Also in this letter:
- Explained: RBI’s recurring payments rules and their fallout
- ‘Celebs must check claims before endorsing crypto firms’
- Nykaa reveals growth plans ahead of IPO this week
Civil society groups want govt to make Facebook accountable for its algorithms
Privacy experts and civil society groups are calling on the Indian government to seek more transparency and accountability from Facebook over its algorithms.
Catch up quick: This comes after several news outlets reported over the weekend, citing internal documents, that the company knows Facebook and WhatsApp are used to spread inflammatory content in India, primarily targeting Muslims, but has done little to combat the problem.
Some of the reports said that a test account set up by a Facebook researcher in India in 2019 was quickly filled with fake news and gory, incendiary images, showing there was a serious problem with Facebook’s algorithms here.
Swift response: Now, privacy experts and civil society groups are asking the government to urgently set up an independent commission to discuss ways to regulate social media platforms.
Experts said the government must ask such platforms for transparency and accountability with respect to their algorithms and content moderation policies, and frame strict rules about what types of content they can and can’t amplify.
Quote: “Every time a Facebook scandal breaks, the conversation gets stuck over the need for more government regulation on social media versus the need for free speech over the Internet. Instead, we need to focus on what content is amplified by the platform, and demand greater algorithmic transparency and accountability. Algorithms on the platform are optimised to maximise user engagement, not safety, and end up magnifying the worst of humankind,” said Urvashi Aneja, director, Digital Futures Lab.
Facebook’s response: In a statement, a Facebook spokesperson said the exploratory effort of one hypothetical test account led to deeper analysis of its recommendation systems, and contributed to product changes to improve them. “Product changes from subsequent, more rigorous research included things like the removal of borderline content and civic and political groups from our recommendation systems. Separately, our work on curbing hate speech continues and we have further strengthened our hate classifiers, to include four Indian languages,” the spokesperson said.
Earlier this month, Nick Clegg, Facebook’s vice president of global affairs, had said its algorithms “should be held to account, if necessary, by regulation so that people can match what our systems say they’re supposed to do from what actually happens”.
Safe harbour ‘rethink’: On October 12 we reported that the Indian government was mulling a rethink of the safe harbour rules that protect social media platforms from liability for content posted by users. “The platforms have to be accountable for the content and can’t hide behind the safe harbour. They have to be much more proactive in identifying and removing harmful and hateful content,” a government official said at the time.
Recurring chaos: the RBI’s new payment rules and their fallout explained
We reported last week that Indian customers of news platforms such as The New York Times and streaming services such as Netflix and Amazon Prime saw their monthly automatic subscriptions fail in October. That’s because most domestic banks are yet to comply with the new Reserve Bank of India (RBI) rules for standing instructions-based recurring payments, which kicked in at the start of this month.
Here’s a quick explainer on recurring payments, the RBI’s new rules and the chaos they’ve caused.
What are recurring payments?
Recurring payments are a type of transaction in which customers automatically pay merchants a periodic fee based on a one-time standing instruction. They are vital for most subscription-based businesses.
What are the types of recurring payments in India?
India has three broad types of recurring payments:
- Standing instructions on debit and credit cards between merchants and customers
- E-mandates on the National Automated Clearing House (NACH)
- AutoPay on the Unified Payments Interface
What are the RBI’s new rules?
The Reserve Bank of India’s new rules on recurring payments that kicked in on October 1 apply only to one-time instructions on debit and credit cards. UPI and NACH-based recurring payments are not affected. The new rules say:
- Merchants can enable recurring payments on cards if the customer’s bank sends a pre-debit notification 24 hours before the automatic payment.
- Recurring payments of above Rs 5,000 can only be done with an OTP.
- Only the bank that issued the card can enforce these rules for merchants.
What’s the issue with the rules?
- Most issuing banks have not been able to meet the requirements.
- International merchants with foreign bank partners are unable to tie-up with local issuers.
- Integrations by smaller banks on common platforms of BillDesk, Razorpay are incomplete.
Who all have been affected?
- Customers making automated bill payments, subscriptions.
- Small businesses, media outlets and SAAS startups running subscription services.
- NGOs and charity houses that collect donations automatically.
- Large internet companies such as Amazon, Apple, Google, Netflix and Facebook.
What are the alternatives?
- Make subscription payments manually using debit card, credit card or UPI.
- Add funds to your e-wallet and use it to make recurring payments.
- Use UPI Autopay or NACH for merchants that have enabled these services.
Who’s up and running?
Note: Support for recurring payments depends on the readiness of merchants as well, so banks listed as ready may not yet support all merchants.
When will all players be ready?
- Most small banks may not be ready even by next month.
- International merchants may have to do away with recurring mandates altogether.
- Most merchants are yet to introduce UPI AutoPay, the easiest alternative.
- Payment gateways Razorpay and BillDesk working to bring all banks on a unified platform.
Celebs endorsing crypto must do due diligence, says ad council head
Celebrities must do their due diligence before endorsing cryptocurrency exchanges or they could be held accountable for misleading claims, Subhash Kamath, chairman of the Advertising Standards Council of India, told us.
This comes amid an ad blitz by crypto companies such as CoinSwitch Kuber, CoinDCX and others during the ongoing T20 World Cup.
Quote: “Cryptocurrency is a very new concept and not everyone understands it fully. Celebrities need to do their due diligence before backing a claim, because if it’s found to be misleading, they could be held accountable for it,” Kamath told ET, referring to the Consumer Protection Act, 2019 that came into effect last year.
The response: Ramalingam Subramanian, head of brand, marketing and communications at CoinDCX said the company had put out adequate disclaimers—comparable to those in mutual funds ads—in its print and TV advertising.
“There are a lot of misconceptions out there. I don’t mind people questioning whether crypto is safe or not. But the dialogue should happen,” he said, adding that the crypto industry itself has asked the authorities to come up with regulations several times.
One advertisement that sparked anger on social media was by crypto exchange Bitbns, which calls some of its crypto investment products “fixed deposits”. In an ad that aired during the India-Pakistan T20 match, it promised more than four times the returns of a traditional fixed deposit.
Gaurav Dahake, CEO of Bitbns, defended this by saying that the investors were getting returns in “the same form factor” as a fixed deposit. However, he admitted that the volatility of cryptocurrencies was not factored into the 4x returns the ad promised.
Self-regulated: In July, two lawyers filed a public interest litigation against crypto exchanges WazirX, Coinswitch Kuber and CoinDCX over the lack of standard disclaimers in their ads. The case will next be heard on December 3, exchanges told us. After the PIL was filed, ASCI and Blockchain and Crypto Assets Council separately announced that they would introduce guidelines for crypto ads.
Nykaa lays out recovery, reveals growth plans ahead of IPO this week
Three days before the launch of Nykaa’s initial public offering, its founder Falguni Nayar told journalists at a press conference on Monday that the company’s gross merchandise value (GMV) has gradually recovered since the initial days of the pandemic.
She also spoke about Nykaa’s growth plans, which include expanding into more categories, launching a house of brands, and expanding to Europe and the Middle East.
Here’s what she said: The company’s GMV fell to $59 million in April-June 2020 amid the nationwide lockdown, but has since recovered gradually to hit $168 million in January-March 2021 and $199 million in April-June 2021.
- In FY21, Nykaa’s total GMV rose to $547 million from $363 million in FY20 and $223 million in FY19.
- “We quickly pivoted during the pandemic with the help of smart and agile tech and AI-led curated content and filtered as per customer needs and which zone they were coming from,” Nayar said.
- 95% of Nykaa’s sales take place online and only 5% come from its 80-odd stores across India.
- Nykaa’s beauty and personal care business clocked a GMV of $147 million in April-June 2021. Its fashion business saw a GMV of $52 million in the same quarter, from just $6 million in the same quarter last year. Unlike Nykaa’s core business, its fashion vertical operates through a marketplace model.
- Asked why the company chose to go public even though private markets are flush with cash, she said, “We are looking at building a more sustainable organisation and offering a window of opportunity to our existing shareholders to exit. Going public was the better option.” The company said it has raised $100 million in equity to date.
IPO details: Nykaa is looking to list on the stock exchanges with a Rs 5,352 crore IPO that would value it at $7.1 billion (Rs 53,200 crore). The IPO will open on Thursday, October 28 and close on Monday, November 1.
- It is looking to raise Rs 630 crore by issuing fresh shares priced at Rs 1,085-1,125 each, and the rest through an offer for sale, in which existing investors will sell up to 41.97 million shares.
- The Sanjay Nayar Family Trust, a promoter, will sell 4.8 million shares in the IPO. Other investors likely to sell shares include TPG, Light House India Fund, JM Financial, Yogesh Agencies, Sunil Kant Munjal, Harindarpal Singh Banga, Narotam Sekhsaria and Mala Gaonkar.
- Nayar and her family will continue to own a majority stake even after the IPO. They currently hold more than 53% in FSN E-Commerce Ventures.
Growth plans: Nayar said Nykaa plans to enter more categories adjacent to the lifestyle sector and launch new channels. It will also look at building its own Thrasio-style house of brands. She said the company also plans to open more physical stores across India and is eyeing international markets such as the UK, Europe and the Middle East.
Dream11 founders move K’taka HC against gaming ban FIR
The founders of online fantasy sports platform Dream11—Bhavit Sheth and Harsh Jain—have moved the Karnataka high court, seeking to quash the first information report (FIR) filed against them over the new state law that bans betting in online games, sources familiar with the matter told us.
The development comes two weeks after Dream11 had to suspend operations in Karnataka over allegations that it was in violation of Karnataka’s new gaming ban.
Catch up quick: When the law came into effect on October 5, other gaming companies such as Mobile Premier League, Paytm First Games, Games24X7 and others deactivated their platforms in Karnataka but Dream11 continued to operate.
The Bengaluru Police then filed a first information report (FIR) against Jain and Sheth, based on a complaint by Manjunatha, a cab driver, who alleged that the Mumbai firm broke the law by continuing to offer gaming services on its platform a week after the state government notified the new rules.
Opposition to the ban: Last week, we reported that the All India Gaming Federation (AIGF) had separately filed a petition challenging the Constitutional validity of the amendments to Karnataka Police Act, 1963.
The Karnataka high court will take up the AIGF petition on October 27. It asks the court to stay the recent amendments to the Karnataka Police Act, and to direct the state government not to take action under them while the case is in court.
Other gaming companies including Mobile Premier League have also moved the court, challenging the law and seeking relief.
ETtech Done Deals
■ Education infrastructure startup Teachmint said it has raised $78 million in a Series B funding round led by Rocketship.vc and Vulcan Capital. The round also saw new investors Goodwater Capital and Epiq Capital join the company’s capitalisation table.
■ The direct to consumer brand roll up from the Firstcry stable – GlobalBees, has acquired home-grown millennial skincare brand Prolixr, the company said. This is the third startup after it acquired health startup andMe and sustainable home care products maker The Better Home.
■ Bengaluru-based micro-savings platform Siply has raised $3.2 million in equity and debt as part of its Pre-Series A. The round was led by LetsVenture, AngelList India and Founder Room Circle.
■ Porter, a tech-based, on-demand, intra-city logistics company, has raised Rs 750 crore in its Series E funding round led by Tiger Global Management and Vitruvian Partners, with existing investors Sequoia Capital India and Lightrock India.
■ Glance, a part of SoftBank-backed InMobi Group, said it has made an investment in talent management organisation, Collective Artists Network. The company, however, did not disclose any financial details.
■ Dairy-tech startup Stellapps has raised $18 million in its pre-Series C funding round from investors led by global animal nutrition and aquaculture company, Nutreco.
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