If you have ever wanted a credit card, you know how easy it is now. With fintech products like Slice Pay, PostPe, or Uni cards, it’s so easy to issue a credit line for yourself and borrow money.
Over the last few years, this credit line is something that almost every working or studying individual in India somehow has acquired.
In fact platforms like LazyPay or Simpl make it so easy to order things and pay later for them. This buy now, pay later concept seems to be growing rapidly in India.
But a week back, the Reserve Bank of India’s (RBI) guidelines around digital lending, which kicked in earlier this week, have upended the fintech sector, forcing those dealing with credit to re-evaluate, or even materially alter their operations, to be in compliance with the law of the land.
In nutshell, these operations are being put on hold because apparently, it seems like these fintech products are capitalizing on the lack of financial people of the people throughout the country.
Now here’s the thing – Whether this digital lending framework was good or bad for the industry and fintech innovation, the customer matters the most right now.
For context, here’s a recap.
This year in August, the RBI’s Working Group on Digital Lending—a body constituted in January 2021 to study issues related to online lending—released a set of guidelines that promulgated greater transparency and disclosures to borrowers in the process of signing a loan.
The notification focused on three main things:
- regulating the entire lending chain
- providing transparency to borrowers
- defining good data privacy practices
While this decision does seem appealing to people in general, it seems that not everybody is happy with the decision.
These regulations somewhat hinder the Indian startup ecosystem in general. Companies like Uni Cards, Slice, PostPe, all of which were extending loans via cards, had to abandon their 1/3rd pay-later business models and pivot to an essentially credit card-like format.
Uni Cards has plans to launch a co-branded card with SBM Bank called ‘NX Wave’. PostPe and Slice have already rolled out these on their platforms.
While this is rewarding for consumers, investors fear that these operations may come at an expense of the millions of dollars of investors’ money that has been pumped into these startups.