💎Police tech, Zelle, Perennial Rice (4th December, 2022)

This week we talk about the following in our Expert Take section:

1. China’s Police Tech
2. Zelle’s fraud
3. Long-lived Rice

Also, in our Investment Insights section, we explain how lease financing as an investment works.

Expert Take

EXPERT TAKE #1 - 40 sec read ⏱

China’s police-tech

Read about the tech tools that China police used to stamp out the anti-Covid protests? They used facial recognition and location tracking to catch hold of the protestors and detain them.

It was in 2020 that China set up a national laboratory to research on advanced policing technologies. They felt it was needed because their police-to-population ratio is 1.4 police officers per 1,000 people in China, whereas the UN recommends 2.2 police officers per 1,000 people.

Some examples...

• They used drones to bust a gambling gang, which would frequently change its location.

• Basis previous spatial patterns, surveillance footage, and emotional recognition, they can predict where crimes can happen.

Our take📝

With the new age technology, police forces around the world have been trying to use data analytics and machine learning to predict and prevent crime. Also, it helps them allocate their limited resources accordingly for patrolling.

But the catch here is, there has to be a fine line drawn so that it does not distort the privacy of the citizens, with respect to the data monitored by the police.

EXPERT TAKE #2 - 45 sec read ⏱

Long-lived Rice

Farmers in China are experimenting with a long-lived variety of rice that allows 2 years of not planting the crop and still getting 8 harvesting seasons.

Wondering how we manage in India currently? Rice is cultivated 2-3 times in most parts of India, with dependency on water supply through irrigation or monsoon. And it is quite labor intensive too.

How can Indian farmers benefit from perennial rice?

• They are 60% less labor intensive so they provide a solution for the aging Indian farmers and their younger generations moving away to cities

• Perennial rice is climate-friendly as it uses less water and fertilizers. The highlight is it prevents stubble burning to make the land ready for the next season

• Keeping in mind the above, the studies have proven that it is up to 120% more profitable than normal rice

  Our take📝

With the above-mentioned profitability figures, it is worth a shot for India to try out perennial rice. Of course, there would be certain factors to consider before realistically implementing the change in India.

Investors should keep a watch on the listed companies in the space and if they are thinking to experiment with it and reap the benefits.

EXPERT TAKE #3 - 50 sec read ⏱

Banks to compensate for Zelle’s fraud

2017: 7 of the biggest banks in America, including the likes of JP Morgan, saw their customers using apps like Venmo to send instant peer-to-peer payments. They rolled out Zelle through a jointly-owned company.

2021: Zelle was super easy and fast to use. It saw widespread adoption and was processing nearly twice the number of payments as Venmo, but as the volume of Zelle payments increased, so did frauds.

Recently last week: Banks are deciding upon a plan to compensate the victims of the scams who lost $440 million.

What went wrong?

Zelle's ease of use made it possible for fraudsters to use social engineering to acquire Zelle credentials. The biggest drawback of Zelle is that it doesn't offer fraud protection for authorized payments. Hence it was a convenient platform for fraudsters to target.

Our take📝

When in 2017, banks launched Zelle, they would not have imagined how keeping the platform simple can actually act against them.

But no fraud protection mechanism had many obvious repercussions for one to foresee. Was a miss definitely!

Investment Insights

INVESTMENT INSIGHTS - 60 sec read ⏱

Lease Financing

What if we said that you can actually lease out computers to Infosys and earn money in the process, without managing any of the operations? Well, lease financing deals can help you do just that! Let’s read and find out more!

What is lease financing?

Let’s take the Infosys example - Being an IT company, they need laptops for their staff. Now Infosys decides that instead of spending money upfront buying laptops, it will lease them. It then reaches out to a finance company, which pays for the laptops and rents them out to Infosys for a fixed duration, getting a monthly rent. This process of renting out computers (or anything else) is known as leasing.

Now you, as an investor, can participate in such deals with the finance/fintech company, where money from multiple investors is pooled together to purchase products (assets) which are leased out. Once leased out, the lease amount is distributed (typically every month) to all investors. By the end of the lease contract, investors make about 10-12% on their investment.

Benefits and drawbacks of lease financing deals

• Lease financing as an investment option offers a lot of benefits to investors

• The returns are not linked to the market, and therefore it helps in diversification

• Since the lease is paid periodically, it acts as regular, fixed income for investors

But they have their own set of drawbacks too!

• Even though it’s secure, if there’s a default, it could lead to legal proceedings, which could delay your eventual payout

• Generally, each leasing deal is valid for a certain time period before which you cannot exit or withdraw your investment, even if you want to

Our take📝

While lease financing offers better returns, there are some additional parameters that you should check as an investor, like:

• Resale value of the asset in case there’s a default

• Payout structure - how much money is paid out and at what frequency?

• Credibility of the company to whom products are being leased

• Credibility of the Fintech/Financial company that is managing the deal

Another aspect to note is that lease financing deals are typically structured as partnerships, where all investors are partners in an LLP firm that does the leasing. The returns are then distributed to the partners after deducting tax (which could be as high as 30% of the earnings). Investors should therefore check the deal structure and evaluate the post-tax returns before deciding to invest.