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In today’s newsletter: 

• RBI recognises FACE as SRO for fintech
• PhonePe rules out IPO until UPI market share clarity
• Govt assesses quick commerce's kirana toll

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In a much-awaited move, the Reserve Bank of India (RBI) governor Shaktikanta Das has announced the approval of FACE (Fintech Association for Consumer Empowerment) as the first self-regulatory organisation for Fintechs (SRO-FT).

• The body will work with fintech entrepreneurs to ensure that the companies follow regulations in the letter and spirit of RBI’s guidelines for the digital delivery of financial services

The RBI returned one application for SRO-FT body, while another one – Digital Lenders Association of India (DLAI) is still under consideration.

• SRO-FT is a major initiative by the RBI to work more closely with fintechs after several of the regulator’s guidelines disrupted fintech business models

• In cases of doubt, the body will work closely with the RBI to determine if a new fintech business model contravenes the regulator’s unspecified rules

Another key focus area for the RBI governor is international cooperation and integration in cross-border payments.

• The central bank is actively working to expand the reach of UPI and Rupay through international partnerships

In addition, the RBI is exploring the development of new Digital Public Infrastructure (DPI) to support the implementation of artificial intelligence (AI) in financial services.

Find out more

PhonePe is facing a significant obstacle on its path to going public!

PhonePe CEO Sameer Nigam has expressed significant concerns about the company's IPO plans, citing the lack of clarity regarding market share regulations for UPI as a major obstacle. 

"We can’t IPO until we have clarity on market share regulations for UPI," Nigam said at the Global Fintech Fest in Mumbai.

Currently, PhonePe holds 48% share of the UPI market, with Google Pay trailing at 37%. 

Also read: PhonePe diversification strategy pays off, high revenue growth likely to sustain 

The National Payments Corporation of India (NPCI) had mandated a 30% cap for third-party app providers (TPAPs) by December 2022, a deadline that has since been extended to December 2024 due to legal and implementation challenges.

"The UPI market cap overhang is definitely a problem for us. I feel nervous going into the market if there’s a 30% market share cap lurking," Nigam said.

Also read: Nandan Nilekani gives a glimpse of the next decade of India’s ‘Finternet’

Looking beyond domestic challenges, Nigam remains optimistic about PhonePe’s global expansion. 

• He revealed plans to enter markets in Europe and the Middle East and noted the support from global investors

In a separate panel discussion at the Global Fintech Fest, Shailendra Singh, Managing Director at Peak XV Partners, emphasised the importance of long-term vision in building fintech startups.

• He called for a focus on precision and financial discipline over speed and velocity 

Meanwhile, Pine Labs CEO Amrish Rau praised India's Digital Payment Infrastructure (DPI) but expressed concerns about potential regulatory challenges as the sector grows.

Also read: Every CEO and CTO must become Chief AI Officers: Kunal Shah, founder of Cred

During the same panel discussion, National Payments Corporation of India (NPCI) chief Dilip Asbe sounded the alarm over the increasing cyber risks associated with AI, calling for immediate action to address these threats.

Quick commerce vs kiranas is no longer just a topic for discussion; it has become an issue that the government is now actively looking into.

Several ministries are looking into the rapid growth of quick commerce and its potential impact on kiranas (mom-and-pop) stores, a government source told us.

“More than one ministry to look into this given the subject -- commerce, consumer affairs, etc…The issue is being seen at a bureaucratic level for now and is at an initial stage,” the person added.

The move is not a surprise. Commerce Minister Piyush Goyal recently said the rapid growth of e-commerce in the last 10 years is a matter of concern, so some action was expected. 

• If the government decides to go after quick commerce, it can pick on the foreign direct investment (FDI) loophole they’re exploiting
  
  
• That will cause an existential crisis for companies, an industry executive told us

While kirana shop owners are a large vote bank for the government and can nudge for some intervention, stakeholders of the rapid delivery ecosystem said any involvement is unwarranted. 

“When automobiles came, we did not continue to hold on to bullock carts. When mobiles came, we did not say mobiles will not be allowed because PCO operators have to keep their jobs. India cannot be exporting DPI (digital public infrastructure) to the world but at home say we will use birds for communicating,” an industry participant told us. 

Kiranas don’t need protection, they need reskilling, the person added. 

Dig deeper

Playing video games can lead to substantial pay packages for Indians, rivaling the salaries of engineers graduating from top institutes like IIT. 

• Top BGMI players earn between Rs 2.5 lakh to Rs 4 lakh a month

Skilled esports players earn between Rs 15 lakh and Rs 30 lakh annually, which matches the average annual salary of Rs 10 lakh to Rs 25 lakh offered to IIT graduates. 

• Esports salaries have increased by 50-100% over the past 1-2 years, thanks to larger prize pools and improved sponsorship deals. Find out more

• The Bureau of Indian Standards is developing AI regulations in consultation with various ministries and industry stakeholders to regulate AI and its applications in India.
  
  
• OpenAI is reportedly developing a new AI model, codenamed "Strawberry," capable of solving complex problems and tasks.

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Join them as they delve deep into the minds of renowned novelists, journalists, and other wordsmiths.  

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