The payment industry is a fragmented one. In Singapore, there are more than 500 payment companies, with some providing just remittance services to major international or listed companies with multiple payment solutions.

The smaller payment companies often focus on just one or two payment solutions (e.g. QR code and/or POS machine for local eateries), limiting their scalability.

Bigger players have the advantage to scale and increasing the adoption rate among merchants. Still, because of an interest to protect their business, the solution is often that of a closed-loop ecosystem (e.g. customers can only use the specific provider’s e-money).

As a result, merchants often have to onboard with multiple payment companies if their business requires multiple payment solutions. This drives up their operation man-hours and costs, which eat up the already razor thin-margin that the merchants have.

Based on the ‘Singapore’s Payment Roadmap’ report, slow settlement speed, cost and security are the major concerns from merchants when it comes to payment solutions.

Understanding the struggles that merchants faced, payment companies nowadays are trying to provide more payment options for their merchants. Most are done via a partnership with other payment companies. This is often termed as Unified Payment 2.0 where payment solutions are unified within a single solution for merchants.

However, it still doesn’t resolve the pain points of having multiple platforms, given that most are done via a partnership with other payment companies, to manage and the slow settlement speed and cost, given that the payment method still revolves around fiat and the traditional settlement method.

Why is it popular

In order to reduce the transaction cost and improve settlement time, one might need to look outside of the traditional payment ecosystem. The existing payment ecosystem is heavily dependent on the conventional payment system which slows down the settlement time and is costly for merchants.

Also Read: Why smart businesses will prioritise smart payments acceptance

In order to solve the pain points for merchants, Digital Treasures Center (DTC), leverages blockchain technology to allow merchants to receive and settle in cryptocurrencies. With blockchain technology, the whole transaction is conducted in a decentralised manner and this helps to improve the settlement time for merchants.

The transaction will go directly to the merchants’ wallets and do not require a third party to perform any settlement for them. As a result, merchants can receive and transfer funds almost instantly. Generally, the transaction cost is lower than the traditional payment mode, when moving cryptocurrency.

Merchants can have peace of mind knowing that DTC is awarded the PCI-DSS Level 1, which is the highest standard for a payment company. Crypto assets received by the merchants are secured by a hardware security module that is state-of-the-art technology.

FIPS 140-2 Level 3 HSM has tamper-evident physical security mechanisms and prevents the intruder with the ability to zero-rise data if an intrusion is detected, rendering all the data in the drive useless to an attacker. For merchants, it gives them the peace of mind that their assets are safe and secure.

Scalability of payment 3.0

At DTC, merchants can experience a unified payment solution, as DTC has obtained the in-principle approval for six of the activities under the Payment Services Act by the Monetary Authority of Singapore (MAS).

This means that merchants can opt for different payment methods (e.g. QR code, e-money, POS, online payment, credit card, cryptocurrency, etc) based on their business needs. All within the same platform.

This allows merchants to better manage and track their funds’ flow to help them improve productivity and reduce overhead costs. Merchants can have the flexibility to mix and use different payment modes in a transaction.

For example, merchants can receive payment from their customers in SGD via online payment, but convert within the DTC dashboard to crypto-assets and send it to their suppliers overseas as payment for goods received. This allowed the merchants to leverage the best transfer methods to reduce the transaction and settlement costs.

With the flexibility to switch and choose a different mode of payment, this could be the start of the revolution in the payment industry or in what we might see as the rise of payment 3.0, where merchants are empowered to choose crypto, cash (fiat), and card all within one platform.

This article was first published on April 6, 2022. 

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There’s no need to explain how online banking changed our lives over the past years. We have 24/7 access to our finances, the ability to pay bills without leaving the house, easily transfer money to friends and family members and even make fast international payments. However, not all markets are equally developed in this field.

Ivitech.Drive has been in the Indonesian market for almost a year now and I perfectly know all the strong and weak spots of this country’s banking sector.

Growing digital banking

According to Indonesia Emas 2045 Road Map, due to inflation and high bank interest rates the total online spending for SEA will grow up to 11 per cent (US$218 billion), and it’s the worst since 2017. However, the development of digital banking in Indonesia is taking huge steps. As of now, it is safe to say that mobile banking is dominating over traditional services. The number of users is growing as well as the Net Interest Income, which is expected to reach its peak in 2024 with US$3.57 billion. 

This would not be possible without Indonesia’s thriving fintech ecosystem with numerous innovative startups. These companies are offering a wide range of services, such as estimating loan risks and lending money to SMEs and individuals.  

Digital banking is helping Indonesians to solve problems that a few years ago were hard to imagine solving. It gives access to finances to rural citizens, therefore expanding the abilities for economic rise and development.

Also Read: 

Even though Indonesia, just like any other modern country has tons of banks, most of them are not client-oriented and offer poor client service. This is exactly why FinTech projects, especially e-wallets, are extremely popular among Indonesians. 

For example, our payment model requires small daily payments for the drivers. After deep analysis and research, we figured out that FinTech instruments, such as Ovo and different e-wallets, are the best fit both for us and our clients. They are user-friendly and constantly developing. I can also note DANA – an easy payment system with over 130 million users. I am personally excited to track their development and growth. 

The number of users of such e-wallets in Indonesia is projected to reach 202 million by 2025 – which is 73 per cent of the whole country’s population. There’s no doubt that the Indonesian FinTech market is going to thrive this decade. 

Of course, banks are seeing this trend, too. We already have new perspective banking sector players, such as Singapore-based Aspire, which is actively expanding to the Asian market and bringing the local client service to a new level. Aspire is a neobank – which means that they don’t have physical locations and provide their services online. 

MSMEs should consider Allo Bank and Jago, which have lately presented several interesting features such as delayed payments of up to 100 million rupees and more. 

Also Read: 

Whats the future

As for predictions, it is absolutely clear that the client-oriented business model is the main trend for Asian banking and financial services for the upcoming years. Users want to be able to have easy and quick access to their funds along with a satisfying user experience. 

The other possible trend is digitalisation. Everything that can be done without leaving the house should be done without leaving the house. Online services would save time spent by clients and money for the bank itself. 

99 per cent of Indonesian enterprises are in the MSME sector – so the strategy of FinTech projects will include development in this direction. Banks and e-wallets will be fighting for rising companies to have them as their clients, and this will lead to creating win-win deals and solutions. It is reinforced by the fact that 99 per cent of the Indonesian economy consists of MSMEs, as well as 60% of the country’s GDP. 

Last but not least – a commitment to sustainability. It is a global myth that South Eastern Asia users are not that interested in ESG initiatives. Based on our experience I can say – the greener, the better. 

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In its latest report on implementing Generative AI (Gen AI) in the banking industry, The McKinsey Global Institute’s estimations underscore the staggering potential this technology holds, projecting an annual value addition of US$2.6 trillion to US$4.4 trillion across various sectors globally. Among these, the banking sector stands out with a potential annual windfall of US$200 billion to US$340 billion, equivalent to nine to 15 per cent of operating profits, primarily attributed to heightened productivity.

However, the journey towards harnessing the full potential of Gen AI is not without its unique challenges.

“For banks seeking to tap this valuable technology, a Gen AI scale-up is in some ways like any other—it requires old-school change management skills, upfront senior leadership alignment and sponsorship, business-unit accountability for results, value-centred use cases, clear targets, and so on. In other ways, a Gen AI scale-up is like nothing most leaders have ever seen,” the report stated.

Firstly, the sheer scope of the task is monumental, necessitating a comprehensive understanding of intricate AI concepts. The sudden immersion of banking leaders into the world of reinforcement learning and convolutional neural networks reflects the urgency to adapt strategically. Management teams must navigate through potential pathways and position themselves strategically to harness the diverse capabilities of this transformative technology.

Secondly, the integration of Gen AI introduces a complexity that disrupts the established balance between business and technology within financial institutions. While advancements such as agile methodologies and cloud integration addressed the historical divide, the prominence of analytics and data as a critical coordination node complicates the operating dynamic. Gen AI demands more profound data and analytics integration throughout the value chain, requiring business leaders to collaborate more closely with analytics experts.

Also Read: Navigating the AI landscape in 2024: Why there is an urgency for enhanced governance

The unprecedented pace of change is the third factor accelerating the urgency of Gen AI adoption. Unlike the gradual shift towards mobile banking, Gen AI tools are swiftly becoming integral to banking operations. The use of AI-based tools by financial giants such as Goldman Sachs to automate labour-intensive processes exemplifies the rapid assimilation into everyday practices. For slower-moving organisations, this accelerated change can strain existing operating models.

Lastly, the talent-related challenges associated with scaling up Gen AI cannot be overstated. Leading banks with established teams of AI experts may have a head start, but others need to bridge the gap through a combination of training and recruitment. The demand for skills such as prompt engineering and database curation necessitates a strategic approach to talent acquisition.

A successful transformation

The report suggests seven steps that the banking industry can take to implement digital transformation with Gen AI successfully:

Strategic Roadmap

Management teams should develop a comprehensive strategic view of where Gen AI and advanced analytics fit into their business. This roadmap should encompass transformative business model changes and tactical improvements, allowing leaders to make adaptive decisions on investment and implementation.

Talent Acquisition

Leaders must personally understand gen AI and invest in executive education to bridge the knowledge gap within their teams. This approach generates excitement and addresses concerns among employees, ensuring a smoother transition.

Also Read: Unlock growth potential with the latest insights on Gen-AI

Operating Model

Rather than a new “Gen AI operating model,” successful institutions should adapt their existing models for flexibility and scalability. Cross-functional teams that align accountabilities and responsibilities between delivery and business teams are crucial for coherence and transparency.

Technology Choices

Carefully considering whether to build, buy, or partner is vital for successful Gen AI integration. Decisions on foundational models, cloud infrastructure, and MLOps platforms should align with the bank’s overall strategy.

Data Management

Given Gen AI’s reliance on unstructured data, banks must reassess their data strategies and architectures. The ability to leverage unstructured data facilitated by Gen AI is a key consideration.

Risk and Controls

With the boost in productivity, Gen AI introduces new risks, necessitating a redesign of risk- and model-governance frameworks. Banks must proactively develop controls to mitigate potential challenges.

Adoption and Change Management

A well-thought-out application can stall without effective change management. Encouraging employees and customers to embrace Gen AI requires careful design, addressing comfort levels and ensuring clear executive support.

As the banking industry embarks on the journey of scaling Gen AI, the successful navigation of these seven points will be pivotal in unlocking the full potential of this transformative technology. While challenges abound, the promise of enhanced productivity and profitability propels the industry towards a future where gen AI becomes an integral force in shaping banking operations.

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Credit serves as a global economic engine, yet it remains frequently misunderstood. Over 70 per cent of worldwide economic transactions rely on credit, and over 95 per cent of our daily currency circulation is generated by the banking system through credit.

The digital era has underscored the need to reevaluate the current credit paradigm due to its complexity, costs, and challenges in financial inclusion. With 3.8 billion adults globally lacking access to banking services and a significant shift in customer expectations driven by digital-native generations, there is a growing demand for innovative credit solutions.

Fairtile addresses these challenges as a credit intelligence and automation platform, developing a modern hybrid multi-cloud solution. Founded in 2016 by Corrado Giannasca, Cristiano A. Motto, Giuseppe Riccardi, Guido Ferrari, and Olle Ahnve, this Italian fintech startup leverages big data, human science, and AI to deliver real-time intelligence and automation at scale.

Product portfolio and innovation

A B2B company, Fairtile focuses on enabling financial inclusion and sustainability through its credit intelligence and automation platform, employing data and AI to assist lenders in making informed decisions and optimising their processes.

The solution aggregates millions of data points from various sources, including devices, digital footprints, open banking, SME systems, etc. Adhering to the European Union’s (EU) General Data Protection Regulations (GDPR), the platform creates a comprehensive 360-degree customer view, enhancing decision-making with advanced AI algorithms. The solutions cover credit scoring, fraud prevention, Environmental, Social, and Governance (ESG) rating, and debt collection.

Its account receivables automation solution, Debbie, engages debtors through a versatile conversational interface across multiple channels (voice, WhatsApp, SMS, email, chats) and facilitates payments through an embedded gateway. This allows debtors to choose their preferred payment method and complete transactions digitally during the conversation.

Also Read: Is fintech in SEA changing its focus for further development?

“We are developing a secure, generative AI virtual agent powered by a large private language. To meet the needs of enterprises, Fairtile acts like a subject matter expert assistant who is always available, learns over time, and finds the most relevant information to better service customers or automatically resolve problems,” said Motto, CEO and Co-Founder.

He added, “Usability and interface models are key. We are creating a virtual agent architecture that provides a variety of interfaces for smart conversations. This includes an open smart virtual agent API set that can be used by customers or partners to construct bespoke interfaces. Other interfaces under consideration include a plug-in virtual agent widget for quickly accessing agent-side and back-office applications.”

Fairtile’s three-tiered SaaS revenue model

Fairtile operates on a SaaS revenue model, which has remained consistent since its inception. All solutions are delivered to customers through an API layer.

The model follows a three-tiered structure, offering various price points for different solutions.

• Set-up fee: A one-time fee during the account registration, ensuring regulatory compliance with segregated towers in the infrastructure.
• Service fee: All solutions operate on a SaaS model, with a standard price per request as the service fee. Customers are charged a standard fee each time they utilise our APIs.
• Annual fee: This fee covers annual maintenance, ensuring the customer receives the required SLAs. Different organisations may require varying service levels.

Custom packages are available for specific customers with unique needs or high-volume requirements.

“We trust the best way to serve our customers is to provide them that maximum result with the minimum effort. We have designed our solutions to ensure a seamless and frictionless integration that does not require heavy and complex implementations on their side,” added Motto

Growth and partnerships

The company began its journey before the COVID-19 outbreak, initially self-funded with contributions from co-founders and support from Betacom, an IT company in Italy, Switzerland, and Germany.

“We survived with no funding or debts, just with our revenues and robust and smart management. 2022 has been the year of the restart. We have signed the co-development and commercial partnership with Experian and revamped our growth. The validation of our solutions with the Bank of Italy, the partnership with Visa and new customers have brought us back to the position to run a round on the market,” Motto said.

Also Read: Navigating the gender divide in the Southeast Asia’s fintech landscape

A few weeks ago, the company announced an investment from Intesi Group, a leading company specialising in onboarding solutions.

The firm is currently in the midst of its fundraising round. It seeks 5 million EUR in funding on 20 million EUR of valuation, with a portion already secured, to support its expansion in the Europe, Middle East, and Africa (EMEA) and the commencement of operations in APAC. The flagship office in Singapore was launched at the end of 2022.

As much as 60 per cent of the investments will be allocated to structure, operations, and technology, while 30 per cent will be utilised to strengthen marketing and sales through resources and activities across EMEA and APAC.

Fairtile also participated in the Global Startup Programme organised by the Italian Trade Agency and the Ministry of Foreign Affairs and International Cooperation.

“Throughout our journey, we’ve always valued building partnerships for success. We’re creating a strong network of digital credit solutions by partnering with various organisations and institutions to push the boundaries of technology in the credit sector.”

Fairtile is concentrating on sustainable finance and ESG for their next solution.

The fintech sector, acting as the primary driver of the global economy, is at the forefront of structural changes. Fairtile positions itself as a leader in addressing the evolving needs of the financial services sector, contributing to growth, risk mitigation, and regulatory compliance through a focus on sustainable finance and ESG.

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With the rapid evolution of technology, the increasing rate of electronic waste (e-waste) has become a growing concern for our planet. As gadgets and devices evolve at an astonishing pace, the issue of responsible e-waste management has emerged as a pressing global challenge. The short lifecycle of many electronic products, driven by consumers’ desire for the latest and most advanced technologies, contributes significantly to the escalating volume of e-waste.

Improper e-waste management often involves the export of electronic waste to developing countries, where unsafe recycling practices further exacerbate health risks for local communities. As the digital landscape continues to expand, addressing this challenge requires collaborative efforts from different stakeholders including governments, industries, and individuals to implement effective policies, promote sustainable design, and raise awareness about the environmental and social impacts of irresponsible e-waste disposal. By fostering a culture of responsible consumption and recycling, we can strive towards a more sustainable and environmentally conscious approach to technology in the 21st century.

Also read: Unlock growth potential with the latest insights on Gen-AI

As such, the Youth E-Waste Ambassador Program (YEAP) to tackle the escalating issue of electronic waste and promote environmental responsibility among the youths in Singapore. By fostering a community of Youth E-Waste Ambassadors, the program aims to create a ripple effect, inspiring broader societal change towards conscious consumption and responsible electronic waste management. YEAP stands as a beacon for empowering the next generation to become stewards of the environment, cultivating a community where sustainability is not just a concept but a way of life.

With an initiative of such magnitude, Carousell, a multi-category classifieds and recommerce marketplace platform, is partnering with YEAP to address challenges in the e-waste space. “The Youth E-Waste Ambassador Program is a great initiative. “The program’s advocacy for reducing e-waste and promoting sustainability aligns with our mission to make secondhand the first choice and aim to advocate for a circular economy. We hope that this programme can show more people how easy it is to participate in the circular economy and take steps to reduce e-waste without drastically changing their shopping habits,” shared Jane Ng, Category Director for Mobiles at Carousell.

Sustainability at the heart of Carousell

With the company’s nature as a platform for reselling products, sustainability is encoded in Carousell’s DNA. “We constantly try to reach out to the youths so that they are increasingly aware of how they can contribute to sustainability through buying and selling of secondhand devices as part of their lifestyle,” explained Ng.

The company believes that the traditional linear economy’s ‘extract-manufacture-buy-use-throw’ approach rapidly exhausts Earth’s limited resources, intensifying environmental issues. This is why Carousell aims to disrupt this cycle by promoting the adoption of a circular economy and facilitating secondhand transactions. “Our users, by buying and selling secondhand items, extend the product life cycle of still-usable products. This conscious choice reduces the need for similar new items, decreasing the demand for fresh production, helping to conserve our planet’s finite resources,” explained Ng. “This extends beyond e-waste management but across all products, where we want to encourage more people to think about selling or giving away items they no longer need and to buy secondhand items where possible,” she added.

Dedicated to making secondhand the preferred choice, Carousell’s mission revolves around encouraging more individuals to actively participate in the circular economy. Carousell has introduced two innovative programs this year, namely Sell to Carousell Mobile and Carousell Certified Mobile, to enhance the trustworthiness and convenience of buying and selling secondhand mobile phones.

Also read: Taiwan tech companies eye regional expansion in Southeast Asia

Sell to Carousell Mobile caters to busy sellers or those seeking a hassle-free way to sell their phones directly to Carousell for cash. Through a user-friendly app interface, individuals can receive an estimated offer for their device, opt for doorstep pick-up, or choose to drop off their phones at partner stores across the island. The process leverages Carousell’s AI diagnostic tool and smart pricing algorithm to ensure transparency and efficiency, minimising the potential for human error that often accompanies traditional methods of selling used mobile phones.

Subsequently, devices sold to Carousell undergo a rigorous 40-point inspection at their diagnostics centre, including data erasure for secure wiping. These thoroughly inspected and sanitised devices are then listed on Carousell Certified Mobile’s official store, providing buyers with the assurance of quality and authenticity. Each purchase is accompanied by a free 1-month warranty, extendable to 24 months, and a 7-day money-back guarantee ensuring a reliable and satisfying secondhand shopping experience.

“Impactful change starts from small incremental steps and adjustments to our lifestyle habits. Rather than leaving old devices in drawers at home, think about selling or giving away these electronic items. This small change doesn’t just cut down on e-waste; it also grants these products a new life with new users, reducing their environmental footprint,” shared Ng.

Youth at the forefront of the sustainability movement

The Youth E-Waste Ambassador Program is an initiative that perfectly aligns with Carousell’s goals, resonating with the broader mission of encouraging sustainable practices and aligning seamlessly with the commitment to prioritise secondhand options in the journey toward fostering a circular economy. 

The hope is that this innovative program can effectively demonstrate to a wider audience the simplicity of participating in a circular economy, emphasising that individuals can take meaningful steps to reduce e-waste without undergoing drastic alterations to their everyday shopping habits. By showcasing the feasibility and impact of such initiatives, the program seeks to inspire and empower individuals to play an active role in creating a more sustainable and environmentally conscious future.

Also read: Bridging Japan and Southeast Asia’s tech landscapes through the ME Innovation Fund

“The role of Singaporean youth is vital in addressing our country’s e-waste issue. We see a growing shift in environmental consciousness in our region among young consumers, favouring sustainable products. Additionally, with the rise of social media platforms, younger generations feel empowered to express their views and build community with like-minded youths to discuss pertinent issues,” explained Ng.

She added, “This presents a valuable opportunity to tackle important matters like reducing e-waste. Besides starting conversations and raising awareness, impactful change can also start with small steps. For example, making secondhand items the preferred choice while shopping creates a win-win situation, offering financial benefits while positively impacting the environment—a step toward a more sustainable planet.”

Carousell’s collaboration with YEAP is a testament to their commitment to sustainability and responsible e-waste management. It’s a succinct narrative that sparks inspiration for change at both individual and industry levels. Carousell and the youth of Singapore are collaboratively shaping a sustainable future, and their partnership with YEAP stands as a pivotal milestone in this inspiring journey.

For more insights on e-waste, and updates on upcoming programs and activities, follow YEAP on Instagram and Facebook.

To learn more about Sell to Carousell Mobile, click here.

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This article is produced by the e27 team, sponsored by YEAP

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Neo banks, or startups ‘aiming to disrupt banking for millions of Indians’, have been a sort of holy grail investment in the fintech VC world. We are talking consumer neo banks, and at my last count, there are more than 20 of them that have raised nearly a billion dollars over the past five years.

That’s a lot of money, but then startups in India raised a lot of money in general over this period. The critique here, though, is that there really hasn’t been a business model other than credit that seems to be sticking.

With that said, I have somewhat of a traditionalist view of credit. It’s not a growth business but rather a risk business. I also think that millions of Indians do not need a disruptive bank. They just need a functional one. This has several cascading implications:

• Disruption typically means feature-rich. While many customers are keen to experience these features, they are unwilling to pay for them.
• Disruption as a value prop is an expensive one when it comes to acquiring customers. Two things create customer pull in financial services — being there at the time of a need and brand. Disruption as a brand value prop takes years to establish and a much shorter period to become a commodity. And being there at the time of a need means running a ton of ads and suffering a low click-through rate. In a nutshell, in financial services, disruption means high CAC.
• Unlike in the case of other startup categories, I want to bank with my mother’s bank. Banking is a serious business, and parents often significantly impact how young millennials bank. Neo banks often don’t get to play a role in this conversation.

Also Read: India and Southeast Asia’s climate tech sector set to reach US$350B by 2030

As a result, the NuBank of India will take a few more years (decades?) to build. In the meantime, the competition in the consumer credit space will continue to increase as well-funded neo-banks start to issue transaction credit instruments such as credit cards or as credit on UPI instruments.

Core tenets of transaction credit

As you read through this section, note that there is a central assumption I make. It is that for credit on UPI to succeed, most transactions need to be MDR-free. I will revisit this assumption and write a follow-up in a few months, but this is my strongly held-point of view for now.

Zero or near-zero MDR

I think the credit on UPI revolution lives and dies by this tenet, and I will try to describe it.

If a small merchant — think the small electrical shop behind my dad’s house — receives a payment on UPI, he expects to receive 100 per cent of the money in his account. If the issuer starts levying a 1.1 per cent MDR on this transaction (assuming it settles using a credit on UPI loop), the merchant starts turning off credit transactions in a heartbeat.

I actually think the RBI will start asking merchant acquirers to turn off credit on UPI acceptance on all merchant QR codes by default. And if that happens, Credit on UPI is dead on arrival.

So, how does credit on UPI work? I think for credit on UPI to succeed, the interest rate needs to be high enough so that issuers can offer an MDR-free transaction. This is not simple — an MDR-free transaction means a significant negative carry for the issuer. In the case of a credit card, the issuer is paid by the merchant in the form of an MDR for the credit-free period offered to the user.

There is a second-order effect — in the case of Credit on UPI, the revolvers must pay for the credit-free period enjoyed by the transactors. Therefore, assuming a current split of transactors and revolvers (see SBI Card; the ratio is 35–65), the interest rate on revolving needs to go up by as much as 18–24 per cent to get to credit card equivalent economics, which means an APR of 50 per cent + for the revolving user.

Rewards need to be re-thought

This brings me to the user segmentation. I believe Credit on UPI needs to be offered only to revolving customers. Adding transacting customers to bump up card spending and earn MDR does not work in this world.

Which means rewards need to be rethought. In the world of credit cards, the ground reality is that revolvers pay enough interest for some of it to be farmed back into rewards that are mostly used by the transactors. In the world of revolver-only instruments, similar rewards don’t really work. The user segment changes and rewards need to be rethought from the ground up.

This has a significant impact on user retention and on spending prioritisation for customers.

Customer engagement takes place on payment platforms

In the world of credit on UPI, user acquisition happens at two levels. First, fintechs acquire users and issue them credit instruments. Second, the payment platforms acquire users and enable them to pay at the point of purchase.

In my view, users will not use the issuer platform as their payment platform. To illustrate, I have never seen anyone open their HDFC bank app to pay at the neighbourhood store. We (predominantly) use Google Pay, PhonePe, or Paytm. In the world of Credit on UPI, the user will simply add her credit instrument to her payment app of choice and just continue her merry way.

Now, you may say that the fintechs issuing these credits on UPI instruments are not HDFC banks, but I submit that they are not PhonePe either, and I bet that winning a user from PhonePe is just not going to be easy.

Also Read: Why SEA and India would take centre stage in startup and VC world in the next decade

I contend that the battle is lost, and it’s best not to invest in trying to ensure that the user uses your app as a payment platform. Gamification and rewards tend to be very effective, but I wouldn’t count on the user opening the issuer app a few times a day.

CAC is crucial

Yes. Fintechs that cannot solve for CAC don’t make it. We saw this in BNPL, and we will see this kill many credits on UPI platforms over the next few years.

Collection muscle unclear

Yes. Fintechs that are built with collections as an afterthought don’t make it. We saw this with a host of personal loan platforms. We will see this kill many credits on UPI platforms over the next few years.

A word of caution: Debt trap

Household financial assets in India are at their lowest ever. The gross savings rate (Savings to GDP ratio) has declined at a rapid clip — from 37 per cent in 2011 to 30 per cent in 2022. Now, sure, part of this is linked to an increase in the value of real assets and investments, but it’s easy to see that spending has increased at a rapid clip, as has credit.

This shows up in household credit, which nearly doubled last year. Again, some of this goes into real estate, but I would contend that a fairly significant proportion goes towards other personal expenses, a sign of increasing aspiration for a large spending consumer segment.

Now, this rapid increase in indebtedness is not unique to India. There is an increase in leverage across the world, most notably in the US. To be fair, an increase in indebtedness is, in some ways, necessary to improve the standard of living in India.

India has always been a consumption juggernaut, and credit allows consumption to grow even faster. Simplistically, if tomorrow is going to be better, we can always grow into paying off the debt, and that remains the most likely scenario.

However, contagion across markets works in funny ways. The Indian consumption economy has been one of the most resilient across the world — not been dramatically impacted by global macroeconomic fluctuations for over a decade now. Importantly, the consumption economy looks at its best — people are spending more all around us.

However, there is a note of caution that I need to point out — a lot of this consumption is credit-fueled. How domestic credit behaves in the wake of a global credit meltdown — which looks more likely every passing day — is anybody’s guess, and we could see a temporary cycle in small-value personal loans and transaction credit.

However, the long-term story is clear as day. Retail credit penetration in India will continue to go up, and there remains a tremendous opportunity to create new, disruptive models in transaction credit.

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Singapore-based climate tech venture builder Wavemaker Impact (WMI) has hit the final close of its debut fund oversubscribed at US$60 million.

The fund, which surpassed its initial US$25 million target by 2.5 times, seeks to drive large-scale decarbonisation efforts in Southeast Asia.

The additional capital will enable the firm to expand its portfolio of companies and continue making follow-on investments in its best-performing ventures to their Series B funding rounds.

Also Read: Wavemaker Impact backs RegenX to promote regenerative farming in SEA

The firm’s latest limited partners (LPs) include the United States Development Finance Corporation (DFC), British International Investment (BII), and Triple Jump/DGGF, three leading international development finance institutions and impact investors.

Beacon Capital, Thailand KBank’s venture arm, and Autodesk Foundation, the corporate philanthropy of Autodesk, also invested in Wavemaker Impact.

To date, Wavemaker Impact has launched and invested in six companies, with another four currently in development. It is on track to finalise its 10th investment by the end of the year and is launching its first companies in India and Australia.

Its current portfolio includes Agros (a sustainable farming platform), WasteX (a distributed biochar technology company), Rize (a platform for farmers to reduce methane emissions in rice cultivation), Helios (a solar mortgage company), BumiBaru (a degraded land flipping company in Indonesia), and RegenX (a regenerative agriculture platform focusing on commodity crops like coffee and cacao).

Also Read: ‘The next generation of unicorns will be from greentech’: Wavemaker Impact’s Steve Melhuish

Marie Cheong, Founding Partner of Wavemaker Impact, commented: “There’s a paradigm shift in the investor community’s perspective, with growing belief that climate tech ventures can be profitable, high growth investments that significantly contribute to the fight against global warming. We look forward to working with all our LPs to realise this vision.”

Wavemaker Impact, backed by Wavemaker Partners, builds sustainability startups with proven entrepreneurs to reduce 10 per cent of the global carbon budget by 2035. Every company that Wavemaker Impact builds is a ‘100×100’ company, a startup with the potential to abate 100 million metric tons of carbon and be a US$100-million revenue business.

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Circulate Capital, an environmental impact investor that aims to advance circular economy for plastics in high-growth markets, today announced the final close of its Circulate Capital Ocean Fund I-B (CCOF I-B), bringing the fund’s total AUM to US$73 million and the firm’s total AUM to US$255 million.

Circulate Capital also announced a US$7 million commitment from British International Investment (BII), the UK’s development finance institution (DFI) and impact investor.

According to a press statement, this marks the firm’s fourth investment from a DFI, including the International Finance Corporation (IFC), the European Investment Bank (EIB), and Proparco, a subsidiary of the French AFD Group, with total commitments from DFIs now reaching US$32 million. These commitments are expected to help catalyse institutional investment into enterprises that develop solutions to combat plastic waste in Asia.

CCOF I-B invests in two complementary strategies aimed at tackling the plastic pollution crisis and fighting climate change:

Circulate Capital Disrupt (CCD)
Described as climate-tech investments in breakthrough innovations that reduce the need for virgin plastics and limit greenhouse gas emissions across the sustainable fashion, biotech and AI, and smart materials sectors.

Circulate Capital Recycling Supply Chains
Described growth investments that transform recycling and waste management supply chains in South and Southeast Asia (SSEA), scaling the highest-potential solutions and replicating their success.

Also Read: Wavemaker Impact debut fund makes final close at US$60M

“We’re proud to welcome BII to our prestigious list of institutional investors so we can scale our investments more quickly to address the global plastic pollution crisis and advance the circular economy,” said Rob Kaplan, CEO and Founder of Circulate Capital.

“To close our climate tech fund with the support of prominent partners including global corporations, family offices, foundations, and now four of the biggest DFIs in the world signifies that the sector is ripe for the capital it needs to achieve circularity and mitigate the negative effects of climate change.”

Kaplan said, “Crossing the US$250 million AUM threshold is an exciting measure of our success, but even more a testament to the growing appetite amongst institutional and impact investors for investments in high growth companies that are delivering both deep impact and meaningful financial returns. Thus far, our climate tech strategy has invested in four impressive enterprises at the forefront of climate tech and circular innovation, and we will continue to identify and add innovators in this space to our portfolio as well as for our flagship strategy of investing in recycling infrastructure in the SSEA region.”

Circulate Capital additionally announced that CCOF I-B has qualified for the 2X Challenge, recognising its significant commitment to women’s economic empowerment. The Fund’s nomination was sponsored by BII.

With a presence in more than 10 countries, Circulate Capital partners with global brands and financial institutions to transform supply chains at scale by delivering economic, social, and environmental value.

Also Read: Qarbotech raises funding for its nanotech solution that boosts agri productivity

Launched in 2018 by supply chain experts and leading corporations including PepsiCo, Procter & Gamble, Dow, Danone, Chanel, Unilever, The Coca-Cola Company, Chevron Phillips Chemical Company LLC, and Mondelēz International, the firm is scaling solutions across the recycling and innovative materials value chains.

Circulate Capital was founded in and focused initially on South and Southeast Asia, but the firm today also targets “untapped opportunities in high-growth markets to spark further development in the emerging circular economy.”

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Image Credit: RunwayML

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Artificial Intelligence (AI) will have a way more critical impact on our future than blockchain, according to Dusan Stojanovic, Founder and Director at blockchain VC firm True Global Ventures. Therefore, regulating AI is more critical than regulating the blockchain industry.

“The success of ChatGPT and similar services has driven enormous user adoption,” he said in an interview with e27.

Also Read: True Global Ventures’s Web3-focused follow-on fund TGV4 Plus hits US$146M first close

ChatGPT now has 100 million weekly active users and nearly 1.5 billion monthly visitors. The US has the highest number (14.82 per cent) of ChatGPT users, followed by India (8.18 per cent). A quarter of companies, including SMEs, have saved roughly US$50,000 to US$70,000 using ChatGPT.

Right now, only a few players are developing and launching AI models for the masses — around 15 in the US, 11 in China, and 1-2 in other developed nations, limiting access to the mainstream.

“The AI industry needs to have a more open playfield. So, regulation is required as soon as possible, and it should be the top priority for any country, starting with the US, because AI will have a more critical impact on our future than blockchain,” he said.

In his opinion, the recent turmoil within Open AI (parent of ChatGPT), with Sam Altman being fired and reappointed, shows how difficult it is to marry research with product development. Altman’s firing/resignation looks like the strangest case since Steve Jobs was fired by the Apple board in 1985 after a power struggle with the board.

Also Read: Next blockchain unicorn will be from gaming: Dusan Stojanovic of True Global Ventures

According to True Global Ventures’s General Partner Beatrice Lion, the institutional consumer demand for exposure to Bitcoin is accelerating the need for regulation. Bitcoin will be one of the most robust use cases for blockchain technology since it is entirely decentralised, and there is nobody to make a legal claim against.

“We believe Bitcoin, the oldest use case of blockchain and decentralisation, will be among the biggest winners in 2023 and beyond. As the demand for Bitcoin increases with spot Bitcoin ETFs expected to be approved in early 2024 and the new supply of Bitcoin halves in April 2024 (Bitcoin halving occurs every four years and cuts the rate at which new Bitcoins are released in circulation by half), we are optimistic about Bitcoin price increases,” she said.

“In this respect, with all other legal battles between regulators and the industry, Bitcoin is and will be untouchable, so the limited downside risk is even more apparent now than it was at the beginning of the year. At the same time, traditional finance is taking over from pure players in terms of market share. The CME Group, which recently took the top spot on the list of the biggest bitcoin (BTC) futures exchanges of the world, replaced Binance for the first time in two years,” she elaborated.

Stojanovic believes that governments will play a crucial role in promoting investments in metaverse ecosystems to avoid being left behind. “One recent concrete example is in Saudi Arabia, where the Neom Investment Fund created a strategic partnership and signed a term sheet investing US$50 million in Animoca Brands, one of our portfolio companies. Neom will apply Metaverse and blockchain technologies to their vision of a US$500 billion mega smart city.”

Also Read: True Global Ventures injects US$10M into NFT metaverse game The Sandbox

Founded by an international group of angel investors, True Global Ventures is a distributed ledger technology (DLT) equity fund. It targets areas like legal AI, education AI, revenue AI, and code-related AI, where it sees that Generative AI has a material impact on productivity and new revenue streams. The fund covers 20 cities in North America, Europe and Asia.

True Global Ventures has invested in companies, including Animoca Brands, The Sandbox, Forge, Chromaway, Coinhouse, GCEX, Chronicled, and Dedoco.

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