The recent report on local fintech players (GS Paper 3, Economy)
Why in news?
- In its report presented to Parliament recently, the Standing Committee on Communications and Information Technology has raised concerns about the dominance of fintech apps owned by foreign entities in the Indian ecosystem and recommended that local players be promoted.
- It mentioned that the Unified Payments Interface (UPI) commanded a 73.5% share of the total digital payments in terms of volume in FY 2022-23. However, its share in terms of value was only 6.67% in the same period.
What does the report infer about the existing ecosystem?
- The Committee in its report emphasised that digital payment apps must be effectively regulated as the use of digital platforms to make payments in India is on the rise.
- It will be more ‘feasible’ for regulatory bodies such as the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) to control local apps, as compared with foreign apps, which operate in multiple jurisdictions.
- The Committee observed that fintech companies, apps and platforms that are owned by foreign entities, such as Walmart-backed PhonePe and Google Pay, dominate the Indian fintech sector.
- PhonePe commands the leading market share in volume terms, followed by Google Pay, at 46.91% and 36.39% respectively. This is for the period between October to November 2023. On the other hand, NCPI’s BHIM UPI’s market share (in terms of volume) stood at a mere 0.22%.
- NPCI’s data for December show that a total of 5,642.66 million transactions were initiated by customers using PhonePe, while another 4,375 million used Google Pay and only about 24.30 million used BHIM.
Recommendations:
- The Committee’s recommendations are also largely in tune with the NPCI issuing a 30% volume cap on transactions facilitated using UPI, back in November 2020.
- That is, the total number of transactions initiated by any third-party app (like PhonePe and Amazon Pay) individually, could not exceed 30% of the overall transactions made using the interfaces cumulatively over three proceeding months. Apps exceeding the specified cap were given two years to comply with the directive in a phased manner.
- NPCI had stated that it would help “address the risks and protect the UPI ecosystem as it further scales up.” However, the timeline for compliance was extended in December 2022 to December 31, 2024.
What are the concerns about fraud?
- While examining the different modes used by scamsters to dupe people and park illegal money, the Committee observed that fintech companies were also being used for money laundering. It was apprised of one such example, an Abu Dhabi-based app called Pyppl.
- The app was being administered by Chinese investment scamsters, it noted. This made it difficult for Indian law agencies to track the trail of money collected through scams on the platform.
- The fraud to sales ratio, which represents the total number of fraudulent transactions in comparison to the total number of transactions in a financial year, has largely remained around 0.0015%. The trend is notwithstanding the rise in volume of the payment mode in the last five years.
- In the ongoing financial year (till September 2023) the figure stood at 0.0016%. The percentage of users affected by UPI frauds stood at 0.0189%.
What does it mean for the ecosystem?
- The local fintech players have a “natural advantage” when it comes to understanding the customer, various ecosystem participants, the digital public infrastructure and broader market infrastructure.
- While foreign fin-techs enjoy the same advantage with respect to new technologies, techniques and global connectivity.
- Mckinsey’s Global Payments Report (September 2023) observed that instant payments in India were only expected to contribute less than 10% of future revenue growth because no fees are charged for the interface (UPI).
- It however, noted that “although UPI generates minimal transaction fees, these revenues still represent an uplift from no-fee cash events, and the paperless process eliminates the hidden costs of managing cash transactions”.
- For perspective, printing and ensuring availability of cash too entails certain costs for the exchequer, thus, the analogous comparison with transaction costs for digital payments.
Why are human-wildlife conflicts escalating in Kerala?
(GS Paper 3, Environment)
Context:
- Protests have erupted in Wayanad, Kerala after a man was killed by a herd of wild elephants, the third such death in less than a month in the district.
- This is the latest in a series of such incidents over the years, and has put the spotlight back on Kerala’s escalating human-wildlife conflict.
Geographical aspect:
- Forest covers nearly 30% of Kerala’s geographical area. For a relatively small State with an average width of just around 70 km and a population of more than 3.46 crore, this means numerous densely populated human settlements are located close to protected forest regions.
- Moreover, a large number of agricultural plantations too lie near wildlife habitats. This is especially true in the case of hilly reaches, which includes most of the heavily forested eastern part of the State.
- Although this situation makes human-animal conflict inevitable, in recent years, Kerala has seen a sharp increase in the number of such incidents with those living near forest fringes suffering crores of rupees worth of damage to livelihood, mostly due to frequent raids by elephants and wild boars.
What is the scale of human-animal conflict in the state?
- As per the State Forest department’s own study, Kerala witnessed human-wildlife conflict across 1,004 areas. The study recorded over 48,000 incidents of damage to major crops between 2013-14 and 2018-19. Among the 35 forest and wildlife divisions in the State, Nilambur north (94), Wayanad south (92) and Wayanad north (70) forest ranges had the highest numbers of major conflict locations.
- Wild elephants were involved in the highest number of incidents in the State. Pachyderms were responsible for 14,611 incidents recorded between 2013-14 and 2018-19.
- Wild boars (5,518), bonnet macaques (4,405) and snakes (2,531) are the others in this category. Elephants, bonnet macaques and wild boars have caused the most damage to farmers residing in forest fringe areas. Herbivores such as sambar, spotted deer and gaur too have contributed significantly to crop damage.
- A total of 814 livestock animals, including cattle, buffalo and goat, have been reported to have being killed or suffered injuries in such attacks, and tigers have preyed on 420 of these.
What are the reasons for the increase in human-wildlife conflict?
- Experts cite increased area under cultivation around wildlife habitats, changing cropping pattern, significant increase in the population of animals like elephants and tigers due to conservation efforts, and movement of livestock and humans in wildlife habitats during odd hours as the main reasons for the rise in human-wildlife conflict incidents.
- There has also been a substantial increase in the population of prolific breeders like wild boars and peacocks.
- However, increased number of incidents involving elephants are due to habitat depletion and fragmentation caused by human activities.
- Moreover, invasive alien species have reduced the availability of food and water. Monoculture of species such as eucalyptus and acacia has also adversely affected plant biodiversity.
What are the proposed solutions and why are they not effective?
- Elephant-proof trenches and solar power fences are widely used in Kerala, and they are considered largely effective, provided they are properly maintained.
- However, there are several regions where these mechanisms have not been installed. These fences are also often broken by people living nearby to let their cattle into the forests for grazing, and elephants too destroy the fences using their legs and tusks.
- In a ₹620-crore masterplan to address the issue, the Forest department recommends hanging power fences that will be out of reach of elephants.
- Moreover, as part of the State government’s new eco-restoration policy, the Forest department is aiming to plant suitable indigenous plants (wild mango, wild gooseberry, and wild jackfruit) in the forest to ensure wild animals’ food security and dissuade them from entering agricultural lands.
- Such measures need to be supplemented by creating early warning systems that can track the movement of elephants and other dangerous animals using drones and watchers, so that people can avoid going to locations where they have been spotted. However, warning mechanisms are not widely installed in Kerala.
- However, the above measures are not effective against wild boars. Although the Centre is yet to accept Kerala’s request to declare wild boars as vermin, the State government recently empowered local bodies to cull wild boars that pose a threat to agriculture crops or human life.
- The other options include capturing and neutering the boars, or relocating them to forests where there are predators like tigers and leopards.
