Fintech Insider Podcast by 11:FS
00:43:49 · Valentina Kristensen, Pranav Sood, Sarah Kocianski, Ross Gallagher
[00:43:49] S3: Yeah. It is. Like, I I just... I honestly don't know what to say. I mean, it's it's a problem with how they've been regulated. It's a problem with the corporate governance. It's a problem with the CEO. I mean, it's just like... It's a total disaster. I mean, I'm I'm I'm intrigued to see what kind of recovery plan, they'll come up with, but it's it's just shocking. [00:44:08] S2: To be clear, this isn't a surprise, by the way. So Yes Bank has [00:44:11] S1: Nobody's been in nobody's surprised by this. You've been following Yes Bank. [00:44:14] S2: I mean, it's been in trouble almost since it was founded. So the the whole thing is like an episode of Game of Thrones, the boardroom politics that have been involved almost since the beginning of of this this organisation. [00:44:25] S3: I wish I'd been following it sooner. [00:44:26] S2: It's been a great story, honestly. And even last year, there was a huge decrease in its share price, I think in Q1 when they brought a new CEO in, which is obviously not usually what you hope is gonna happen when you bring someone in to run the organisation. I think, I mean, two things. One is, yes, he's been accused of of lots of heinous crimes. This is also, and I'm speaking as an Indian, it is a country in which nearly 50% of the MPs in our lower house of parliament are accused of accused of crimes as well. So it's perhaps not as unusual as you might expect. [00:44:57] S0: It's almost a done thing.
00:44:57 · Ross Gallagher, Pranav Sood, Sarah Kocianski
[00:44:57] S0: It's almost a done thing. [00:44:58] S2: It's almost a done thing. Yeah, you're in the majority almost. But I think it does bring some quite interesting questions to light. There's been a ton of innovation in the kind of lending space in India in the last couple of years, both from the big tech guys, so Amazon, Xiaomi, Google as well have partnered as well, but also local players too. So Kashy, I think in particular has been quite an interesting one and lots of P2P stuff as well. And I hope that you know, as much as this is a really shocking story, it doesn't detract from the fact that there is a ton of quite exciting stuff going on and that you don't get that sort of tarnishing of everything with the same brush. [00:45:34] S1: To that point, whilst I'm not surprised by what happened with the S Bank because as you say, like a Netflix Netflix series coming soon. What what I hadn't foreseen, perhaps because I haven't been following the story closely enough, was that when it went down, it would take down all these fintechs with it because it's basically a large infrastructure provider. And they, you know, it kind of made sense basically basically what happened was they turned off all Yes Bank systems and that included all its APIs, which meant that everybody that was using the... Oh god, UPI, what does it stand for? [00:46:03] S2: I'll remember.
00:46:03 · Pranav Sood, Sarah Kocianski, Ross Gallagher
[00:46:03] S2: I'll remember. [00:46:06] S1: UPI, which is basically a universal ID system that you use to attach to payments. Basically, those APIs are switched off and so lots of these fintechs were like, well, we all of a sudden we can't do what we're supposed to do. There's a couple of things in that. One is that a lot of the fintechs didn't even know that Yes Bank was involved in that processing because it was hidden within another third party that built on top of them. So when it went down, most fintechs took a while to to work it out. The other thing is that while some of the larger fintechs, I looked one up, but switched in twenty four hours to ICICI. ICICI. It switched in twenty four hours. It it was able to do so because it was very large, had a of money, a lot of funding, can move over very quickly. What concerns me is the smaller fintechs who may not have been able to find a solution. And to your... Exactly to your point that if these infrastructure players go down, you... They'll probably build it back up again. They won't let the bank go bust. They'll find a plan, and it looks like loads of other banks are basically gonna buy shares in it. But what about all those fintechs who were kind of left on the side? And what do we do to protect those fintechs when they're relying on infrastructure from the big guys? [00:47:10] S0: Yeah. And and and, you know, so analysts are sort of saying that it's too big to fail. They're expecting regulators to move quickly to prevent that situation getting worse.
00:47:10 · Ross Gallagher, Pranav Sood, Sarah Kocianski
[00:47:10] S0: Yeah. And and and, you know, so analysts are sort of saying that it's too big to fail. They're expecting regulators to move quickly to prevent that situation getting worse. [00:47:20] S2: I I think this is a live story actually. I think they've actually made the investment today. So just to be clear, State Bank of India is not the State Bank of of India. So it's got its majority owned by the government. [00:47:28] S1: Well, that's not at all. [00:47:30] S2: No. Exactly. It's majority owned by the government. I think it's about 60, 65%. [00:47:33] S0: Yeah. It's the largest... Yeah. The largest state owned. Well, in a in a in a country where I think most of the banks used to be state owned.
00:47:33 · Ross Gallagher, Pranav Sood, Valentina Kristensen, Sarah Kocianski
[00:47:33] S0: Yeah. It's the largest... Yeah. The largest state owned. Well, in a in a in a country where I think most of the banks used to be state owned. [00:47:39] S2: Yeah. And and in fact, the laws on foreign direct investment are quite strict. So it's hard for people to kind of come in and do that from the outside. I think they made the investment today. The Feet was talking about it being 1,300,000,000 US a few days ago. I think the ticket size was about a quarter of that, if I've read the story right. So I'm sure as Val said, there are going be a ton of questions being asked about corporate governance. And I'm sure there's going be some kind of a lock in period as well to make sure that things turn around in the next three to five years. But as you say, Sarah, the main thing is let's hope that it doesn't drag a whole bunch of other things down with it. And there are I mean, look, there are lots of things going on in India right now in general with the geopolitical situation, with what's going on in Kashmir and all the rest of it. I think it would be a hopeful and optimistic interpretation to think that fixing this particular thing is is top of the list of things that Narendra Modi is waking up in the morning and [00:48:33] S0: and wanting [00:48:33] S3: to do. [00:48:33] S1: Very fair point. He probably has an an awful lot else on his plate right now.
00:48:33 · Sarah Kocianski, Ross Gallagher, Pranav Sood
[00:48:33] S1: Very fair point. He probably has an an awful lot else on his plate right now. [00:48:37] S0: And and and I think a lot of the the questions that these guys are gonna have to answer moving forward do speak to governance and ops and all of that sort of stuff. It seems they also just have some systemic issues around, like, credit decisioning. It seems the proportion of bad loans in their loan book was disproportionately high. That was then underreported. So I think this was an accident waiting to happen. I think Sarah you summed up quite nicely the impact on the other fintechs. The one thing that I'm keen that we don't understate obviously then is the impact on the consumer. And I think we actually talked a little bit about the impact on consumer confidence in these types of providers moving forward. The fact that their online and mobile banking just went down, the fact that there was no information forthcoming from the banks themselves to the actual customers. Customers talked about turning up at 8AM to withdraw money even within the limit that have been set at $630 getting there at 8AM and not having any sort of communication or anything like that until 3PM and still just being kind of in in a queue just waiting to that's that's gonna affect consumer confidence. This [00:49:38] S2: is also a country where there was a huge demonetization exercise not that long ago and also where the government has turned off the internet in large parts of the country in response to civil unrest. So again, not a lot of this stuff surprises me.