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How fintech startup Recko, uses technology with its clients Grofers, Dunzo, and Udaan, to ease reconciliation

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In recent years, India has seen an increase in digital transactions. The majority of businesses in the country are continually dealing with rising transaction volumes and increasingly complicated payment flows and systems.

Saurya Prakash Singh and Prashant Borde, two entrepreneurs, identified a major issue faced by finance departments in organisations: reconciliations. It inspired them to launch Recko in 2017.

Today, the fintech firm is automating the reconciliation process for customers in industries such as banks, ecommerce, food tech, fintech, neo-banks, gambling, insurance providers, and others that have a significant volume of transactions.

Solving a difficult problem

Most organisations, according to Prashant, receive data from a variety of sources, including settlement files, order management systems, banks, and so on. These files are in various formats, and they must be cross-checked to ensure that the information they contain is consistent.

These data must be transformed and reconciled by the financial departments. When working with various finance instruments for accounting, tax, and payment, for example, more data processing is required.

“One can only imagine how difficult things would turn out to be when the volume increases,” says Prashant.

Recko is addressing this, according to him, by employing Big Data frameworks that are optimised for precision, consistency, and scalability. The startup uses pre-defined rules to identify data that is input into the system and reconciles it on a transactional basis.

For enterprises to track, manage, and account money end-to-end, the platform provides a complete and strong technology stack to manage financial data and enable financial activities such as reconciliation, commission calculation, payout production, and reporting.

Recognizing a deeper issue

Prashant explains that merchants have difficulty reconciling these payments due to outdated equipment and technology.

Most organisations currently perform the entire process of confirming that the amounts in the settlement files and bank account are in accord with one another manually.

“We started thinking what if there is a platform that can enable businesses to reconcile easily. Saurya and I started talking to finance teams in a variety of industries and geographies (India, the US, SEA, etc). They all faced a similar problem and were using Excel sheets to reconcile payments,” Prashant explains.

Another unresolved case, commission tracking, was also identified by the duo. “No other tool offered this kind of flexibility without getting too technical,” Prashant explains.

They wanted to automate and speed up this process in order to enable businesses track correct revenue, close SLAs for receiving money in order to optimise working capital, and minimise support costs by having a clear image of money sent to portion of the supply chain.

The Product

Saurya and Prashant, with the help of a few developers, produced the first functioning prototype of the product (codename Perlis). “It took a few months for us to figure it out. Saurya used to handle the product, design, and customer interactions while I concentrated on the technology,” Prashant explains. “We focused a lot on the accuracy, which helped us gain the trust of the finance teams and gave us the confidence to move ahead,” he added.

However, one of the difficulties they encountered was supporting scale. To make scale and security a basis in the architecture, Prashant says they had to redesign a major portion of the first iteration.

Prashant explains, “We then published the next version of our software (codename Wilkes), which provided scale, accuracy, and security.” Wilkes eliminated the majority of the operational tasks and began orienting new customers to the program. This allowed customers to save up to 80 percent of their time spent on monthly activities, thanks to Wilkes.

“We continued working on the enhancements and hired a full-time UX designer to improve the intuitiveness of the product. Users wanted more out of the product and we started enabling them to automate tricky use cases. They needed more analytics and alerting capabilities. We also figured out that manual push of data affects data quality and we need direct integration with data sources,” says Prashant.

The ecommerce industry was among the early adopters of Recko’s products. Prashant claims that they partnered with industry titans such as Myntra, Meesho, Dunzo, PharmEasy, and Grofers to assist them develop into the on-demand food tech space.

Constructing a scalable product

“As we onboarded more customers, we noticed that organisations across industries saw data in very different ways. We didn’t want to miss anything, but we also had a mission: to give it our all. Prashant says, “We added analytics, custom reports, commission calculation, and other interfaces like storage services, payment gateways, and banks.”

The team quickly began working with clients from various industries and places. Recko introduced geographies such as Southeast Asia and the European Union. Versioning was also released to support audit logs and time travel capabilities that needed to be reworked to accommodate future growth.

To cope with the increased load, the team realised it needed to implement new technologies such as Spark, Data Lake with rollback support, and Kubernetes. To remove tech debt and make the codebase more modular, Recko had to rewrite a substantial portion of it. 

Prashant clarifies, “Considering the global outlook, we needed a design overhaul as well. So, we started working on the next version (codename Minsky). We discussed state machines, flowcharts, and architecture diagrams, and once the initial draft was ready, we ran it through a few industry experts to avoid common pitfalls.”

Developing a more distributed process

The team then focused on the system’s dependability and extensibility, according to Prashant, and there was a shift in the tech thought process itself.

Today, businesses like PagarBook and others are focusing on the increasing SME segment in the fintech sector of reconciliation. Recko, on the other hand, is unconcerned about whatever sector he belongs to.

Prashant explains, “We were thinking of a more distributed process, trying to familiarise ourselves with no-SQL design principles using seamless, columnar databases.”

Recko is looking to introduce new modules, such as payouts calculation and a scalable ledger, in the near future. The payments calculation module will assist startups and mid-market businesses in setting up payouts without having to devote time in their development. And then the ledger module acts as a sole source for truthful financial data.

Lastly Prashant explains, “We are planning to open APIs as well so that they can be integrated deeper into companies’ tech stack to solve a multitude of problems. Our long-term goal is to provide enough insights that enable businesses to make financial decisions in real-time,”

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The Crypto Effect : Framework, challenges & The way forward

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SHASHWAT MISHRA – Mumbai Uncensored, 15 January 2022

2021 was a year full of buzz around cryptocurrency in India, apps coming up with private cryptocurrency(bitcoin), people investing in bitcoins, government twice was close to come up with a law banning all private cryptocurrency, but no material step was taken in this area. It becomes imperative to understand all about cryptocurrency and the article aims to give a detailed analysis on cryptocurrency, its challenges and the way forward. 

What is cryptocurrency?

A cryptocurrency is a medium of exchange similar to a Rupee or any other currency. The difference is while a rupee or a dollar exists in a physical form which is a printed note, cryptocurrency is held in an electronic form based on a technology named blockchain. Blockchain is nothing but a decentralized ledger in an electronic form which contains “blocks” in other words transactions across a peer-to-peer network, which means without an involvement of a third party. 

Bitcoin is the world’s best known cryptocurrency which is considered to be the largest in terms of market value followed by Ethereum. If we talk about how cryptocurrency works, it needs to be understood in the context of a fiat money (currency with authorized permission and regulation), for example a rupee is regulated by the Reserve Bank of India which ensures that the money in circulation is genuine and is recorded. In the context of a cryptocurrency, a chain of private computers execute this process and solve complex cryptographic puzzles, this is done to authenticate the transaction, this process is called mining. 

TRADING IN CRYPTOCURRENCIES

To trade in cryptocurrency, one needs to first buy a cryptocurrency, there are two ways in which a cryptocurrency can be brought, firstly, you can buy crypto coin from someone and the second, is to mine your own cryptocurrency. Buying happens in either an exchange facilitated transaction or a peer-to-peer transaction. Talking in the context of India, the simplest way to trade in cryptocurrency is through one of the exchange and trading platforms which includes, WazirX, CoinDCX, CoinSwitch Kuber etc.

To trade in cryptocurrency by using INR, the user needs to register on one of the exchange platforms mentioned above, and complete a KYC process, then if the user is buying cryptocurrency for the very first time will need to load INR money in their wallet of their cryptocurrency exchange. 

FRAMEWORK ACROSS COUNTRIES & INDIA

El Salvador has become the first country to recognize bitcoin as a legal tender, China on the other hand has imposed a complete ban on cryptocurrency. It becomes imperative to look at some of the other jurisdictions around the world and their regulatory framework regarding cryptocurrency.  

In the United States, The federal government does not recognize cryptocurrency as a legal tender, the two major regulators i.e. US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are playing catch up while regulating the digital currency market, their objectives are two fold, firstly, protecting the investing public and secondly, maintaining market stability. 

In the United Kingdom, Her Majesty’s Revenue and customs department has not considered crypto assets as a currency. Furthermore, it has noted that cryptocurrency does not qualify to be any form of investment activity. 

In Canada its regulator, Canada Revenue Authority (CRA) though does not recognize it as a fiat currency but treats it like a commodity used for payment and investment purposes and the same is subject to taxation. 

Israel through its legislation, Supervision of Financial Services Law includes digital currency within the definition of financial assets. The Israel tax Authority demands 25% on profits made through exchange and trading of cryptocurrency.  

India though has not come up with any policy or legislation either regulating or banning cryptocurrency, however, before the winter session of parliament last year there were conjectures that the government may come up with a law banning all private cryptocurrencies, but nothing concrete happened, which has led to uncertainty amongst investors in the Indian crypto market. The Reserve Bank of India (RBI) though, has given some hints as to what would a regulatory framework on cryptocurrency in India look like. 

The RBI is expected to come up with Central Bank Digital Currency (CBDC) a digital currency that can be transacted using platforms based on blockchains and would be regulated by RBI. However, this is just a form of digital currency, but the broader question is what should be a comprehensive policy related to cryptocurrency? Mr. Hemant Batra a renowned public policy expert and a lawyer while speaking to Mumbai Uncensored has provided his detailed insight and expertise on the policy regarding cryptocurrency, he says, “public policy can be of two types, firstly, a policy which brings or initiates a reform in any sector or segment within the society and second, is a policy brought about to formalize a change which has already happened. The Indian cryptocurrency market has now become very big with involvement of billions of dollars in the market hence, it is now unattainable and irreconcilable for the government to completely ban all sorts of cryptocurrency and its trading and investment. India is absolutely ready to accept cryptocurrency with a regulatory system based on global requirements as per the guidelines issued by IMF (International Monetary Fund). Banning cryptocurrency will lead to damaging the financial statistics of all nations”  

CONCERNS AROUND CRYPTOCURRENCY 

The next aspect is the challenges that cryptocurrency puts forth before the policy makers, these can be termed as “macro” consequence of cryptocurrency. First aspect is the challenge related to the monetary policy, former RBI governor Duvvuri Subbarao speaking at a public forum has expressed his concerns on cryptocurrency and its impact on monetary policy according to him, cryptocurrency may erode central bank’s control over money supply, “Crypto is backed by algorithms and there is fear that the central bank might lose control over money supply and inflation management. There are also concerns that crypto will disrupt the monetary policy,” he said, “Crypto can jump capital controls; fiat money is linked to the reserve currency,” his indication was towards “stablecoins” whose value is tied to a fiat currency by maintaining equivalent reserves (“currency board” exchange rate regime). 

The next challenge is fiscal, that is cryptocurrency being used as a tool for tax evasion as it would be very feasible for a crypto investor to invest his untaxed money in purchasing bitcoins and similar would be a case in money laundering wherein “proceeds of crime” could easily be invested in any of the cryptocurrency exchange and trading platforms. Mr. Batra on this point states, “FATF (Financial Action task force) and IMF have expressed their serious concern about this issue, there are certain sets of cryptocurrency that are based on very private blockchains wherein one cannot identify the nation from which such virtual currency is operating and there are cases investigated globally wherein there has been a direct link between financing illegal and terror activities through crypto exchanges. To tackle this scenario, the government has to introduce regulatory regimes not on the cryptocurrency but crypto service providers.” 

On the point of cryptocurrency being a very lucrative investment avenue Mr. Batra says, “investment in government bonds and securities, SEBI controlled mutual funds, financial securities might take a hit as people will not take risk in investing smaller companies and thus, they will either invest in blue chip companies or in cryptos”. Thus, cryptocurrency in India has now become a major factor in the financial as well as the economic realm and now what is needed is a comprehensive regulatory framework which ensures investor protection as well as market stability of crypto. In the budget session scheduled to start from 30th January; the Union Budget will be presented on February 1st, the government is expected to come up with a law on cryptocurrency, it would be very interesting to see how the law is formulated.

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Indian Startups raise from $11.5 billion to $42 billion in 2022

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India is the third largest unicorn hub with 90 unicorns, USA being first with 487 and China second with 301.

Akankshya Mukherjee, Mumbai Uncensored, 14TH January 2022 :

A report from the Orios Venture Partners says that Indian Startups have grown from $11.5 billion to $42 billion in 2021. ‘The Indian Tech Unicorn Report 2021’ was the report titled which says that India saw 46 unicorns, companies with $1 billion worth in 2021. It doubled to 90 unicorns.

According to the repot, they included Cred, Meesho, ShareChat, MPL, Grofers which is not Blinkit, Nazara, Spinny, Mamaearth, upGrad, GlobalBees, Acko, and others included. With around 6,00,00 startups, India is the third largest startup ecosystem in the world. These starts generate employment on a larger scale and also develop innovative technologies and solutions. One out of the 13 startups were born in India.

As per reports, Bengaluru is the city with maximum unicorns. E-commerce, Flipkart and Software as a Service (SaaS) have the maximum number of unicorns while Crypto, Gaming, D2C, ed-tech, health-tech have been closed. Delhi being the next with 29 and Mumbai with 16. Also emerging startup-based cities in India are Pune, Jaipur, Hyderabad, and Chennai.

Flipkart is the most valued unicorn, it raised from $3.6 billion to $37.6 billion in July 2021, Mensa Brands is the fastest to turn unicorn, it took only 6 months from May 2021 to November 2021 to raise the first $50 billion.

The report also says that India has 4 decacorns, companies with less than $10 billion and above value such as Flipkart, Byju’s, Oyo Rooms and Paytm. 2021 has setup a landmark year for Indian startups. In total 11 startups, out of which 8 are unicorns, raised around $7.16 billion with public offerings. One96 Communication, Paytm, raised India’s largest ever IPO of Rs.18,300 crore which is about $2.46 billion. Zomato has the highest market capitalization of $14.8 billion, followed by Nykaa with $13.5 billion and Freshworks with $6.9 billion the report further adds.

It had been an exciting, tremendous and promising year for tech startups due to the economic turndown in the first half. According to the measuring scale for the ecosystem, the report clears that validation of value creation has been achieved for both IPO and unicorns through technological innovation, Mr Rehan Yar Khan, Managing Partner says at Orios Venture Partners.

The report also notes 20% of the Unicorn Founders are non-engineers, 2/3rd of the Indian unicorns has been founders of one or more IIMs, ISB and IITs. Also highlighted, that about 13 of the Unicorn founders are female, out of which 8 have been featured in 2021: Falguni Nayar- Nykaa, Gazal Kalra- Rivigo, Ruchi Kalra- OfBusiness, Divya Gokulnath- Byju’s, Ghazal Alagh- MamaEarth, and Saritha Katikaneni- Zenoti and others.

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“Writ Petition By Borrowers Challenging SARFAESI Proceedings Initiated By Private Banks/ARCs Not Maintainable”: Supreme Court

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Bhuvana Iyer, Mumbai Uncensored, 13th January 2022 :

The Supreme Court Wednesday said borrowers, aggrieved by proceedings initiated under the SARFAESI ACT by the bank or the assets reconstruction company (ARC), have to avail the remedy under this law and no writ petition would be maintainable. 

The apex court held this while vacating the order passed by the Karnataka High Court which had directed maintenance of status quo with regard to possession of mortgaged properties subject to the borrowers making a payment of Rs 1 crore with the ARC concerned. 

The High Court of Karnataka entertained writ petitions under Article 226 of the Constitution of India filed by borrowers against an Assets Reconstructing Company and passed an interim order directing for maintaining status quo with regard to SARFAESI action (possession of the secured assets). Challenging this, the Assets Reconstructing Company (ARC) preferred appeals before the Apex Court.

A bench of Justices M R Shah and B V Nagarathna, while referring to an earlier judgement delivered by the top court, opined that filing of writ petitions by the borrowers before the high court under Article 226 of the Constitution in the case was an “abuse of process” of the court. 

The apex court delivered its judgement on the pleas filed by the ARC challenging the order passed by the high court, which had entertained the writ petition and passed interim order directing for maintaining status quo with regard to the proposed action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI) 2002.

The bench said the high court orders directing to maintain status quo with respect to possession of secured properties on payment of Rs three crore in all is “absolutely unjustifiable” as the dues are to the extent of approximately Rs 117 crores.

“Filing of the writ petition by the borrowers before the high court is nothing but an abuse of process of court. It appears that the high court has initially granted an ex-parte ad-interim order mechanically and without assigning any reasons”, it said. 

“Even otherwise, it is required to be noted that a writ petition against the private financial institution – ARC – appellant herein under Article 226 of the Constitution of India against the proposed action/actions under section 13(4) of the SARFAESI Act can be said to be not maintainable”, the apex court noted.

It said the secured creditor or its assignor have a right to recover the amount due and payable to it from borrowers.

“The stay granted by the high court would have a serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the high court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters”, the bench said, adding, “In these circumstances, the proceedings before the high court deserve to be dismissed.”

The bench said an ARC cannot be said to be performing public functions which are normally expected to be performed by the state authorities.

“During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the state authorities”, it noted.

The apex court, while allowing the appeals, vacated the interim order of August 2015, which was further extended by the orders passed in February 2017 and March 2018.

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