Deepfakes a ticking bomb for video KYCs; Indian startups cut 28,000 jobs in brutal 2023

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The convenience of digital onboarding comes with a lurking danger: deepfakes. Startups offering video KYC solutions are scrambling to ensure their tech can outsmart these realistic spoofs. This and more in today’s ETtech Morning Dispatch.

Also in this letter:
■ US parent of EbixCash files for bankruptcy in Texas
■ Noise onboards global audio firm Bose as strategic investor
■ Zupee’s revenue zooms to Rs 831.51 crore in FY23


Industry on edge as Zerodha CEO flags deepfake concerns

As the fintech industry looks for customer onboarding through digital means, deepfakes, which have taken the world by storm, could pose a major threat. Tech startups that offer these services to financial institutions have started early conversations to ensure that checks in video KYCs can catch such acts of spoofing by fraudsters.

Starting the debate: Nithin Kamath, the chief executive of Zerodha, one of India’s largest stockbrokers, took to social media to post a deepfake image of himself and pose questions about how it can impact the finserv industry.

This led to the conversation getting wider around how deepfakes can impact video KYC processes, popularly used by banks, brokers and NBFCs to onboard customers remotely.

Nithin Kamath Quote Card


Checks in place:
Industry insiders told us that the Reserve Bank of India (RBI) mandates a live video call between the customer and a bank official which means that deepfakes might not pose a threat here. But market regulator Sebi allows non-face to face videos, which are more susceptible to such attacks.

While regulators have not consulted the industry on such issues yet, startup founders believe that it would do well to start preparing for any such future attacks.

Also read | How to spot a deepfake

Lenders more at risk: Certain industry insiders pointed out that more than stockbrokers who accept public deposits, it is the lenders who are at risk of losing money to fraudsters. They also spoke about fintech startups often taking shortcuts while onboarding customers through video verification which can impact the sector in a big way in the future.

The need of the hour is to start building systems like liveness detection, randomised questionnaires etc to ensure that only a live person can answer them and pass the scrutiny.

Also read | Narayana Murthy speaks out against deepfake onslaught


28K and counting: That’s the 2023 layoff data from startup land

Startup layoffs 2023

Indian startups laid off well over 28,000 employees in 2023 — the worst in three years — as they implemented major restructuring plans to extend their runway and prioritised verticals essential for continued operations.

In comparison, over 20,000 people were fired in 2022, while just over 4,080 employees were laid off in 2021, according to Longhouse Consulting.

Wide impact: Firms across the ecosystem in sectors like edtech, quick commerce, healthcare, social media and marketplaces were impacted. Sectors like edtech, real money gaming and business-to-business (B2B) ecommerce were the worst hit. On the other hand, sectors like fintech and deep tech were comparatively better off.

Layoff GFX

Job insecurity heightens: Attrition rates in startups improved to the 9-14% range in 2023, their best in three years, despite hikes across the ecosystem worsening to the -30% to 20% range in 2023, the worst in three years.

The joining ratio — meaning people who joined a company after taking up the offer — improved to 40-90% in 2023, from 10-40% in 2021, at the peak of the startup investment cycle.

Non-core jobs hit: Job cuts in startups usually begin with “non-core” roles like marketing, sales, human resources and operations, which was the case with Indian startups too, as they began layoffs last year. This year, however, the layoffs cut much deeper with “core” roles like those in tech, product and finance teams being shed.

Also read | Funding in Indian startups sinks to $7 billion, lowest since 2017

Vaibhav Gupta

Vaibhav Gupta, cofounder and CEO, Udaan

Udaan lays off over 100 employees: Business-to-business ecommerce firm Udaan has laid off over 100 employees or about 10% of its staff. Sources told ET that the layoffs were due to redundancies following a rejig of the business in September. The layoffs come shortly after the company raised $340 million in a funding round led by UK savings and investment firm M&G Prudential.


US parent of EbixCash files for bankruptcy in Texas

Robin Raina

Robin Raina, founder, Ebix

Ebix Inc, the parent of Indian payments and remittance company EbixCash, has filed for bankruptcy protection in a Texas court after defaulting on a $617 million loan, according to a Bloomberg report.

Details: The software services company for the insurance and healthcare sector failed to repay its dues against a $600 million credit facility from American banks. Per court filings cited by Bloomberg, Sidney Austin LLP has been assigned as bankruptcy counsel, while Jefferies LLC will act as the investment banker to the proceedings.

India impact: It’s unclear how much of this will impact Ebix’s India business, EbixCash. However, media reports said Ebix Singapore is one of the guarantors to the deal that Ebix signed with US banks in November to extend the credit facility. Ebix Singapore owns 100% of the company’s India business.

Journey in India: Ebix, founded by Indian-origin businessman Robin Raina, entered the Indian market through multiple acquisitions starting in 2017 when it bought a majority stake in domestic remittance company ItzCash. The Indian entity had even attempted to go public in India in 2022, but the plan never took off.

About EbixCash: According to its draft prospectus filed in 2022, EbixCash operated across four major verticals such as fintech, cross-border and domestic payments, travel technology and IT services for the healthcare sector.


Noise onboards global audio firm Bose as strategic investor

Noise cofounders

Noise cofounders Amit Khatri (left) and Gaurav Khatri

US-based audio equipment maker Bose has bought a minority stake in Indian wearables startup Noise, in the latter’s first ever fundraise.

Details: Noise did not disclose the investment figure or the quantum of stake acquired by Bose, citing a non-disclosure agreement. Amit Khatri, the cofounder of the Gurugram-based company, said they are looking to raise more funds going ahead.

Also read | ET Startup Awards 2022: Noise wins the Bootstrap Champ award for its scale, profits

Strategic investment: Khatri said the two companies will collaborate to develop products that will be launched in the near future. They will work together to innovate in the audio space, strengthening its research and design, and leverage Bose’s distribution to expand into other geographies, Khatri told ET.

Also read | Noise eyes overseas market for its wearables, open to fund raising

Segment dynamics: In the September quarter, Noise stood second in the overall wearables sweepstakes, with a 10.8% market share, but with a flat 0.6% on-year growth in shipments. The firm competes with homegrown brands such as Boat, Fireboltt and Boult Audio for devices such as bluetooth earphones and smartwatches.

Also read | Indian smartwatch brands turn to price cuts to gain market share


Zupee’s revenue zooms to Rs 831.51 crore in FY23

Dilsher Singh Malhi

Dilsher Singh Malhi, founder & CEO, Zupee

Online real-money gaming startup Zupee has more than doubled its operating revenue to Rs 831.51 crore in FY23, from Rs 405.10 crore in the previous year. The Gurugram-based company also narrowed its net loss 72% to Rs 36.5 crore last year, thanks to slower increase in expense than revenue growth, according to the company’s regulatory filings sourced from business intelligence platform Tofler.

Details: Zupee’s robust revenue performance mirrors those of online gaming firms such as Gameskraft and Mobile Premier League (MPL) in FY23, prior to the impact of the goods and services tax (GST).

Expenses up: Zupee’s total expenses rose 66% to Rs 900.78 crore in FY23. This was mainly due to an 85% jump in advertising and promotional expenses to Rs 703.33 crore, which included marketing costs, as well as cashbacks and bonuses given to users.


Other Top Stories by Our Reporters

Sadasiva Ranganath

Sadasiva Ranganath, CTO, Hewlett Packard Enterprise India

Organisations in India maturing on cybersecurity, says HPE India tech chief: Organisations across sectors in India are having mature conversations on cybersecurity and want a multi-layered and comprehensive “secure-by-design kind of model to be put in place,” the chief technology officer of Hewlett Packard Enterprise India said.

Physics Wallah eyes offline expansion in 2024 with 100 physical centres: Edtech unicorn Physics Wallah plans to expand in 2024, taking its offline footprint to 100 centres from 64, cofounder Prateek Maheshwari told ET. A Rs 100-crore corpus has been earmarked for expansion for two years starting January 2023.

Accenture opens GenAI studio in Bengaluru: Multinational professional services company Accenture launched a generative AI studio in India’s tech capital Bengaluru. The studio will develop a full stack of genAI capabilities for enterprises to leverage to optimise their business processes, the company said.


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