Hello everyone, 

Welcome to the 59th edition of The Pattern, a weekly newsletter where I unwrap and decipher the latest rumblings from the world of technology and finance. Let’s get started. 

It has been a relatively quiet week in the world of FinTech. We heard chatter about lenders and FinTechs poring over the latest RBI guidelines that deal with the outsourcing of Information Technology Services. 

It’s a pretty misleading name for something this overarching. These guidelines impact almost all banks and FinTech relationships. What this means is that any vendor who provides even a small software service to a bank or NBFC has to comply with these guidelines. 

The new directions add additional compliance for both lenders as well as Technology Service Providers. The current scramble is about complying with these norms as well as anticipating future directions and tweaking operations or processes, if necessary. The RBI wants to ensure that irrespective of the increasing complexity of financial services partnerships - nothing untoward happens and definitely not behind the scenes.  

“The underlying principle of these Directions is to ensure that outsourcing arrangements neither diminish REs ability to fulfil its obligations to customers nor impede effective supervision by the RBI,” the regulator said in a statement. 

Meanwhile, the Finance Minister of India has spoken against blindly trusting the growing breed of fin-fluencers - social media celebrities who claim to be finance gurus. The FM said that audiences should take their advice with a pinch of salt, verify their credentials and ensure that they make decisions with advice from certified financial advisors and planners only. 

This is important because as a  recent story  showed, more and more lifestyle influencers too are moving towards dispensing personal finance ‘advice’ - bolstered by a brand partnership in the backend that seeks to promote - at the end of the day, a certain app. 

It’s ‘get rich quick’ but with a slightly more believable script. And that’s what makes it so scary. 

Startups hurry back home

There’s an ongoing wave of startups ‘reverse flipping’ their base to India from other locations such as SEA or Singapore etc. The biggest example of the same was PhonePe whose parent Walmart had to shell  $1 billion in a tax bill  for shifting the FinTech company’s domicile from Singapore to India. 

Now, Walmart CEO Doug McMillon has suggested in an interview that the company might seek to list on Indian stock exchanges, if and when that happens. 

The reverse flipping of domicile seems to be motivated by the startups’ desire to gain favour with the policymakers, prevent restrictive directives, as well as ease a potential future listing on the bourses. 

A  LiveMint report  suggested names of companies such as Razorpay, Pine Labs and Groww among those considering a move back to India. 

Bank branches and mixed signals 

At a time when digital transactions in the country are rising at an unprecedented rate, it’s slightly jarring to read about banks expanding their branch network rapidly. But this is the case according to latest reports. 

Turns out, large banks such as HDFC Bank, ICICI, and Kotak Mahindra are all planning to launch hundreds of new branches in the upcoming year. While HDFC is set to open 600+ branches, Kotak Mahindra will be launching another 150, and ICICI Bank might just do way more than that. 

"In this year, the pace of branch addition has picked up significantly,"  said  Anindya Banerjee, Group CFO, ICICI Bank, during the post earnings investor call. "We have added 480 branches in the year and out of that 180 has come in the fourth quarter. So, I think that's kind of a starting run rate and we should see significantly higher branch additions next year than what we have seen this year."

But why are the banks adding branches at a time when there’s so much noise about digitisation of banking in the country?  The answer, simply, is that digitisation is just one part of the puzzle. It doesn’t necessarily solve for access, equity, and overall deepening of financial inclusion. I highly recommend  reading this piece  by our co-founder and CEO Rajat Deshpande on why he thinks that the internet won’t solve for financial inclusion. 

This is all from me for this week. See you next week. As always, leaving some interesting data and reading recommendations below. 

Between the digits 

Rs 1,100 crore  - Alleged  IGST evasion fraud  committed by 24 big importers in India. The authorities are now looking into this. 

Rs 1,600 crore -  The budget for Digital Health Mission is in doldrums as the touted digital health stack is facing a crisis with few willing to take the punt, as per a deeply reported  story . 

$10million/year -  The speculated amount of money an OTT platform has to pay to air one HBO show. This number is what has  made things difficult for Hotstar  as the platform is trying to reduce cost damages by letting foreign shows go off from the platform, as its subscriber base dwindles. 

Reading list 

1. Startups reverse flipping to ease listing

2. Why Onboarding Is The Key For Banking Startups To Bridging The Financial Inclusion Gap

3. 57% fraud incidents linked to social media, e-comm, fintech platforms in India: PwC

4. The case for credit in the reseller-led social commerce space led by Meesho 

5. RBI imposes over Rs 1.73-cr fine on HSBC for wrong credit card data

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter  here  and follow  FinBox on LinkedIn  to never miss any updates.  

Cheers, 

Mayank

All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.