Fintech companies have stopped the “buy now, pay later” schemes, read.
Many fintech companies have stopped buying now, pay later (BNPL) services following a recent announcement from the Reserve Bank of India. The new guidelines, issued by the RBI last month, stopped non-banks’ prepaid payment instruments (PPIs) from being loaded with credit lines.
The central bank’s move comes amid growing concern about card-based credit services and PPIs being loaded through credit lines.
According to RBI, the new credit instruments can result in systemic risk. In recent times, Fintech companies are using credit lines from banks and non-bank financial corporations (NBFCs) to load customer wallets.
The bank regulator is concerned about the lack of due diligence while loading the PPIs through credit lines.
The new RBI guidelines, issued on June 20, have sent fintech companies into a rut and many have temporarily stopped prepaid instruments.
Under the new directive, non-banking companies can offer credit cards or other PPIs without prior approval from the RBI. However, customers can load their prepaid wallets with cash or use credit and debit cards issued by their banks for the same purpose.
Fintech companies have asked for clarification from RBI as the new guidelines have caused a disturbance in the industry, especially negatively affecting small players.
Fintech startup PayU India’s lending platform, LazyPay, has temporarily closed its purchase now, pay later product LazyPlus UPI. The product was launched in September 2020, and it issued credit lines of up to Rs 1 lakh to the users.
LazyPay is now planning to change its LazyCard offer from a prepaid card to a credit card to comply with RBI guidelines, the Economic Times reported.
Online credit service platforms Jupiter, EarlySalary and KreditBee have temporarily stopped all transactions through their prepaid cards. Slice and Uni also have limited issuances of new credit cards in accordance with the RBI directive, mentioned the ET report with citation of sources.
The electronic credit service platforms follow three models, which are under RBI’s scrutiny. The three models include credit cards, an operator who receives a loan and gives it to the PPI holder as a card load, and a PPI holder receives a loan from the operator. In recent years, interest-free loans have increased, and there is therefore a risk of ending up in a vicious circle of over-consumption, RBI points out.
