India’s cricket betting rush is straining banks

By Andy Mukherjee

To purists and pundits, the Indian Premier League may be more glitz than cricket. But it’s serious business for the nation’s richest tycoon — and an operational nightmare for banks.

Mukesh Ambani is offering advertisers brain-mapping studies of how audiences behave during an IPL match to garner the most revenue for the billions of dollars his conglomerate has spent to stream and broadcast the country’s most-beloved sport, according to Reuters. Meanwhile, banks are doing a different kind of analysis: They’re trying to map the money flow.

The two-month-long cricket league — this year’s finals are on May 25 — is a major catalyst for annual Indian gambling demand in excess of $100 billion, according to analysts. Online bookmakers located overseas provide illegal access to residents via cryptocurrencies. They also use mule accounts in the local banking system. The legitimate gambling industry, which pays domestic taxes and caters to customers with rupee-denominated bank deposits, is smaller, but it’s growing fast.

One popular avenue is Dream11, a startup that allows people to create their own fantasy teams and compete against other users. Prediction markets like Probo offer all-or-nothing binary options on a variety of actual outcomes. People place real-money bets by withdrawing cash from their bank accounts and instantaneously crediting the betting site.

This frenzied activity is a strain on lenders’ IT departments. To help complete in-match wagers quickly, they have to make sure customers’ money reaches the destination bank over India’s Unified Payments Interface, a public utility shared by more than 600 institutions. Banks that hold the accounts of legitimate betting sites are under pressure from clients to not miss any of the funds coming their way. Or, they will take their business to another institution.

Welcome to the digital age. Before the arrival of the common utility in 2016, Indian banks had all the time in the world to record debits and credits in software that ran on servers stored on their premises. A check written on a different institution in another city took days to clear. Now smartphone-based transfers are immediate. Banks suddenly have to cope with a tsunami of data from intermediaries that do most of their computing in the cloud.

Thanks to the popularity of the UPI protocol, which handles the equivalent of $3 trillion a year, India accounts for half of all real-time transfers taking place anywhere in the world. Every month, the National Payments Corp., which operates the shared utility, publishes each bank’s failure rate — as a remitter and as a beneficiary. Customers know where they should keep their money to avoid embarrassing situations.

The Reserve Bank of India, too, has become less forgiving of glitches. The regulator has started taking a stern view of user access and data security provided by financial institutions’ digital operations. As I wrote last year, inadequate investment in technology has proved to be Indian banks’ banana peel. To avoid slipping, many are warming up to new-age analytics vendors like VuNet Systems.

Even without the IPL betting rush, the workflow is staggering. Every person who walks into an electronics store, buys a TV, and decides to pay for it in installments, triggers some 200 digital dialogues — over so-called application programming interfaces — among the parties involved in the sale, financing, and payments.

VuNet, which observes more than a billion transactions every day, logs 50 terabytes of data. That’s like watching TikTok videos nonstop for 4 years. “This information was once accessible only to technical teams and troubleshooters,” says Ashwin Ramachandran, the chief executive officer of the Bengaluru-based startup. No longer. “Today, our conversations with banks increasingly involve top management. We use big data and artificial intelligence to help leaders gain real-time visibility and prevent the next failure — in plain English.”

At some point, though, the elephant in the room will need to be tackled. Unlike credit and debit cards, most of the 185 billion instantaneous transactions taking place annually earn little for the banks, regardless of whether people are paying for an autorickshaw ride — or placing bets during an IPL match.

The government wants to keep the network free for users, so it offers some incentives to the intermediaries. Yet those aren’t enough. Banks exposed to the fast-paced inflows and outflows can’t afford to treat them as a low-priority activity. They have to invest heavily, both to weed out money-laundering and fraud, and to improve users’ experience of genuine transfers. The sword of digitization cuts both ways: Deposits acquired with little effort are easily lost — for lack of effort to retain them. Similarly, the UPI network, hit by frequent service outages in the past couple of weeks, will need to become more robust if it has to remain a public monopoly.

One botched IPL wager may be just a transaction ID to tech support. For the customer who wanted to bet on the Gujarat Titans to beat the Rajasthan Royals Wednesday, it’s a winning gamble ruined.