Good Morning Toasters!

Hiii friends!! Air passengers are expected to reach 83% of pre-pandemic levels this year, with the IATA expecting the industry to return to profit by 2023, based on current consumption trends. 1700 out of the top 2000 listed stocks closed in red, however, Nifty50 was green 🤭

In today’s issue, we cover RBI’s vision document on Payments which aims to make a meaningful reduction in cash circulation as a % of GDP. Created on the 4Es, E-Payment, Everyone, Everywhere and Every Time, the RBI is geared towards expanding the digital ecosystem.

Once a pandemic darling, recording astronomical growth, Robinhood markets are down >80% from its issue price, with revenue / MAUs and engagement on its platform dipping from pandemic highs. A tight monetary policy, coupled with a return to work has slowed things down for the company.

And finally, we’ve started a rollout of our newest product, Trade:able, that aims to democratise trading, via a unique and fun learning experience. There are a bunch of amazing rewards and prizes to win. Click here to know more.

Market Watch

Nifty 50: 15,350.15 | +56.65 (0.37%)
FII Net Sold: INR 1217.12 crore

Sensex: 51,597.84 | +237.42 (0.46%)
DII Net Bought: INR 2093.39 crore

Industry News

RBI releases vision document ‘Payments Vision 2025’; what’s up and what do you need to know?

• With an objective to make the payments ecosystem safe, secure and affordable, the Reserve Bank of India released a vision document, ‘Payments Vision 2025’, based on 4Es (E-Payment, Everyone, Everywhere, Every Time)
• To promote innovation, the RBI aims to explore
  • A UPI-like system for cards
  • Enable networks for Internet of Things (IoT) based payments
  • Interoperability of contactless transit card payments in the offline mode
  • Create payment systems for merchants
• With these new initiatives, India’s OG Bank is targeting
  • a 3x increase in digital payment transactions
  • UPI to register average annualised growth of >50%
  • increase the payment transaction turnover vs GDP to 8x
  • debit card usage to surpass credit cards in terms of value
  • increase PPI transactions by 150% and
  • achieve a meaningful reduction in cash circulation as a % of GDP
• In continuation towards its quest to make the payments ecosystem safe (for the economy at larger), RBI plans to introduce separate regulations for BNPL (Buy Now Pay Later) players

Interesting! Some details, please?

• RBI believes the growing prominence of fintech and bigtechs, while generally positive for creating a fresh ecosystem, also pose financial & economic risk in equal measure (across stakeholders), with a new set of regulations expected to regulate related players
• Likewise, after initially limiting banks from charging customers a Merchant Discount Rate (MDR, see link below for explanation), and instead of passing on the cost to Merchants / Payment Providers, the RBI now plans to release a comprehensive paper, reviewing all angles
• The expectation is a possible hike in MDR within the current credit card categories, with the possible introduction of MDR in the UPI segment (initially to at least cover cost)
• RBI recently allowed linking UPI to your credit cards (initially only via Rupay cards), with the development expected to positively impact, with the likelihood of UPI integration to be extended to other card companies and banking products
• By focusing on expanding the digital payments ecosystem (both locally and globally), with the clear objective of reducing cash circulation as a % of GDP, the RBI is assessing current participants, while identifying solutions for the future (we believe)

In case you wish to know more about Merchant Discount Rates.

If you’re interested in financial news & analysis, and wish to receive this email in your mailbox consistently, click here to Subscribe Now

Around the World 🌎

• Winter is coming – Economists across the globe have raised the probability of a recession to 44% in the next 12 months (vs 28% when surveyed in April). Aggressive inflationary pressures and counteraction by the Fed along with supply chain struggles, rising commodity prices and overall high borrowing costs seem to be major reasons. It is unlikely that the Fed will be able to address these issues without inducing higher unemployment and an economic downturn
• Disney’s magic should not fade – The new chairman of Walt Disney Co.’s General Entertainment Content unit Dana Walden is responsible for more than 300 shows and an annual budget of around $10 billion. She took on the job after Peter Rice was dismissed abruptly due to clashes with Disney Chief Executive Bob Chapek and other seniors
• Real estate scene better this time around – In spite of a pandemic that wiped away income sources for millions, homeowners this time around are benefitting from home values that surpass their mortgage principal even though they have fallen behind on mortgage payments. The robust home prices and tight inventory have enabled them to sell their homes before foreclosure

Global Company

Robinhood Markets faces the brunt of a post-pandemic world; what’s up and what do you need to know?

• Leveraging increased interest in the markets, combined with work from anywhere culture brought on by the pandemic, Robinhood Markets made what was typically a very boring profession, cool
• Not to mention a suspiciously loose monetary policy with the Fed printing $$ at the go, investors and traders were armed with cash; at its peak (last year), Robinhood had 22 Million funded accounts
• During its best quarter (Q2FY22), Robinhood did USD 565 Mn in sales, 80% of which came from routing (selling to Hedge funds / High-Speed Trading firms) customer orders across stock, options and crypto (booked USD 145 Mn in sales tied to the famous dogecoin trading)
• And just as it grew in 2020 and 21, its business has depleted in equal measure; MAUs dipped by 25% during Q1, revenues fell by 47% and its stock is now at an all-time low, trading 81% below the issue price
• And to manage the situation, while ensuring the company survives the current slowdown, Robinhood markets had to cut headcount by 9%, reducing a bloated team (a by-product of high growth phase hiring)

Interesting! Tell me more? How’s the company moving ahead?

• In May, one of the biggest names in cryptocurrencies (billionaire founder of FTX Crypto Exchange, Sam Bankman) invested in Robinhood, picking up a 7.5% stake for USD 648 Mn, which led to buyout rumours rather than, reinforcing trust in the business
• To add further challenges, regulatory changes are expected to negatively impact the company’s core revenue contributor
  • In stark contrast to Indian brokerage companies, Robinhood & other American brokers are able to maintain near 0 processing charges due to their ability to route customer order details to high-speed trading firms
  • This in-turn allows high-speed trading firms to better judge prices, and accordingly make higher # of profitable trades (one would imagine at least)
  • Think: GameStop frenzy and Robinhood selling order details to Citadel Capital
  • To better align the flow of orders, while also safeguarding investor interest, the SEC has recommended new regulations, including creating an auction system, that requires brokers to compete to execute orders
• ~12% of Revenue for Robinhood Markets during Q1 of this year was attributed to selling order flow for stocks, with Options contributions pegged to be far higher
• And yet, the company has evolved with changing macro-environment, cutting expenses, launching products geared towards increasing transactions, with the CEO indicating plans to charge ahead with new product launches

A great tweet by the Zerodha Founder on key differences between Indian & American Financial Markets.

What else caught our eye? 👀

Air India is back and how

• Air India Ltd. is considering ordering over 300 narrow-body jets – one of the largest orders in commercial aviation history as it looks to overhaul its fleet under new ownership
• Though Airbus dominates the Indian aircraft space, the order is intended to go to Boeing Co. (for their 737 Max models) for a deal valued at $40.5 billion at sticker prices excluding discounts
• Production and delivery is likely to take place after years – and may even cross the decade mark – Airbus builds only about 50 narrow-body jets in a month

Zilingo Pte scrambling to survive

• Co-founders of Zilingo made a last attempt to propose a management buyout to the board for the embattled fashion e-commerce platform with commitments secured from a small group of private investors
• The investor group will inject $8 million in new equity in a newly incorporated entity, while the remaining assets and the old corporate entity will be liquidated in due course
• Financial irregularity allegations have been plaguing the board since March and have even led to dismissal of CEO Ankiti Bose

Educational Topic of the day

Demand Destruction

Demand destruction occurs when demand for a product or service falls significantly during a very brief time period and there is no evidence or reason to believe that demand will recover for the foreseeable future. Demand has been, in effect, destroyed.

Edited by Raunak Karwa

Let’s connect, I always love hearing from you. Hit me up at Raunak_Karwa on Twitter or Raunak.karwa@finlearnacademy.com