Hello everyone, 

Welcome to the 90th edition of The Pattern, a weekly newsletter where we unpack and dissect the latest from the world of finance, technology, and the economy. Let’s dive in!

Earlier this month, I wrote about  sophisticated financial fraud  and how authorities can stay ahead. The finance ministry was scrambling to get cyber fraud under control, and just last week, the central government began discussions around new safeguards against fraudulent transactions. These include measures against SIM cloning and fraudulent use of QR codes.

Unfortunately, though, it seems as if just as the authorities get a handle on one issue, another one creeps up from behind the proverbial bushes. One of India’s major integrated identity platforms, IDfy, recently released a  report  stating that 1 out of every 14 loan applicants attempted to deceive KYC checks. More specifically, of all the IDs required during the loan application stage, voter IDs show the highest instances of forgery at 6.78%, PAN cards at 3.84%, and Aadhaar cards at 3.11%.

Concerning numbers, to say the least. However, it’s encouraging to see the government make a comprehensive effort to stay up-to-date with evolving risks and technologies. The centre has asked state-run banks to focus on capacity-building of key executives, especially in the areas of cybersecurity, digital infrastructure, and risk management.

This comes after banks were asked to strengthen financial cybersecurity systems and curb digital payments fraud.

Only time will tell if and how these efforts pay off. 

On another note, a recent report by Kotak Institutional Equities (KIE) has revealed that 75 percent of online transactions are through credit cards, while the number is 50 percent in offline transactions. This is despite the massive popularity of UPI for online transactions

“The RBI data broadly suggests that the impact of UPI appears to be a lot stronger in hurting the growth of debit card transactions over credit cards at this point”, said a representative of KIE.

According to some  industry leaders , features like rewards, cashbacks, and EMI incentives, coupled with overall convenience, are driving the increasing popularity of credit cards in India. Increased discretionary spending on travel and entertainment too have played a role.

But remember, not too long ago, data obtained from the RBI under the Right to Information Act revealed that credit card defaults have risen by INR 951 crore, to INR 4,073 crore in FY23 from INR 3,122 crore in FY22.

A couple of months prior to that, in  edition 68 , I wrote about the rising popularity of credit cards in India, and its potential downside – the biggest being a potential bubble burst.

Does the KIE data imply that we’ve sidestepped this burst, or are we heading towards one that’s even bigger than we anticipated? I hope for sure it’s the former.

That’s all from me this week. As always, I’m leaving you with some interesting reads and numbers from the past week. Reading list:

• RBI announces community cloud for financial sector, proposes fintech repository

• $5 trillion economy goal for 2025 nearly impossible: Raghuram Rajan

  
  

• RBI imposes monetary penalty on five co-operative banks

• Do Indian banks care about climate finance?

Between the digits

• INR 1 lakh crore: The amount of money Indian Railways plans on spending on new trains in the coming years

   

• INR 31,692 crore: Total value of loan digital loan disbursals in Q2 of FY24 by Fintech Association for Consumer Empowerment (FACE) companies 

• INR 36,169 crore: Total AUM for fintech lending companies

• USD 20.58 billion: India’s mercantile trade deficit in India, a decline of  4.3 % from $56.95 billion in the same month last year

   

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 always get all updates.  

Cheers,

Mayank

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