The IBS Times; 197th issue; December 2016

FINTECH IN INDIA BY DIXITA REDDY

The IBS times COVER STORY

FINTECH ECOSYSTEM

BY ANTRA BHARTI

STRUGGLING INDIAN START-UP

ROBO ADVISORY

BY RADHIKA GUPTA

BY DEBANJAN PAUL

BLOCKCHAIN TECHNOLOGY

FINTECH’S DISRUPTIVE INNOVATION TO GLOBAL BANKING

BY JEET PC

FinStreet, IBS Hyderabad

ISSUE NO. 197, DECEMBER 2016

What’s Inside

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INTELLIGENCE BEYOND SUCCESS LETTER FROM THE EDITOR

TEAM IBS TIMES ISHAN GUPTA (EDITOR-IN-CHIEF) ROHIT TILLU (MANAGING EDITOR) ABHINAV BANERJEE

ANUPAMA KUMARSWAMI CHESTHA KUMAR EYAMINI N

Dear Readers, Greetings from Team FinStreet.

We wish you a Merry Christmas and a Happy New Year. Thank you all who has contributed and made us where we stand today. We look forward to continue our work of making available of all the latest happenings round the globe with all your gracious support in the year 2017.

Team FinStreet is proud to present the 197th edition of The IBS Times.

HEMLATA HAJONG JATIN SHARMA PRATEEK PANDEY RANU SARUPRIA SANDHYA ADHAVAN SWARUPA ROY ANTRA BHARATI DEBANJAN PAUL DIXITA REDDY GAGAN KAPOOR JEET PC RADHIKA GUPTA SHILPAM DUBEY SHREYA RANI SMRITI PATODIA SNEHA TIBREWAL

The world is changing at a fast pace. Technology is touching each and every sphere of our lives. The financial world is also adapting to it. In this issue we bring to you a series of articles which simplify these changes. We start with our COVERSTORY, FINTECH ECOSYSTEM followed by FINTECH IN INDIA and FINANCIAL INCLUSION. We further look into blockchain, biometrics, bank in a box and P2P lending among others.

For Sector research we‘ve published a report on Indian Aviation Industry and the Market Watch, THE UNKNOWN VARIABLES will help you understand the movement of market for your future reference. From the investment point of view, this issue also brings to you an exhaustive report on Jet Airways by Team Vriddhi Research.

Do make the most out of it and keep enjoying the experience of The IBS TIMES. Your feedbacks and opinions will help us make it better.

Once again, Merry Christmas and Happy New Year to all our readers.

Ishan Gupta Team FinStreet

SRUJANA NAIK UTSAV CHANGOIWALA

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NEW AGE BANKING BANK IN A BOX

-Shilpam Dubey

As a country moves towards more financial development, its banking system it will produces more innovative products hence would require more sophisticated technologies. Though technologies have always existed in banking, it is experiencing almost an overhaul with new technologies turning the tables upside down. ―Bank in a box‖ is one such technology which has created disruption in the banking ecosystem.

In the beginning, Bank in a box became very popular with the new entrants and non banking financial services but it is becoming increasingly popular with the established banks as well. By providing innovative solutions in streamlining the businesses and monetizing the existing customer base, Bank in a box is disrupting the banking industry but making traditional banking software models appear completely outdated.

What is Bank in a box?

Not just the new banks and NBFCs are leveraging Bank in a box solutions but a lot of non-financial companies like TESCO, ASDA and Walmart are entering the arena of banking using these solutions because they have the advantage of their already high customer base.

―Bank in a box‖ is a banking software that enables a bank to meet up its operational needs from core banking management to channels to card management systems. All of these are bundled together and provided by an outsourced service. It helps a bank in reducing it cost while bringing in operational efficiencies. Bank in a box delivers a wide array of banking facilities like payments processing, Aadhar-enabled payments for financial inclusion, current accounts, savings accounts, mortgages consumer loans, card managements for all types of cards, reconciliation to payment gateway for ecommerce.

Benefits of Bank in a box With the whole new revolution in technology the banking sector, famously known as ‗fintech‘, large established banks are facing challenges from the new entrants. These new entrants are wholly equipped with the technology in a much better way than their larger established counterparts for multiple reasons. One of them is that the new ones have entered the business with the already sophisticated technologies, while the large established ones have been functioning through the traditional models. Changing the whole technological infrastructure in all the business segments with their larger customer base is not an easy task for them. Hence, these new banks, popularly known as ―challenger banks‖ backed up with new solutions like Bank in a box are having an edge 4

edge over the older banks and they are increasingly using this edge by expanding their customer base and tapping in the spaces where traditional ones can‘t reach.

Fintech serves dual purposes. Not just it improves the back-end processes of financial institutions and provides them with more incentives to renovate, but it also manages the front-end processes by making the interaction with the customer smoother, providing better value-added services and more interactive marketplace. While doing so, it‘s solving not just the operational issues but in a way also marketing and challenges associated with customer relationship management. Hence, unlike the traditional models which mostly focus on one aspect of the business, Bank in a box provides a more holistic and complete solution package to the financial institutions.

In a nutshell, Bank in a box gives following benefits: Easy and quick deployment: Bank in a box of most of the software services companies is easy to deploy because it‘s already configured and is ready to use. It saves time by reducing implementation lag and its deployment to the different business units. TCS‘ Bank in a box starts it basic banking operations in less than 60 days.

Customizability: As it provides with both back-end and end-to-end solutions it makes iteasier to customize services for different customers.

Reduced costs: It‘s a money saving tool in multiple ways. Firstly, it involves less investment and resources .Secondly, it cuts down operations cost by making it more effective. Thirdly, it increases ROI by making processes efficient.

Compliance with the regulatory norms: Since the industry is expanding both in term of number of players and their customer sizes, complying with the regulatory norms of the central banks is not easy. Bank in a box helps the financial institutions to comply with the latest regulatory and statutory requirements.

Fintech in India In the banking sector, India is not an exception and is moving with the flow. But, what makes India different is particularly the size of the economy which is larger as compared other industrialized or emerging economies. Secondly, Indian banking industry including NBFCs and Fintech face much tougher regulations from its central bank and other government institutions. Though, some of these regulations have been relaxed particularly for NBFCs and fintechs.

After demonetization, cashless transactions have increased exponentially calling for more fintech startups and more technological sophistication for the established banks.

Consequently, India will see a surge in the adoption of Bank in a box for all kinds of financial institutions one can think of. For example, IDFC outsourced Bank in a box service from FSS solution, Shivalik Cooperative bank from FiS India.

2015 has seen dramatic changes in the banking industry because of Fintech revolutions. Whether its fintech startups, new bank entrants, startup NBFCs, nonfinancial services, incubators etc. This year too growth in the industry has been multi-dimensional.

Thus, it has become imperative for banks to collaborate with the fintech services to maintain their competitive edge.

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BLOCKCHAIN TECHNOLOGY FINTECH’S DISRUPTIVE INNOVATION TO GLOBAL BANKING

The Prime Minister of India Narendra Modi in an unscheduled live televised address at 20:15 IST on 8 November, 2016 declared that use of all Rs.500 and Rs.1,000 banknotes would be invalid after midnight of that day, and announced the issuance of new Rs.500 and Rs.2,000 banknotes. the demonetisation was a move aimed at counterfeiting of the current banknotes allegedly used for funding terrorism, as well as a crackdown on black money in the country. The catastrophic event, transpired to a significant rise in the use of third – party payment portals all across the Nation, and it was believed India was moving towards a long-term goal of cashless economy. PayTm became an overnight success. Indian Commerce would mainly be based on the Internet until the ‗Cash – Crunch‘ was eased, this meant relying almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud f

- Jeet PC

is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party. For the first time in India there was a need of an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

The solution to all these problems, has been out there for the past 5 years but never before there has been a genuine need to look at it as a substitute to third – party payments. The solution is named ‗BLOCKCHAIN ‗. It is not a methodology but a technology and that makes it more vital, since there are numerous possibilities associated with technology. A blockchain is a public ledger of all bitcoin transactions that have ever been executed. A block is the ―current‖ part of a blockchain which records some or all of the recent transactions, and once completed, goes into the blockchain as permanent database. Each time a block gets completed, a new block is generated. Blocks are linked to each other (like a chain) in proper linear, chronological order with every block containing a hash of the previous block. To use conventional banking as an analogy, the blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a gew 6

blockchain just the way bank transactions are.

Meanwhile, blocks, are like individual bank statements. The full copy of the blockchain has records of every bitcoin transaction ever executed. It can thus provide insight about facts like how much value belonged to a particular address at any point in the past.

Some developers have begun looking at the creation of other different blockchains as they do not believe on depending on a single blockchain.

Parallel blockchains and sidechains allow for trade-offs and improved scalability using alternative, completely independent blockchains, thus, allowing for more innovation. In simple terms consider blockchain technology like Google Sheets, you record every change in a shared spreadsheet, allowing transactions to be verified against the record at any time.

From a financial industry perspective blockchain promises a massive disruption to the world of back office systems and ledgers.

The enthusiasm in the banks is palpable; the technology offers a potential to eliminate as much as $20 billion of costs from the financial sector. Fintech saw this huge potential in blockchain, in its developing stages. Fintech start-ups for long has been attacking narrow areas of finance and are trying to replace core bank functions like credit and payments with new capabilities but fintech is a diverse population without one company being pointed to as a game-changer.

That prompts the question: Where is the Uber of banking? This a question regularly asked in the innovators world of finance as Uber is the ultimate new technology unicorn. The key to answering this question is thinking about the business model of Uber, Airbnb, Facebook and the like. All of these firms are engaged in what is call infomediation: taking a fergergtrfgr

marketplace of people who have something and, through software and servers, connecting them with the people who need something.

The software and server becomes the intermediary for information which, in the world of the valueweb, is shortened to an infomediary. The reason for all of this excitement by Fintech for the blockchain technology is because it allows the exchange of value peer-to-peer globally, in real time, for almost free, in a trusted and secure mechanism. The blockchain allows the financial system to deliver the processing engine for value exchange. The blockchain is not the engine. It's the technology. It is the Uber of the valueweb, or rather, the infomediation tool between those who have value and those who need it.

Currently only a very small proportion of global GDP (around 0.025%, or $20 billion) is held in the blockchain, according to a survey by the World Economic Forum‘s Global Agenda Council but Number of FinTech startups using blockchain platforms to power digital currencies, expand transaction security, and decentralize markets has exploded in the last few years. Germany particularly its upcoming fintech hub, Berlin is continuing to make waves in this industry.

With a steadfast approach to blockchain technology that could transform the financial sector within the country, Germans seem to be optimistic when it comes to the future of the er 7

nascent fintech industry. At a recent IMF/World Bank conference hosted by the U.S. Federal Reserve, an estimated 90 central banks, including the Bank of Canada, came forward to talk about their research into and experiments with distributed ledger technology (DLT), the blockchain and digital currencies. The big Canadian banks are also members of the R3 Consortium, which is working with 50 member banks worldwide, developing a fool proof methodology and standard for blockchain technologies for banks. blockchain has got the attention of financial world was most palpable at the recently concluded Sibos Market Infrastructure Forum in Singapore. While many in the market are looking at blockchain as a long game, a recent report by Wedbush Securities estimated that 20 per cent of US GDP, which comes to roughly $3.6 trillion, is generated by industries that could be disrupted by blockchain technology. A further indicator of blockchain‘s growing popularity is that Deloitte is studying blockchain systems for auditing, reconciliation and other functions. It has partnered with an Australian digital currency trade group to develop new accounting guidelines. Banks are not the only businesses that are looking at blockchain with enhanced interest. The technology and its resultant benefits have piqued the interest of people on Nasdaq and Wall Street also. To that end, Chain – a start-up funded by Citi Ventures, Visa and Nasdaq – is working on a product that will allow trading of stocks in private companies, like tech start-ups, on a new kind of blockchain. It aims to replace paper share certificates and reduce substantially the time which is spent managing the certificate process.

Two of the largest multinational professional fr

consultancy firms, Ernst & Young (EY) and Accenture, believe blockchain technology is at the forefront of innovation and mass adoption. Both EY and Accenture are hosting two separate accelerator-focused events on bolstering fintech and distributed ledger protocols, but Whether blockchain is a tyrannical technology that stifles individual thought. A report from PwC claims that 83 percent of financial services companies believe specific aspects of their businesses are at risk to various fintech start-ups, with the number of worried management-level professionals reaching 95 percent in the banking sector. While traditional financial services companies believe fintech start-ups could take hold of 23 percent of their business, the fintech companies see the possibility of taking as much as 33 percent of the business from the legacy financial system.

According to the PwC report, banking and payments companies feel the largest amount of pressure from the fintech industry. Fund transfer and payment companies believe they could lose as much as 28 percent of their business to fintech start-ups over the next five years, while bankers see themselves losing 24 percent of their business. the banking and payments sectors also appear to be the most knowledgeable among the respondents when it comes to the potential of blockchain technology. The fund transfer and payments industry held the highest level of confidence in their understanding of the blockchain, with 30 percent of respondents claiming to be very familiar with the technology. Sixty percent of respondents from the banking sector said they were at least moderately familiar with the technology.

A technological arms race seems to be underway between banks – currently every ferdf 8

large bank is considering the adoption of the technology. Rival blockchain technologies undermine the technology‘s core attribute i.e. system interoperability, a key to unlocking the colossal opportunity for trade, payments and settlement reconciliation to be automated securely across extensive networks without a need for centralised authority. Blockchain as a commercially viable technology remains on an unclear path. There are still questions looming around security, key management, data privacy, anti-money laundering and reporting. Given that to date most banks have been focused on PoCs, these topics have not fe

taken centre stage but as we move out of the lab toward production they are areas that need to be fully understood by a banks CIO, CTO, head of compliance, internal audit and others from both inside and outside the bank. It is difficult to say where it is going and whether the technology will realise its full potential.

However, there is no doubt it is a technology in which the financial sector needs to be a willing and long-term participant if a blockchain solution is ever to make it to fruition.

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FINTECH FINTECH IN INDIA

Fintech In India The buzz around fintech has gained substantial attention of traditional financial institutions, startups, venture capitalists and regulators. Fintech became one of the hottest sectors in India last year, attracting over US$1.2 billion in funding. It saw the emergence of numerous fintech start-ups, incubators and investments from public and private investors. This year, Indian fintech startups have continued to attract VC interest, even though we haven‘t seen a mega deal like the US$890 million invested in Alibababacked mobile wallet Paytm. Demonetization is an added bonus.

Fintech may be defined as technology-based businesses that compete against, enable and/or collaborate with financial institutions.

The future of fintech in India: Trends to watch with the right combination of incentives, policies and regulations

Consolidation in wallets: A number of the acquisitions have happened in the mobile wallet and online payments space. The buyers are mainly ecommerce and consumer internet companies that want to improve their payment system in an integrated way instead of relying only on external providers of payment services.

New models for lending: Traditional banks have left a lot of holes in lending, especially for small businesses and entrepreneurs who often don‘t have the collateral or credentials to get loans from banks. Banks haven‘t kept fwre

- Dixita Reddy

up with the widening circle of needs for individual consumers either. Fintech startups with new models of lending are bridging these holes.

For instance, while traditional banks (around 100) and NBFCs (around 1100) in India use technology to simply calculate credit scores, fintech ventures use machine learning algorithms and alternative data points such as social media footprints, call records, shopping histories, and payments to utility service providers to increase efficiency and provide greater access to credit.

The turnaround time(1- 10 min compared to 28.5 days for banks) is also much faster for the approval and disbursal of loans by fintech firms despite several banks (State Bank of India, ICICI, HDFC, and Axis bank) digitizing and speeding up these processes markedly The easing of regulations by the RBI is also helping. P2P (Peer to peer) lending, loans for buying things, and new data-driven credit profiling are among the emerging trends.

P2P lending allows online services to directly match lenders with borrowers who may be individuals or businesses. Examples are Lendbox, Faircent, i2iFunding, Shiksha Financial, GyanDhan, and MarketFinance.

Mobile Payments: It‘s no surprise that startups solving problems in mobile payments are in demand in the world‘s fastest growing smart phone market. New government-led infrastructure for identity verification through f 10

Aadhaar and the unified payments interface (UPI) for easier inter-bank money transfer is driving innovations in this space. For example, PhonePe, which got acquired by Flipkart, is a UPI-based payment app. The removal of surcharges on electronic transactions, tax benefits for consumers and businesses using e-payments, and changes in authentication requirements are other examples of the government‘s efforts to encourage the growth of a fintech ecosystem in India.

India bought a record 35 million smart phones in the last quarter, and less than 20 percent of the 1.3 billion population own smart phones.

Put those two data points together and you can see that the smart phone boom and mobile payment innovations will only accelerate in 2017.

Companies allow both private individuals and businesses to accept payments over the web and on mobile without needing merchant accounts. Transfers are made directly to the bank account linked to the payee in order to secure against fraud. Examples are Mobikwik, Paytm, and Oxigen Wallet.

Remittance Services: A few startup ventures, albeit registered abroad, are trying to address the gaps in remittance transactions (both inbound and outbound) as the current process is cumber some and expensive. These startups aim to disrupt the current monopoly held by firms like Western Union and MoneyGram.

Examples are Instarem, FX, and Remitly.

Personal Finance or Retail Investment Services: Fintech companies are also growing around the need to provide customized financial information and services to individuals, that is, how to save, manage, and invest one‘s personal finances based on one‘s specific needs. Such companies are called ‗Robo advisors‘. It is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners Examples are FundsIndia.com, Scripbox, PolicyBazaar, and BankBazaar Miscellaneous Software Services: Companies are offering a range of cloud computing and technology solutions, which improve access to financial products and in turn increase efficiency in day to day business operations.

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The scope of fintech is rapidly diversifying at both macro and micro levels, from providing online accounting software to creating specialized digital platforms connecting buyers and sellers in specific industries.

Equity Funding Services: This includes crowd funding platforms that enable the funding of a project or business venture by raising funds from a large number of people.

Such internet-mediated platforms are gaining popularity across the world as access to venture capital is often difficult to secure.

These services are particularly targeted at the early stage of a businesses‘ operation.

Examples include: Ketto, Wishberry, and Start51.

demonetization. The Indian fintech software market is forecasted to touch USD 2.4 billion by 2020 from a current USD 1.2 billion01, as per NASSCOM The transaction value for the Indian fintech sector is estimated to be approximately USD 33 billion in 2016 and is forecasted to reach USD 73 billion in 2020 growing at a five-year CAGR of 22 per cent as per KPMG report.

Cryptocurrency: India being a more conservative market where cash transactions still dominate, usage of digital financial currency such as ‗bitcoin‘ has not seen much traction when compared to international markets. There are, however, a few bitcoin exchange startups present in India – Unocoin, Coinsecure and Zebpay.

The State of Fintech In India The traditionally cash-driven Indian economy has responded well to the fintech opportunity, primarily triggered by a surge in e-commerce, and smart phone penetration and the move of 12

FINTECH INFRASTRUCTURE FINTECH ECOSYSTEM

We‘ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. None of the firms are immune from the coming disruption and each one of the must need to build a strategy to utilise the powerful advantages of the new financial technology ―FINTECH‖ revolution.

What is FinTech? ―FinTech‖ is a phrase increasingly gaining popularity in media and technology circles, also known as Financial Technology. It is an area that is going to bring radical changes to our society and the way we do business professionally.

In broader sense, it is an economic industry comprising several companies which uses technology to make financial services more efficient and easier to reach. These companies are generally start-ups, founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. These innovators are using tech tools to achieve seamless and innovative financial services for banked as well as unbanked population.

Why FinTech matters to Business World?

From mobile payments to crowd sourcing, transferring money across the border, it has never been this easier along with the number of choices available.

Fintech firms can pass on huge savings as rerd

- Antra Bharti

they are far more nimble than traditional banks, not having the same overheads and commitment banks are blessed or burdened with. Their relative lack of size also allows them to innovate and adapt in a way bigger corporations can only dream of, enabling entrepreneurs to operate and expand at relatively low cost.

What is FinTech Ecosystem?

FinTech ecosystem is a collaborative network which is critical to fostering the kind of technological innovation necessary to make financial markets and systems more efficient.

It comprise of different partners like financial institutions, universities, research institutions, government agencies, technology experts, industry consultants and association, working together to create a highly integrated ecosystem that would bring expertise, technology, experience and facilities of all the entities together.

Success of any FinTech hub depends entirely on its ecosystem, as it is responsible for attracting the talented pool from various segments and become the locus of creative thinking and business activity.

Participants in FinTech Ecosystem It is imperative that each participants should clearly understand its role as well as the benefits it is tend to achieve from the involvement and hence leading to proper functioning. As one‘s efforts help further another‘s. Companies generally see what the new offerings are and tend to make similar fee 13

adjustments to their product offerings.

Every country has developed its own FinTech ecosystem revolving around common pillars.

Eg. Innovate Finance‘s CEO, Lawrence Wintermeyer outlined why exactly ―London has the blueprint for the best FinTech ecosystem in the world.‖ London has the world‘s largest financial services sector, supported by a neighbouring booming tech sector. The combination of these two neighbouring thriving sectors is something which distinguishes London from the likes of Silicon Valley or Wall Street. We have a unique environment for investment as a result of tax break incentives such as the SEIS that allow investors to invest £100,000 in a start up with a 50% tax break. We have a diverse ecosystem, with hipsters, tech start-ups, capitalists and large financial institutions broadly participating and collaborating in the same space. This is backed by emerging financial hubs across the country, which Innovate Finance is aiming to connect to ensure that we are supporting FinTech innovations on a regional scale.

Above example reflects that to make an ecosystem successful all the participants must be effective.

Government: Governments must implement and enforce policies and a regulatory environment that will ease the development of the FinTech ecosystem. Doing so encourages entrepreneurial activity and hiring by financial services and technology firms. It also improves the country‘s overall competitiveness.

In India, government is working along with regulators such as RBI and SEBI to move the fe

country towards cashless digital economy and emerge as strong FinTech ecosystem.

Different approaches taken by government are: Funding support: Start-up India initiative launched by government provides US$ 1.5 billion funds for start-ups. Hence encouraging them to implement the innovative ideas.

Tax and Surcharge: Tax rebates are provided to merchants accepting more than 50% of the payment digitally. Also there is 80% rebate on the patent costs for the start-ups.

Government is also trying to support by adding necessary infrastructural and IP facilitation support.

Investors: A recent report found that the global investment in this sector has skyrocketed from US$ 930 million in 2008 to over US $12 billion by the beginning of 2015.

It is also estimated that the sector might boom as a US$ 45 billion by 2020, growing at a compounded annual rate of 7.1 percent.

Investors are coming forward and their interests are beginning to manifest itself in different sub- segments such as investing, lending, wealth management, credit reporting etc.

Goldman Sachs, Tiger Global Management, RRE Ventures, August Capitals are few companies which lists in top 10 FinTech investors. These top 10 FinTech investors are responsible for nearly US $5 billion of the total investment in 2014.Also 9 of them are based in United State since London, Singapore, and Hong Kong are arguably equally strong global financial poles as New York.

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Start-ups: Start –ups plays a vital role in setup of successful FinTech ecosystem, as they redesign the financial service process with their innovative and high end technological expertise, but that does not mean the incumbent ―old guard‖ is excluded.

Many long-established financial services companies are differentiating their services through FinTech, they are also changing their business as per the demand. Hence, there is a greater collaboration being observe and expected between different players of the ecosystem with the start-ups.

The total capital invested in Fintech start-ups rose from US $1.8bn in 2010 to US $22.3bn in 2015. The trend makes cities like New York and especially London extremely important on the world's start up map.

Users: The booming FinTech industry is capturing traditional market share by offering customers easy-to-use and compelling products and services.

A Survey conducted by EY shows that 15.5% of digitally active consumers have used at least two FinTech products within the last six months. As awareness of the available products and services increases, adoption rates could double within the year.

Hong Kong has the highest rate of FinTech use of all markets surveyed (29.1%). The United States has the second-highest adoption rate (16.5%), followed by Singapore (14.7%), the United Kingdom (14.3%), Australia (13%) and Canada (8.2%).

Technology vendors: FinTech is all about innovation so-called disruptive start-ups which requires the use of upgraded technology.

Universities and Research institutions: For a successful and innovative ecosystem, the young minds should be fuelled up with entrepreneurial as well as technical knowledge.

Robo-advisers, Block chain technology, Crowdfunding and marketplace/peer-to-peer lending are the major areas where we can observe noticeable technological changes.

IIT ROORKEE has launched Global Entrepreneur Conclave to build entrepreneurial skills along with academic competence of technology in students.

Financial Institutions: Financial institutions, including global and local banks, private equity, and venture capital funds could contribute deep content and market expertise to the ecosystem. Also, many of these financial institutions can stimulate their own innovation by establishing partnerships with FinTech product firms. These partnerships can strengthen the competitive position of financial institutions,

Also we have seen Fintech courses and lectures started at different universities around the world. For example, MIT launched a graduate course on Fintech, Wharton launched a series of Fintech lectures, Hong Kong University launched a Fintech course.

Example, SBI has teamed up with Ezetap to provide mobile POS devices across India.

Fintech has only just got started

The rise of FinTech has opened the world of possibilities and the financial world is ripe for disruption.

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GOING CASHLESS NEXT GENERATION PAYMENT

What is Fintech The term Fintech meaning financial technology, relates an emerging financial services sector in the 21st century.

Users of fintech can be divided in to four major categories 1) B2B for banks 2) Business clients 3) B2C for small businesses 4) Consumers The payment industry today is in a state of drift with major technological, economic and demographic factors cutting across the length and breadth of value chain and hence making it more fragmented. Growth in the digital payments, entry of non traditional players and proliferation of immediate Payments has made banks to think beyond their traditional approach and collaborate with fintech players in the payments space. With increased growth in e-commerce industry and penetration of mobiles the retail and consumer payments are ahead in adoption of innovative payment capabilities. Survey says that 46 percent of Indian fintech are focused on payments and trade processing. Initiatives such as UPI are expected to define future payments.

Trends in digital payments Contactless payments- This method of payment uses RFID or near field communication technology to provide consumers a fast, secure and convenient way to pay. And it helps to reduce queuing and to improve in-store payment experience. Also a significant reduction in the use of cash can be seen. It also paves the way to multivretetrgrg

- Srujana Naik

application, as the same device can also be used for transit or access control.

Payment hubs- Also known as enterprise payments architecture, it is an IT system that allows financial institutions to build their own version of payment architecture. Usually all financial institutions rely on transaction processing systems that are dedicated to specific types of payments like credit cards, electronic fund transfer etc. and are expensive to maintain with difficult integration. But hubs are web enabled technology that is in between payments processing platforms and the front end access channels making it more efficient and comparatively cheaper.

Cashless societies-With the smart phone boom and falling data prices have led to a gush in digital payments. Countries like Sweden Norway and Denmark are in the process of becoming cashless societies by adopting no cash models and this has been possible as countries are adopting Fintech revolution.

Real time payments- With real time payments financial institutions, merchants, consumers and society is being benefitted by offering enhanced visibility into payments, cash management and by helping businesses to manage the daily operations by improving liquidity. It provides businesses with the opportunity to win, serve, and retain their customers through more efficient, secure and engaging commerce experiences.

Increased Penetration of virtual currencyThe next disruptive force to hit payments, grew 16

banking, financial institutions, retail and other industries is virtual payment system. Bitcoin is the leading virtual currency which uses side-chain technology, a new block chain technology which helps in mitigating risks associated with the decentralized virtual currency ecosystem.

Omni channel offerings-By integrating retail channels, with social media, online and mobile channels Retailer can create value. 80 percent of Smartphone shoppers use their mobile-in store to help with shopping, More than 50 percent of purchases are now influenced by digital information and 39 percent of retailers use in-store signage to convert customers to digital. Customers experience seamless transaction across channels because of digital payments.

Rise of marketplace banks- Challenger banks are being supported across geographies and given licenses to operate freely. E.g. Rise of ATOM and Tandem in UK. Standardization- payment processes can be made at lower cost and can be better integrated in the digital value chain. Some key examples are T2S, a single pan European settlement infrastructure for creating settlement efficiencies and an international payments framework between the U.S. and Europe.

Digital India India is now in the process of being digital behemoth. With the increase in Smartphone usage and easy internet access consumers stay constantly connected Indian government is keen on adapting to the Cashless Bharat vision and has taken noteworthy steps to achieve the goal.

Launch of Unified Payment Interface (UPI). It is an open architecture system, wherein any service provider connected to UPI will be able to provide payment and payment management solutions to users registered on UPI. The platform includes peer-peer payments, person-merchant payments and B2B payments. And the users don‘t need to remember the bank IFSC codes etc, only UPID is necessary. Furthermore, this facilitates transactions with more security and authentication.

Launch of Bharat Bill Payment System (BBPS)- Bill payments contribute to one of the major components of retail payment transactions. Existing system don‘t cater to the needs of the consumers due to lack of interoperability and access to electronic payments. BBPS is an integrated bill payment system that is interoperable, accessible and cost effective.

Adhar makes KYC easy- As Adhar card is the national identity instrument, it made KYC process easy by linking customer‘s mobile number to Adhar account. And hence, Jan Dhan initiative experienced a positive response by more than 270 million accounts being created.

In summary, the payment industry has seen several developments and is undergoing transformation. The competitive digital payments in India as of now are occupied with telecos, banks wallet companies and payment banks. But with the right policy framework and infrastructure from government and business a conducive and sustainable business environment can be provided for payment services in the coming years and India can also be one among the cashless societies.

17

NEW FINANCING FORUMS P2P LENDING

– Gagan Kapoor

Distributed loaning, at times truncated P2P loaning, is the act of loaning cash to people or organizations through online administrations that match banks specifically with borrowers.

Since the shared loaning organizations offering these administrations work completely on the web, they can keep running with lower overhead and give the administration more efficiently than conventional money related foundations.

Accordingly, loan specialists frequently acquire higher returns contrasted with funds and venture items offered by banks, while borrowers can obtain cash at lower financing costs, even after the P2P loaning organization has taken a charge for giving the matchproduction stage and credit checking the borrower.

reshaping the purchaser credit industry by reclassifying the loaning standards. At first the idea which began with people has extended its range to incorporate littler SMEs, retailers and many others.

Otherwise called crowdlending, many shared credits are unsecured individual advances, however a portion of the biggest sums are loaned to organizations. Secured credits are now and then offered by utilizing extravagance resources, for example, adornments, watches, vintage autos, compelling artwork, structures, air ship and different business resources as insurance.

They are made to an individual, organization or philanthropy. Different types of shared loaning incorporate understudy credits, business and land advances, payday advances, and additionally secured business advances, renting, and factoring.

Socially-cognizant venture: For speculators intrigued by socially cognizant contributing, shared loaning offers the likelihood of supporting the endeavors of people to break free from high-rate obligation

P2P loaning is changing consumer loaning by transforming the gauges.

Global P2P rergfeg56y

banks

are

fundamentally

The global market for P2P lending is expected to grow at a CAGR of 60 per cent to USD 1 trillion by 2025 from USD 9 billion in 2014, with the U.S., the U.K., Australia and China being the largest P2P lending markets.

Focal points and feedback Financing costs : One of the fundamental favorable circumstances of individual toindividual loaning for borrowers can some of the time be preferred rates over conventional bank rates can offer.

Credit hazard: Distributed loaning additionally pulls in borrowers who, as a result of their credit status or the deficiency in that department, are inadequate for conventional bank advances.

Driving tech venture movement The U.K. elective loaning business sector is developing by many overlays every year. In 2015, UK's option back area developed by 84% and created USD 4.7 billion turnover.

The little and medium ventures fragment were the most noteworthy clients of the stage.

18

Developing regulation of the division is one of the key achievement elements of the market in the U.K. This is on the grounds that, as the market is progressively going standard contrasted with the past 'option fund' angle, the requirement for institutional cash is likewise getting to be distinctly fundamental.

The key main thrust for the banks will be to influence the mastery of the P2P loan specialists and make a win-win show for both.

Conventional banks need to outfit mastery of P2P moneylenders in zones including - credit chance evaluation, client encounter, operational efficiencies, shorter distributions cycles and accomplishing ease models.

India overview

In India, the P2P banks exhaustively focus their portfolio under the arrangements of scaled down scale support, buyer credits and business progresses. For example, 30% of Faircent's credits are taken by littler scale and SME divisions, boutique firms and mother and pop stores. The rest are taken by individuals for private purposes, for instance, weddings, remedial and home.

A segment of the other driving P2P moneylenders in India are i2ifunding, Loanmeet, i-credit, Lenden Club, Milaap, MicroGraam, InstaPaisa and Vote4Cash.

The advancement capacity of the market in India is monster as there are around 57.7 million privately owned businesses in the country.

At present, without a regulatory framework, Indian P2P new organizations are selected under the Companies Act and submit to The Negotiable Instruments Act. RBI starting late released an examination paper on P2P advancing arrangement of activity where associations ought to be selected as an extraordinary class NBFC11 and talked around six prime areas including permitted development, reporting, prudential and organization requirements, business congruity orchestrating and customer interface, in like manner giving an approach to manage abbreviate the risk here. The contemplation is to bring the P2P advancing stages inside the degree of NBFC organization.

Pushing ahead, we assume that development joining is most likely going to make P2P crediting more secure and speedier. UPI and blockchain are two noteworthy development insurrections that are foreseen to positively influence the expansion of P2P crediting business in India. The organization of India needs to address certain key districts for P2P credit pros, for instance, on capital structure, essential of hold for bank protection, system of trade of money and establishment needs and guaranteeing that objective of at an early stage bearings is to control the wild practices instead of acting limits for fintech allocation in the country P2P advancing can get the opportunity to be particularly tricky in nature; subsequently, the P2P organize rules should not ensure outstanding returns to moneylenders.

19

THE RATIONAL CONSULTANT ROBO ADVISORY

Gone are the days where we were required to meet clients‘ day to day to understand their goal, lifestyle, and level of risk tolerance in order to provide them effective financial advice and plans to meet their financial objectives. As things in every sector are getting automated, why leave financial sector behind. Now, very less human intervention is required to advice you on your next financial investment. This is all because of Robo Advisory.

So, what exactly is Robo Advisory?

A robo-advisor is an automated advisory system that provides financial advice, helps in portfolio management and also helps you buy some financial products with minimal human interventions.

How it works?

Being an online financial advisory firm, it requires a lot of critical set of data and information. Primarily it uses automation and algorithms to offer investment advice.

Generally, one has to fill out an online form in the robo-advisors‘ portal. There is a set of questionnaire given asking about one‘s basic information, investment goals and his or hers‘ comfort with risk. Goals can be either short term or long term in nature. The users are also categorized into various categories based on the parameter such as age, time horizon, quantum of investment (lumpsum or systematic), nature of household and of course risk appetite. The algorithm of the platform tells you the amount you must invest and into what categories of fund. Based on efde

- Debanjan Paul

your risk profile, there may be smaller subdivision such as blend of large, mid and small cap mutual funds.

On an ongoing basis, you can view portfolio online, get alerts on performance, monitor and change investments. You can also keep a tab on portfolio‘s performance.

your fund your your

What are its various models?

Robo advisory firms in India offer various services. Some operate in an advisory model and charges advisory fees. You can also invest in mutual funds through the platform for which convenience fees are being charged for facilitating the transactions.

The second category of firm operates on distribution model which is quite similar to traditional advisors. They advise investment on particular funds and assets and this is done free on this platform. This platform, in turn, earns a commission from the mutual fund house. FundsIndia.com is the prime example of a robo advisory which works on distribution model.

Finally, there is a platform that have a mixed model. They charge you for the advice in case you opt to transact on your own. An example of this model is Arthayantra, which charges an annual fee of Rs 1,000 for any financial advice, and you are free to buy the units directly from the fund house. However, if you choose to make the investment through its platform, the service fee will be waived off and they will offer you free advice.

20

What is the cost?

Many of the platforms are currently free, however, this is going to change in long run.

Some of the platform lets you sign up for free, however, for a more detailed report, you need to pay a fee.

Typically, platforms that works on advisory model charge an annual fee. This covers one time advice, ongoing portfolio alerts, analysis and enabling transactions. Some of the examples of such firms working on advisory model are Wixifi, ORO Wealth, Bharosa Club etc. Consulting with human advisors, which is an added feature available with some firms, may be charged additionally. One can also maintain multiple account under a single family account.

Is it for all?

If you are a small investor or a beginner, finding a good advisor may be hard. Roboadvisory can help you get started and build a strong portfolio. But, if you are a seasoned investor, you may be better off choosing the fund yourself. There are certain limitations to this service as for instance you may not be able to talk with an advisor when you need to, suppose when the market is volatile. It will always lack the personal touch and the face to face reassurance that a human advisor will offer.

How different it is in India?

This automated financial advisor is kicking up action in India now, but they have been around in the US for a few years. There are three ways in which robo-advisory services offered in the US differs from the one in India.

The service is typically fully automated in the US, whereas, it requires a user here.

Further, Investor‘s money is invested in ETF‘s. In India ETFs are still in early stages and money under robo advisory.

Also, The fee structure in US is based on assets under management. It is either free or a flat fee that is charged annually.

There are other differences as well and a shift is required to get users in India pay for advice or services when a commission free product is available online.

What is the future of Robo Advisors?

Love them or hate them, effective or ineffective, robo advisors are here to stay. It is fast becoming the preferred option for many investors. The aim of these platforms, in the near future, is to be a one-stop shop for all financial advice, offering insurance, loan and property, and services such as tax filing.

As per Bloomberg, out of USD 257 billion worth of assets in 2015, pure robo advisors are estimated to control roughly USD 50 billion worth of assets. The number is going to push much higher in the coming years. The scale of this shift is unprecedented and major banks including Morgan Stanley, Wells Fargo and Bank of America have already announced plans for robo investing platform which is likely going to drive fees down even with the battle of market share heats up. It is clear that old ways of consulting investors with high fees in return for a monthly and quarterly statements with no added value are gone.

Something which was completely out of reach a few years ago, is within our reach now.

21

MARKETWATCH THE UNKNOWN VARIABLES

The US Federal Reserve has increased the interest rate on Wednesday 14th December, 2016 by 25 basis points ranging Between 0.50% to 0.75%. It is the second hike reported since last December and yet two more hikes are expected to be announced in upcoming year by fed reserve. The federal open market committee (FOMC) said that ―inflation is expected to increase to up to 2% and forecast a steeper path for borrowing costs in 2017‖.

However, this fed rate hike will affect all the markets across the globe. The value of US dollar has boosted up to 14 year high where as commodities such as gold and oil fell down as all of these are negatively correlated to US dollar.

Even as the government is promoting incentives to enhance digital cash transfers and digitalisation scheme to make India a cashless economy. There was lesser than expected fall in consumer inflation indicating that it affected purchases less than expected.

Crude oil prices fell over 3 per cent due to a strong US dollar. OPEC pumped 33.87 million barrels per day (bpd) last month, according to figures it collects from secondary sources, up 150,000 bpd from October, OPEC said in a monthly report.

Oil is traded in dollars and it can hit crude demand making fuel purchases more expensive for other countries using different currencies at home. Other than the bearish impact from the U.S. interest rate hike .The oil prices were also dragged down by increasing output from the Organization of the Petroleum Exporting Countries (OPEC).

- Shreya Rani

Effects on commodities: • Weaker rupees and stronger dollar will negatively affect the yellow metal prices.

• Gold (99.9) was up 0.5 per cent at $1,134.18 an ounce by 0726 GMT. In its previous session gold hit its weakest since Feb, 2 per cent at $1,122.35 • Silver gained 1 per cent at $16.11 an ounce, after falling over 5 per cent on Thursday. It has fallen over 4 per cent so far this week.

• Platinum rose 1.2 per cent to $904.20, after dropping to the lowest since early February in the previous session.

• Palladium lost as much as 1.2 per cent to $692.35, on track to finish the week down over 5 per cent.

• As per the global financial services major the food prices has remained low past the first 10 days of this December and its increasingly likely that the RBI will meet its target of '5 percent by March' CPI. • As per the government data the index for primary articles declined nearly by 0.9% to 259.4 from 261.8 in the previous month.

The index readings for power and Fuel with weight of 15% rose up nearly by 2%.

Effects on forex markets: Rupees fell down by 40 paisa to Rs 67.83 against US dollar but Indian RBI is under pressure and are bind not to cut interest rates despites of the expectations of sharply lower inflation and surplus liquidity in banks because that may lead to flight of the capitals from the Indian market to US markets. It is expected that after a short ripples Indian fewrs 22

market will be stabilized. India will be in far better position than rest of the emerging market economies.

Effects on US markets: US labour market displays strong performance and an improved image of US economy.

Effects on crude oil prices: Crude Oil prices slashed down on as a hike in US interest rates dragged the money away from commodities and pushed into US bonds and the dollar but a tighter fuel market will be looming in 2017 due to planned production cuts led by the Russia and Organization of the Petroleum Exporting Countries (OPEC).

US West Texas Intermediate crude oil futures were trading at $50.87 per barrel at 0235 GMT and down by 17 cents from their last records .

International Brent crude oil futures are down by 7 cents at $53.83 a barrel.

Effect on equity markets: The Indian equity market has been very volatile over the last month due to the fefwffes

domestic factors as well as external factors.

November was a unexpected win for Donald Trump in the U.S. presidential elections which hiked the volatility in all the emerging markets. Adding to that the Indian market was exploded by the Modi government‘s demonetisation bomb which led to shriek decline in the weeks following all the events.

The equity market has now stabilised with FPIs returns only in the past few days.

Bharti Airtel went down the most in the Sensex group by almost 2.67 per cent followed by ONGC (2.30 per cent).

Aurobindo Pharma dropped 0.55 per cent.

Others such as ICICI Bank, NTPC, ITC, Hero MotoCorp, Tata Steel, Bajaj Auto, Wipro, Dr Reddy's, Coal India, Lupin, Adani Ports, GAIL, and Axis Bank too fell down and the infrastructure by (1 per cent). IT and Consumer durables went up by 0.82%.

Broader markets too lack lustre with smallcap by 0.25 per cent and mid-cap by 0.04 per cent lower indices. Cipla, TCS , Tata Motors and Infosys were few of the notable gainers of the market.

Effect on international markets European stocks went higher even after the ew 23

Federal Reserve raised the interest rates, the benchmarks like Stoxx Europe 600 index was up by 0.86 per cent, Germany‘s DAX rose by 1.08 per cent and France‘s CAC 40 was up by 1.05 per cent.

Hong Kong's Hang Seng fell down by 0.18 per cent. Japan's Nikkei surged 0.66 per cent and Shanghai Composite increased by 0.17 dwe

per cent. London's FTSE fell a little down by 0.05 per cent and France' Paris was down by 0.01 per cent.

The BSE Sensex 30-share plunged 231.94 points around 0.87 percent to 26515.24 and the NSE Nifty 50-share dropped 90.95 points or 1.10 percent to 8170.80 . (dated from 2016-12-09 to 2016-12-20)

24

START UP STATUS STRUGGLING INDIAN START-UP

A start up is an entrepreneurial venture which is newly started and aims to meet a marketplace need by developing or offering an innovative product or service. Usually it is a company of a small business, a partnership or an organization designed to rapidly develop scalable business model. These small companies generally are involved in deigning and implementation of innovative processes of development, validation and research for target markets. During the period of 20122015 the start up industry in India was at a boom. But this year every failure from firing to hiring is taking a sign of impending collapse.

Earlier this term was not that much trending but now this has come into limelight and many startups have come into existence, due to which all startups are struggling. Almost every start up is struggling for success. Most of the start- ups have failed to achieve potential success in online. Near around 90 percent of the startups fail in five years and rest of the start- ups die in next five years.

The life span of start ups in very less.

Today the main difficulty faced by every start up is raising funds at their preferred valuations. For example Snapdeal and Flipkart are struggling to raise funds at their preferred valuation there are n number of reasons due to which start ups fail. Some of them are- they may run out of cash, as cash is a basic necessity for any business to run but if the business won‘t have cash it may lead to their failure. Another reason for their struggle can be cost issues. Some of the start-ups reerdf

- Radhika Gupta

develop great but costly products which lead to underperformance in sales and revenue as compared to competitors. For a start up only idea is not sufficient. There has to be a monetization strategy from the very beginning. For a start up to be well established proper marketing is the essential criteria. Right audience should be targeted and right channel should be chosen to market.

Many start ups struggle because the timing for the launch of their product is not appropriate. Location plays a very important role in every business. If it is placed in an isolated place than people won‘t have much knowledge about the product that is prevailing in the market so location should be precise. What is not helping the cause is grassroots level corruption apart from startups self inflicted ethical mess. Many legal challenges also arise when a start up diversifies in different fields and markets and if a start up is not dynamic in nature it won‘t be able to sustain in the market.

Many start-ups even after having a good name are struggling. For example Fllipkart and Ola Flipkart a start up founded by Sachin Bansal and Binny Bansal in 2007 is going through its toughest part. Recently news flourished in the market that Flipkart is funding crunch, there is devaluation by investors. Entrepreneurs and investors have started giving a thought that is online retailing an ideal Indian starts up or if it is fast becoming the perfect lesson of what not to do.

Flipkart is in the middle of a storm of its own 25

making. Flipkart had been one of the most successful Indian technology start-up on various parameters including fund raising, valuation and employment generation still it is facing many troubles. Flipkart made world‘s largest E-commerce deal in 2014. It raised $1.9 billion in three tranches. In May, 2014 it acquired fashion retailer Myntra for $300 million, at that time it was valued at $2 billion. In March Flipkart decided to raise its target to $10 billion but it could not achieve its target. In February 2016 the value of Flipkart was still at $5 billion. This year was not good for Flipkart as it faced many problems. There was instability in top management; devaluation twice in 2016 that means if Flipkart had to raise funds in this year it may force to go for a down round where investors had to purchase stocks at a valuation lower than during the earlier round.

A new government policy of e-commerce also made Flipkart to struggle. According to this policy the technology companies that acted as a facilitators between buyers and sellers are now not permitted to have more than 25% of their sales coming from one vendor. There were several other reasons because of which Flipkart is struggling.

Hyderabad with bumper to bumper traffic puts these drivers into tremendous amount of pressure and causes rage and makes them impatient. Drivers work so hard to complete their targets, often sleeping for fewer hours that cause fatigue. Another problem faced by this start up is excess customer demand due to which they are unable to manage their network of drivers leaving behind disgruntled customers who don't mind paying a little extra for better service.

These were just a few examples. Many start ups are facing almost same problems and this had made investors and entrepreneurs to think that they should invest in start-ups or not.

Another example of a struggling start up is OLA. A start up founded by Bhavish Aggarwal and Ankit Bhati on December 3, 2010. This company has a expanded network of more than 200,000 cars across 100 cities.

First it made a trial in Bangalore than post trial it expanded to other cities like Delhi, Pune, Chennai, Hyderabad, and Kolkata, in 2015 it expanded it services to various other cities. In 2015 it was valued at $5 billion. But there were many challenges face by this company also. Driving in cities like Bangalore, Mumbai, Delhi, Chennai and verfd 26

INDUSTRY ANALYSIS AVIATION INDUSTRY

- Smriti Patodia

India‘s civil aviation industry is on high growth stage. It is the ninth-largest civil aviation industry in the world and aims to become the third largest aviation market by 2020. The market size of the industry is around US$16 billion. Indian civil industry being driven by various factors such as lowcost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity, is ushering into a new era of expansion.

The growth rate of civil aviation industry in the last 10 years is 13.8% Industry has attracted FDI of over US$ 569 million from April 2000 to February 2015. The Indian airports cater to 220.04 million passengers around the world and 4.63 million tonnes cargo per annum and handled 168.92 million passengers and 2.28 million tonnes cargo in 2013-14.

The expansion of aviation sector also brings along challenges relating to safety and prevention of terrorism. On 22nd march, 2016, world witnessed the horror of Brussels airport suicide bomb attack. Considering the population of India, such incident will be fatal for India. In this context, a report by the department relating to Parliamentary Standing Committee on TTC (Transport, Tourism and Culture) raised concerns by suggesting that 27 most functional and busiest airports in India should be protected by forces apart from Industrial Security Force (CISF).

Aviation Industry ewfwefefd

is

expecting

huge

investment as Brownfield and Greenfield airports would be required by 2020 by government. With encouraging private sectors to involve actively in the construction of the airports through different Public Private Partnership model, support of state in financing, tax holidays, concessional basis land allotment and other incentives.

With the announcement of GAGAN, (GPSaided geo-augmented navigation) the Indian SBAS (Satellite based augmentation system) in 2015, technological improvements have reached heights. Launch of GAGAN has made India the fourth country in the world to have satellite-based navigation system technology. It was developed for smooth and seamless transition of air traffic management across continents. It provides improved accuracy, availability and credibility to rely on GPS for all phases of flight routes.

However, most aircraft registered in India are not equipped to utilise the benefit of this technology. The issue assumes that significant airlines are not equipped with the required airborne equipment.

A Stakeholder Consultation has been planned on the subject on 21st December 2016 at 1500 hours in DGCA Conference Hall to plan implementation and address bottlenecks, if any. The consultation meeting is being organised by Flight Standards Directorate of DGCA. In the recent Union Budget 16-17, different proposals for Maintenance, Repair and Overhaul (MRO) operations for airplanes was issued by the government where exemption fsds 27

for custom and excise duty for tools and tools-kits used in MRO was included.

According to the new norms, foreign aircrafts brought into India for MRO works would be allowed to stay up to 6 months or as extended by aviation regulator Directorate General of Civil Aviation (DGCA). They will also be allowed to carry passenger at the start and end of its period of stay in India.

refundable, if cancelled added salt to injury for the industry and slammed a break on that too as these sales had shot up.

Market Size Domestic air passenger traffic which was 52.36 million during January-August 2016 rose by 23.15 percent to 64.47 million during the same period in 2016.

The total aircraft movement in July 2016 at all Indian airports stood at 168,400 being 14.3 percent higher than that of last year. Whereas the domestic traffic is estimated to cross 100 million passengers. It is the five fastest growing market globally with 275 million new passengers. The operating profit as projected by airlines is Rs. 8,100 crores in 2016.

Demonetization Effect On The Industry Demonetization was more like a bump for the aviation industry. It saw a drop of 7-10 per cent in the overall sales after the demonetization move. People are busy handling their high denomination currency rather than indulge in making vacation plans. ―Pehle cash thikane lagana hai. Travel is a discretionary thing which can wait till the other, bigger issues are sorted out,― said a senior airline official.

Decision of the government to make tickets purchased using 500-1000 rupee note nongerg

28

BANKING FOR ALL FINANCIAL INCLUSION

“It is the beginning of freedom from poverty.”

- Narendra Modi Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players According to KPMG report of Fintech June 2016, some of the factual figures of financial inclusion involves:

• 38% of the adults do not use any formal financial services and 73% of the poor people are unbanked.

• 9% of people in low- income countries use cell phones to receive money • 68% of the world‘s population growth will be in less developed countries over the next decade • 89% people in high- income countries have an account at a financial institution compared to 24% in low-income countries.

• 11% of people in low- income countries saved money at a financial institution.

• In India over 145 million households do not have access to banking services.

The challenges faced by Financial Institutions is to address the constraints of poor connectivity, no credit history, diverse profile of consumers and to scale up their operations in unbanked sectors. Steps and measures are being taken around the globe with a vision to achieve single digit financial exclusion.

- Sneha Tiberwal

Global Steps to increase Financial Inclusion: Looking at the global impact of financial inclusion over the world, United nation along with World Bank has come up with a commitment for creating ―Universal Financial Access‖ (UFA) by 2020. The aim is to cover 25 countries and target 75% of the financially excluded population. India and China have the largest share of unbanked people and together they account for some 32% of them.

The rest of the focus countries includes: Bangladesh, Brazil, Colombia, Cote d'Ivoire, DRC, Egypt, Ethiopia, Indonesia, Kenya, Mexico, Morocco, Mozambique, Myanmar, Nigeria, Pakistan, Peru, Philippines, Rwanda, South Africa, Vietnam, Tanzania, Turkey, and Zambia. The keywords UFA2020 focuses on are: • • • •

Introducing transaction accounts, Expanding access points, Improving financial literacy, and Driving scale and viability through highvolume government programs, such as social transfers, into transaction accounts.

• Strengthen public and private sector commitment, enabling legal and regulatory framework, and bolstering financial and information and communication technology infrastructure.

Importance of Financial Inclusion in India

The biggest challenge for policy makers in India is to penetrate the rural and semi-rural areas of the country. The main focus points are:

29

• The lower income category rural India are always living in duress. Creating a habit to save would help them to improve their financial state.

• Lack of information about credit avenues among the unbanked population.

• Direct money transfer to the actual needy section of the society for whom the subsidies are actually meant for.

Indian Government Initiatives: Of many initiatives by Indian government, the biggest is the Pradhan Mantri‘s Jan-Dhan Yojana — the Prime Minister‘s People‘s Wealth Program — it envisions bank accounts for all Indians. On 15th August 2014, Prime Minister Narendra Modi announced it as the national mission of financial inclusion. The program was formally launched on 28th August and on the very first day, 15 million accounts were added to various banks. In initial stage the program was not merely having an account in a public sector bank but also involved the following: • Every account holder got a RuPay debit card, launched by the RBI • Accidental insurance cover of one lakh.

• Life insurance cover of thirty thousand.

• An overdraft facility of five thousand.

As of now, the results are: 30

Steps taken by Reserve bank of India: RBI has taken several measure to facilitate financial inclusion in the country, few of them are: • Initiation of no-frills bank accounts.

• Eased know your customer (KYC) norms • Banking services reaches home through business correspondents.

• Use of technology - unified payment interface.

• Issuing of general purpose credit card.

• Adopting electronic benefits transfer.

• Given licenses to 10 entities to set up small financial banks.

With demonetization having both positive and negative impact on financial inclusion of the country, the long term goals can only be achieved significantly. With increase in usage of alternate payment system, and support of government and regulatory bodies, the penetration of financial services are expected to grow enormously.

31

PROTECTING ONLINE TRANSACTIONS EVOLUTION OF SECURITY SYSTEMS

Security is said to be a feeling of being safe , stable and free from any kind of fear, anxiety or danger. Security of someone and something precious to us have always been the priority to all of us as their security reduces the chance of losses. Especially in this era where everything is being more digitalized and talks of cyber crime is increasing with the days coming by. This has made it very important for us to keep our privacy under reliable security system. As the years pass by the methods used to secure themselves and their belongings like earlier lockers had lock and keys which changed to various code numbers and now it is the biometrics. Using biometrics has taken the security systems itself to a whole new level and breaking in on these system is very tough.

Biometrics system is a system where people need to be physically present in front of the machine to unlock it using that part of the body whose characteristics is put as the password. Earlier this system was been in use but only by handful of people but now you can see these biometric systems being widely used and being installed not only for security but also for many other purposes like attendance in institution and colleges. This system stores in critical information that is really valuable for the person and by using these biometric he can assured of the safety of those items. We can even see people have installed this system at the entrances of their houses or apartments in order to restrict any unknown person from entering.

Biometric is originated from a Greek words Bio (life) and ‗metric‘ (to measure).

- Utsav Changoiwala

What are Biometric systems?

Biometric security systems is a mechanism that captures an individual' s various physical characteristics like fingerprints, hand patterns ,texture, voice or facial recognition which remains unchanged throughout the lifetime of a person in order to authenticate and provide access based on the automatic and instant verification. These systems are installed at those places which require critical physical security in other words those places that are highly prone of identity threat. Basically this system requires people to store in the information on a person's physical information into the system which it verifies with whoever needs access to the place and if verified they are permitted to enter. Once it grants access it stores in accurate information of the person , timings of entry and exit, day of entry ,last visited etc and these information cannot be tampered easily. These information on the biological organism or set of biological organisms used for biometric analysis is called Biometric Data.

Evolution of Biometric systems: Biometric that is being currently related to computer and network security but the concept of it has been there from a long time even before the invention of machines. It has been first known to be practiced by a Chinese merchant way back in 14th century where people were made to put their palm prints on paper using ink. This method is being used on most of the important documents even today.

Later in 1890's an anthropologist named Alphonse Bertillion came up with a Biometric 32

system which was could convict criminals using the sizes of the skull, length of fingers, etc thinking that criminals can change their appearances but these characteristics will remain the same throughout their life, but later it was found to be an unsuccessful method as it was seen that many other people could also have the same size and length which could not be distinguishable. Finally it was Richard Edward Henry from Scotland who conceptualised the whole system in the technological form and from then it has been refined on its accuracy and identification to reach it current state.

Types of Biometric systems - DNA matching, Ear, Eyes-Iris and Eyes-Retina Recognition, Face Recognition, Fingerprint Recognition, Gait, Odour and others.

Boon to the Financial world It is the bankers and other financial institutions that were highly prone to cyber attacks as any one big attack on them has chances of its dissolution. With the upcoming of Internet banking and mobile banking the vulnerability of banks to these cyber attacks have increased which had been evidently seen with two major banks in US that faced a heavy Cyber breach which affected millions of its customers. Therefore in order to protect the interest of common people who use banks as their medium to save their lifelong saving it becomes necessity for banks to take up cyber security seriously, like JP Morgan Chase on understanding its importance and effects, it doubled its investment in cyber securities by paying USD 500 million. Many other banks have now decided to adopt biometric system into their operations for authentication purpose and many other have collaborated with prominent Fintech start-ups

for initializing voice and touch identifications for it mobile customers.

Globally many Fintech startups have started to focus on various areas of specialisation take the case of Behavox is working on various fraud detection and market abuse solutions for forensic and compliance officer, Crypta Labs has set in to revolutionize mobile security market with its Quantum Random Number Generator (QRNG) which uses the device's lens and light sensor to detect photo beams which help them in generating random numbers. Even in India where talent is hidden in every corner, Banks have started to organise various events like 'mobile hackathon' for people to come up and showcase their product on security and biometrics. One of the major bank have started the facility of voice recognition for their customer identification for faster banking transaction and they have synced people's aadhar card details for credit profiling. This whole process has become more safety and made faster loan approvals.

Facility of 'Smart Vault' is also made available where in locker facility in a secure lounge with biometric authentication.

Digitalization has come with a lot data being generated throughout which makes banks a lot more vulnerable if readily measures are not taken it will lead security breaches which will further lead to huge financial losses to the financial institutions. Adaptation of various cyber securities needs to be implemented as soon as possible to protect themselves from future cyber attacks. All of this is done to gain the confidence of customer in the banking system of the country.

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VRIDDHI RESEARCH JET AIRWAYS

- Manikantha Kosuri

Industry Analysis:

Growth Drivers:

• India‘s civil aviation industry is on a highgrowth trajectory. India aims to become the third-largest aviation market by 2020 and the largest by 2030.

• The Civil Aviation industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity.

• India is the ninth-largest civil aviation market in the world, with a market size of around US$ 16 billion. India is expected to become the third largest aviation market by 2020.

• During January-August 2016, domestic air passenger traffic rose 23.14 per cent to 64.47 million from 52.36 million during the same period in 2015. Passenger traffic during FY 2015-16 increased at a rate of 21.3 per cent to 85.57 million from 70.54 million in the FY 2014-15.

• In July 2016, total aircraft movements at all Indian airports stood at 168,400, which was 14.3 per cent higher than July 2015.

International aircraft movements increased by 8.2 per cent to 32,830 in July 2016 from 30,330 in July 2015. Domestic aircraft movements increased by 15.8 per cent to 135,570 in July 2016 from 117,050 in July 2015.

• Indian domestic air traffic is expected to cross 100 million passengers by FY2017 as per Centre for Asia Pacific Aviation (CAPA)

• Five international airports (Delhi, Mumbai, Cochin, Hyderabad, and Bengaluru) have been completed and are operational under Public Private Partnership (PPP) mode.

• Greenfield airport at Navi Mumbai, Mopa (Goa) and some brownfield airports of Airports Authority of India (AAI) and 50 airports under the no-frills model would be developed all over the country of which same would be executed under the PPP model.

• Indian aviation is experiencing dramatic growth which includes the emergence of Low Cost Carriers (LCC) / new carriers to a growing middle-class ready to travel by air as well as growth in business and leisure travel.

• Greater focus on infrastructure development; increasing liberalization – Open Sky Policy; AAI driving modernization of airports, Air and Navigation Systems.

• Growth in aviation is also increasing demand for MRO (maintenance, repair and overhaul) facilities.

• India is home to large scale collaborations/ Merger & Acquisitions (M&A) deals – Etihad Airways & Jet Airways, Tata Group & Singapore Airlines, Tata Group & AirAsia.

• India plans to increase the number of operational airports to 250 by the year 2020.

Sector Outlook:

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• The domestic airlines are likely to add 55 new aircraft during FY2017 as against 33 added during FY2016. The addition of aircraft in the fleet, coupled with improved network planning and operational efficiencies, are likely to boost overall industry capacity, with the industry ASKMs expected to report strong double digit growth during FY2017. Considering this capacity addition, it is expected that passenger growth to continue to remain robust at 20-25% in FY2017, even if the PLFs are maintained at the current levels.

• Currently, the airlines are providing deep discounts, by utilizing the buffer provided by lower fuel prices, and maintaining healthy PLFs. The current scenario of comparatively steady yields and lower costs has given rise to some improvement in revenue per available seat kilometer (RASK)-cost per available seat kilometer (CASK) spread. Despite the benefits of low fuel price, which is unlikely to change anytime soon, it is believed that sustainable improvement in the cost structures and the underlying demand, backed by recovery in business and tourism, remain critical points for long term sustainability of domestic airlines.

• With rising competition, a strategy revisit by the airlines is necessary to maintain market position, possibly by offering differentiated services, better connectivity and competitive pricing.

• Overall, the prospects of the Indian aviation industry in medium term are largely dependent on the movement in crude oil prices and exchange rate, in addition to reforms. However, underpinned by the improving operating performance, the balance sheets of Indian carriers are expected to improve in FY2017.

Company Analysis: Jet Airways, which commenced operations on May 5, 1993, is a full service airline with one of the youngest fleets in the world, operates a network that includes flights to 76 destinations spanning the length and breadth of India and destinations in Europe, North America (USA & Canada), the Middle East and Asia.

The airline flies to 63 destinations spanning the length and breadth of India and beyond, including New York (both JFK and Newark), Toronto, Brussels, London (Heathrow), Hong Kong, Singapore, Kuala Lumpur, Colombo, Bangkok, Kathmandu, Dhaka, Kuwait, Bahrain, Muscat, Doha, Riyadh, Jeddah, Abu Dhabi and Dubai.

The company‘s primary hub and maintenance base is at Mumbai, whereas Delhi, Kolkata, Chennai, Pune, Bengaluru and Brussels are its secondary hubs.

Jet Airways operates flights to 20 international destinations, offering a better choice in the skies. The airline‘s service class comprises Première–business branded for domestic sectors and First Class, Première– ertf34 35

business class branded for international sectors In 2013 Jet Airways entered a Strategic Alliance with Etihad Airways, a transaction for the subscription of 24 per cent minority equity stake in Jet Airways.

Etihad Airways and Jet Airways will combine their network of 130 destinations, with Jet Airways establishing a Gulf gateway in Abu Dhabi and expanding its reach through Etihad Airways‘ growing global network.

Fundamental Analysis: 1.) Low fuel costs keeps the margins of the company upbeat. Keeping the average pricing of oil for FY17 at $59, the performance of the company looks good. Average ATF prices during FY17 remained around Rs.42000/kl 2.) During FY11-16, the international segment has outpaced the domestic segment with revenue CAGR of 9.7% vs. domestic segment (Jet + Jet Lite) revenue CAGR of 5.4% in FY11-16. The revenue share of the international segment as of FY17 was at 55%.

3.) International presence to strengthen further over with 60% in next few years with Etihad coming on board with 24% stake.

4.) Given the healthy macro factors for aviation like passenger traffic growth coupled with lower ATF prices, it is expected to report healthy revenue growth along with margins.

5.) Although domestic traffic growth has moderated during FY11-16, international passenger traffic has grown at a CAGR of 9.7% during the same period due to better margins and healthy demand along with benefit of strategic code share agreement with Etihad Airways.

Technical Analysis as on 16/12/2016

With the 14 day EMA having crossed 28 day EMA from above in August, the stock is seeing a downtrend right now. The Bollinger bands are showing a consolidation phase at present. With the RSI near 30, the stock is oversold and no volume to support an uptrend, we can expect the price to be stable for the near future. With the stock near its 52 week low, it is the right time to buy the stock.

The Verdict: Given the healthy macro factors for aviation like passenger traffic growth (up over 23% YoY) coupled with lower ATF prices (24% of revenues), we expect the company to report healthy revenue growth along with better margins during the period FY16-17. Hence, we remain positive on the company and maintain our target price of Rs.510/share (i.e.

7x for EV/Sales) with BUY rating on the stock.

Buying Price: 360 Target Price: 510 Target Period: 12-15 months Profit %age: 41.66%

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