Here’s How Fintech Regulations Are Harming You
It was Apple co-founder and master marketer Steve Jobs who once said, “Some people say, ‘Give the customers what they want.’ But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!’”
If the keystone of your business edifice is customer delight, then, Takshashila’s Arindam Goswami says, the Indian fintech industry is quite likely to crumble on the customer satisfaction index. Why? Because while the RBI’s intentions are good — after all, who would argue with the protection of customers’ interests — the unintended consequences are far too many for the customer to keep protecting herself from.
In his op-ed for The Indian Express, Arindam argues that,
“The regulatory zeal, ostensibly aimed at pre-empting potential outages, lacks a tangible basis for outage events. It’s reminiscent of the regulatory crackdowns of the past, where rigid checks were imposed without a clear understanding of the underlying issues, like the one on HDFC a few years ago or on Paytm recently. This knee-jerk reaction to largely hypothetical scenarios, reflects a systemic failure to distinguish between proactive risk management and reactive overreach.”
He argues further:
“The stated intention behind data localisation is privacy and security. The question that needs to be asked is: Was this the most effective and least disruptive option? Card storage guidelines were also poorly thought out — card data could be stored only at the network level or by banks, not by other entities including payment aggregators and merchants. No banks have provided that facility. This caused a lot of disruption because merchants used to store these card numbers, as stored card transactions are preferred for the reduced friction in the transaction flow. The cumbersome protocols for subscription services, necessitating one-day prior notifications and convoluted cancellation procedures, have only exacerbated the disruption, particularly in international payments. What was needed was just to mandate more transparency, not added mandatory steps.”
Arindam is right. What the Indian fintech customer needs is ease of use combined with data and privacy protection. But the fortifications around her are so high that she is unable to let herself out into the fresh air while remaining trapped inside. Literally, with little or no choice.
What does effective regulation look like, then?
“Separation of regulatory powers, transparency, consultative processes, greater proactiveness and responsiveness in responding to consumer feedback – all noble ideals, in fact, necessary conditions, yet mere band-aids on a gaping wound... What we need is a fundamental rethink of our approach to fintech regulation. It’s time to embrace innovation, develop expertise, build guardrails, not roadblocks and think outside the box.”
Read his full piece here.
The Xi-Putin Bro Code, And What It Means
Quiz: How many times have Chinese President Xi Jinping and Russian President Vladimir Putin met? The answer is 43, and it's quite a record. Heads of state, even if they are close strategic partners, hardly meet once a year, if at all. So, what gives?
In her latest op-ed, Takshashila’s Anushka Saxena examines this brotherhood of neighbours.
“On May 16, 2024, Vladimir Putin and Xi Jinping set a new record by concluding their 43rd meeting, marking the 75-year anniversary of China-Russia diplomatic relations. The meeting witnessed affirmation of the ‘comprehensive partnership’ and ‘strategic cooperation’ between the two sides and a reiteration of their mutual contempt for “closed-door military and political alliances” led by the West. Further, Putin and Xi discussed the future trajectory of the relationship – more tourism and better people-to-people ties, enhanced calibration and alignment of international interests, contributing to the “renovation” of global economic governance.”
The deal is that in the past, as with the current meeting, both leaders have indicated that their partnership is not a marriage of convenience. In fact, the term often used is this: No limits partnership.
“And even though the phrase has since come to dominate popular narrative surrounding the nature of the relationship,” Anushka reminds us, “its inception lies in a statement made by the-then Chinese Vice Foreign Minister Le Yucheng to his Russian counterpart Morgulov Igor Vladimirovich during a regular video consultation in December 2021.”
More important, though, is this:
“The developments of the past two years hence indicate that the Sino-Russian convergence on most multilateral and regional issues is likely to remain a central feature of the contemporary geopolitical order. From enabling each other’s defense ecosystems and sustaining each other’s economic growth, to even developing a voting pattern at the UN that is aligned with each other’s interests and well as with the interests of many other Global South countries, China and Russia have indeed demonstrated the ability to sustain a ‘no limits partnership’ in the face of common challenges and aligned interests.”
Read Anushka’s full piece here.
How India can leverage its software strength for Nvidia
Arindam Goswami has been on a roll lately. His other article for the week is this insightful piece for First Post wherein he argues that India, with its robust software development industry, is uniquely positioned to contribute to the transformative shift in AI, and this strategy plays well to India’s strengths and could assist India from a geopolitical perspective too.
How? Well, for starters, India’s prowess in software engineering can be a significant asset in enhancing its geopolitical soft power. By driving international standards and protocols for AI development and deployment, India can shape global norms and practices. This influence can extend to forming strategic alliances with other nations and tech giants, solidifying India’s role as a leader in the global AI community.
Arindam writes:
“Focusing on AI software development, particularly in creating platforms that transcend hardware limitations, can have profound economic and security implications. Economically, it would stimulate domestic innovation, create high-value jobs, and attract global investments. From a security perspective, reducing reliance on single-source hardware providers diminishes vulnerabilities and enhances national security, ensuring that India’s critical infrastructures are more secure and robust.”
You can read his full piece here.
Talking Of Semiconductors…
Nvidia may be the toast of the global high-tech industry, but what has India been up to when it comes to semiconductors? In their article for First Post, Takshashila’s Satya Sahu and Pranay Kotasthane remind us that,
“The India Semiconductor Mission’s (ISM) ambitious goal to establish a robust domestic chip design and manufacturing ecosystem is gradually achieving fruition. The Union government recently approved three semiconductor units, including India’s first fabrication plant by Tata Electronics Private Limited, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation in Dholera, Gujarat.”
There is a rider, however:
“India’s presence in the chip design stage of the global value chain (GVC) is sizeable and well-established, playing host to global semiconductor design houses such as AMD and Qualcomm. There’s a slight glitch in the matrix, though: despite a large pool of skilled design engineers and a growing domestic market, India has struggled to establish a robust home-grown chip design and product ecosystem.”
They explain:
“…a key hurdle for startups and academia is the lack of standardised and affordable access to collaborative research facilities, and critical chip design toolkits inextricably linked to the fabrication stage of the supply chain that India is focused on: Process Development Toolkits (PDKs). A PDK is essentially a suite of files, libraries, and documentation provided by a semiconductor fabrication facility that contains detailed information about the manufacturing process, rules for design, models, and other technical specifications required to reliably design millions of chips.”
They have some well-thought-out solutions as well. You can find them here.
What did the China-Japan-ROK Summit Achieve?
The China-Japan-South Korea trilateral summit is not new; it has been held since 2008 and primarily focuses on maintaining relations, regional economic challenges, and disaster relief. The May 2024 one, however, took a few steps forward. For one, all three countries sought to revive trade and security dialogues that have been hampered by global tensions. In fact, Chinese premier Li Qiang, Takshashila intern Vanshika Saraf points out, called it a “new beginning.”
She writes in her blog post that Li expressed the need for greater
“openness and inclusiveness, to gather more momentum for cooperation, in line with principles of non-exclusivity and non-discrimination, with an open attitude and transparent measures.”
She adds:
“The final joint declaration focused on six main themes — civilian exchanges, climate change, the economy, public health, science, and disaster relief. The year 2025-2026 was designated as the Year of Cultural Exchange among the three countries. To promote sustainable development and bolster their response to climate change, a collaboration with Mongolia was declared to address the challenge of dust and sandstorms in East Asia. In order to strengthen their economic cooperation and trade, they vowed to continue discussions to speed up trilateral FTA negotiations.”
Read her insightful post here.
Why the world should take China’s proposal seriously
Did you know that at the United Nations Conference on Disarmament held in Geneva this February, one of Beijing’s senior officials dealing with nuclear weapons policy declared that “nuclear-weapon states should negotiate and conclude a treaty on no-first-use of nuclear weapons against each other or make a political statement in this regard”?
You are not alone, to be honest. With scores of countries going in for elections this year and two major wars distracting us, hardly anyone noticed. But we should, says Takshashila co-founder Nitin Pai in his latest column for Mint.
He writes:
“There had been some indications towards the end of 2023 that China was planning to engage the United States in a new phase of discussions on nuclear security, but the proposal in Geneva is as breathtaking as it is promising. The world—and India — must approach it constructively. Now, it is easy to be sceptical about China’s intentions. Although China has always maintained a no-first-use doctrine—Mao Zedong believed atomic weapons were paper tigers—it has used a ‘cat’s paw’ technique of letting its proxies hold out nuclear threats against its strategic adversaries.”
Nitin adds that,
“A global no-first-use regime is in India’s interest and New Delhi should support the idea. Unfortunately, Beijing’s dogmas are getting in the way. As much as China would like India’s support—especially against the United States—Beijing holds that India is not a nuclear power and is thus loath to engage New Delhi in international discussions.”
Read his full piece here.
Podcast Recommendations You’d Love
We have several podcast recommendations this week. We start off with Takshashila’s Anusha Saxena’s appearance on the Policy Room podcast on Spotify where she delves into the intricate web of India-China military and economic relations. She unravels complex bilateral ties' historical context, current state, and future trajectory. Listen to Anushka here.
Next up is another of Anushka’s discussions, this time with Dr Felix Heiduk from The German Institute for International and Security Affairs (SWP), where they explore the evolution of the Indo-Pacific, the role regional and non-resident powers play, the security architecture, and dynamics, and how inclusivity can be viewed and defined within the region. Listen to the episode here.
Our favourite All Things Policy episode of the week is this spirited chat between Prof Anupam Manur and resident legal nerd Shrikrishna Upadhyaya where they question the idea of nobility attached to professions. They discuss how professionals are burdened with restrictions relating to advertisements & marketing, client solicitation, and earning profits, that in turn have skewed the market for the delivery of these important services. Join the debate here.
Our final recommendation of the week is easily one of the best podcast series globally — Amit Varma’s The Seen and the Unseen. In the latest episode, he sits down with Takshashila co-founder Narayan Ramachandran to talk about stimulating change, building institutions -- and making ideas and serendipity come together. Listen to their fascinating discussion here.
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That’s all from us this week. Take care.