MobiKwik: Dealing With the Fallout From an Alleged Data Breach and Its Repercussions on Its Proposed IPO

Introduction

The Digital Payments Ecosystem in India had seen a significant increase in traction, particularly in recent years. This could be attributed to the introduction of innovations such as UPI⁶. Indian Government’s demonetization exercise of 2016 provided a major fillip to digital payments. India had seen a sharp increase in digital payments. Transactions rose thanks to many digital payment solutions, including UPI and Aadhaar⁷-enabled Payment Systems(AePS), from Rs 23.4 billion in 2019 to Rs 46.7 billion in July 2022. The payments ecosystem in India had changed as a result of advancements in payments infrastructure, changes in information and communications technology, a flexible regulatory framework, a supportive political climate, and a growing emphasis on customer-centricity. The subsequent growth was accelerated by the COVID 2019 pandemic and the new societal norms associated with the same wherein digital transactions increased as individuals switched to contactless payment options. Physical PoS⁸ and QR⁹ acceptance locations for digital payments in the country were on the rise. The payments industry's expansion had been the obvious outcome of this scenario. With the Indian government’s push for better infrastructure, there had been a steady increase in procurement of POS devices. Growing Indian digital population is a harbinger of growth for the digital payments industry. The Indian Government’s aim towards digital economy was also in accordance with its objectives to tackle black money and corruption in the country. In the Budget Speech, 2017, Finance Minister Arun Jaitley¹⁰ had stated:

Literature Review

We first look at the demonetization of Indian banknotes in 2016 as an external shock that encouraged people to move to digital payments. In an unplanned move on November 8, 2016, the Indian government demonetized the two biggest denomination banknotes in use (INR 500 and INR 1,000). This left the economy with a cash shortage. Overnight, 86% of the currency in use was deemed to be unreliable. Due to this, there were significantly more digital payments made using both cards and e-wallets (Agarwal et al., 2018a). Users of mobile phones can deposit, transfer, and withdraw money using mobile money without having a bank account. This differs from mobile banking, which enables consumers to access and manage their online banking accounts using their mobile devices. Telecommunications providers offer mobile banking, which enables users to pay with their SIM card directly. (Suri, 2017). The ability to use big data analytics and unstructured data to better forecast loan behaviour is one of the benefits of FinTech lenders. These details include “mobile footprints,” which refer to the online habits of the households as observed through their mobile devices. Agarwal et al. (2020) found that the mobile footprint of an individual surpasses traditional credit bureau ratings in forecasting loan approvals and defaults using data from one of the largest FinTech lenders in India. utilising extensive digital data on the applicant's social connections or the kinds of programmes they utilise. Startups fail due to the longer time required to achieve a profitable position, high initial investment costs, a lack of understanding of the Indian consumer market, and a lack of understanding of logistics (Velayanikal, 2016)^10a.