) considers how multilateral platforms could address cross border payment frictions.

The paper, Exploring multilateral platforms for cross-border payments, mentions 20 separate platforms, most of which use conventional technologies and are in production. It also includes three central bank digital currency (CBDC) cross border payment platforms – Project MBridge, Project Dunbar and Project Jura – which are still in development and all use blockchain. Each of the three involves the BIS Innovation Hub, a co-author of the new report together with the International Monetary Fund (IMF) and the World Bank.

The paper does not go on to mention other private distributed ledger technology (DLT) initiatives, among the most well-known of which include Fnality, Partior and Baton Systems.

The report also highlights several challenges with multilateral platforms, many of which have been raised in previous cross border CBDC reports.