Earlier today we reported that many fintech founders were disappointed with the RBI’s latest circular, which bars non-banks from loading their credit lines onto wallets and prepaid cards. One founder said the regulator apparently wants to give banks full control over fintech innovation. A new report by Macquarie Research echoes this view, saying the rule will hamper fintech firms and benefit banks.

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Credit: Giphy

Also in this letter:
■ Zomato board likely to approve Blinkit buy on June 24
■ Leap raises $75 million, and other done deals
■ Twitter board greenlights Musk’s $44 billion takeover


RBI making life tougher for fintech firms, says report

Reserve bank.

The RBI’s latest fintech regulation – which bars non-banks from loading their credit lines onto wallets and prepaid cards – could have an adverse impact on fintech companies while benefiting banks, according to a report by Macquarie Research.

It says the regulation will allow banks to speed up card acquisition while reducing competition.

According to Macquarie, the RBI circular could affect companies such as Slice and Unicards, which have been adding many customers through this route.

It also said the RBI is sending a clear message that fintech firms will face more regulation in the coming months and years.

Catch up quick: In a one-page circular released on June 20, the RBI said non-bank entities should stop loading their credit lines onto wallets and prepaid cards immediately.

The directive has caused widespread confusion in this segment of the payments industry, we reported earlier. The RBI seems to have issued the order over concerns that many new-age companies have assumed the lender’s role without building sufficient safeguards.

Big numbers: According to the Macquarie report, some new-generation firms were adding 200,000 to 300,000 cards using prepaid payment instrument (PPI) licences and loading users’ wallets with credit lines from banks, non-banks, and other financial institutions.

Fallout: “It is clear that the risks are increasing for the fintech sector, for which regulations have been a light-touch so far. With regulatory arbitrage now being plugged slowly, we are expecting a slowdown in growth and/or profitability prospects for the fintech sector in India,” the report noted.

Earlier, founders of top fintech firms said the RBI’s note made it clear the regulator wants banks to be in full control of fintech innovation, thereby hurting new-age companies with business models built around agility.

“The RBI seems to be apprehensive of the control being with fintechs and wants to move it fully to banks,” said one of the entrepreneurs we spoke to. His startup is among those likely to be affected by the new regulations.


Zomato board likely to approve Blinkit buy on June 24

Zomato

Zomato’s board of directors will likely approve the acquisition of quick-commerce startup Blinkit at a meeting on June 24, according to a filing with the NSE, which did not name Blinkit.

Deal details:
Zomato will pay in its shares for Blinkit, formerly Grofers, as we reported earlier.

  • Under the agreement, Blinkit’s stockholders will receive a little less than 10% in Zomato.
  • SoftBank Vision Fund, Blinkit’s largest investor, will receive nearly 4% in the food delivery firm.
  • Sources told us Blinkit investors may be required to hold Zomato shares for at least six months.
  • Shareholders of Zomato are expected to get 10 Blinkit shares for each of the food delivery company’s shares.


Almost done:
Zomato invested $100 million in the Gurugram-based quick commerce startup last year, acquiring a 10% share, but a merger has been on the cards since 2020.

We reported on March 15 that based on Zomato’s market capitalisation at the time, the deal was expected to value Blinkit at $700-800 million, significantly less than its previous valuation of just over $1 billion.

Quick-commerce ambition: Zomato has been trying to enter the quick commerce space after twice dropping plans to deliver groceries online since the start of the pandemic in 2020.

But during its investor call in May, its first since going public last year, CEO Deepinder Goyal said the company was “very conscious” about not overpaying for Blinkit.


ETtech Done Deals

Funding

■ Overseas higher-education startup Leap raised $75 million in a funding round led by Owl Ventures, Steadview Capital, Paramark Ventures and a few others. Started in 2019, Leap offers test preparation, admissions and visa counselling, and loans to international students It has raised about $150 million in funding so far.

■ Singapore-based crypto platform FalconX has raised $150 million in a funding round led by Singapore’s sovereign wealth fund GIC and B Capital, doubling its valuation to $8 billion. It plans to use the funds to expand its workforce, make acquisitions and increase its services.

■ Healthtech startup Spry has closed a $7 million Series A round led by Eight Road Ventures, with F-Prime Capital, and Together Fund also participating. Spry is a digital health platform that offers a suite of services to help physical therapists manage their clinical and administrative functions.


Twitter board greenlights Musk’s $44 billion takeover

Elon Musk

Twitter’s board have given their unanimous approval to shareholders to complete the social media platform’s $44-billion sale to Tesla chief executive Elon Musk, according to new regulatory filings.

Musk, who was keen on wrapping the deal quickly, told Bloomberg on Tuesday that the approval of shareholders was one of three “unresolved matters” holding up the acquisition.

Twitter shares flat: Despite the board’s approval, Twitter shares remained flat and far below the $54.20 per share that Musk has offered to pay. That means if the deal were to close today, Twitter investors would earn a profit of $15.22 per share.

If the deal is concluded it will be a huge relief for Twitter, given Musk earlier threatened to walk away from it over the issue of spam bots. Many Twitter employees, who are no fans of Musk, are likely to be less enthused.

Tweet of the day


Ant and Alibaba to go their separate ways amid China crackdown

Ant Group

Jack Ma’s prized jewels, Alibaba and Ant Group are separating their businesses and seeking new independent opportunities as the effects of China’s tech crackdown continue to weigh on them.

Ant, a subsidiary of Alibaba, was created by the ecommerce giant as its payments and financials vertical before being spun off into a separate entity in 2011. Alibaba still owns a 33% stake in the company, and the two have overlapping leadership.

Competitors: Since both are now going their separate ways, they’ve started restricting access to each other’s services, and are competing for clients and partnering with rivals.

China’s tech crackdown included a record fine of $2.8 billion for Alibaba last year, while Ant saw its $37-billion IPO suspended.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Ruchir Vyas in New Delhi. Graphics and illustrations by Rahul Awasthi.

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