rbi fintech order: Issuances of prepaid cards are drying up for fintech companies

Prepaid cards issued by fintech companies such as Slice, Uni and LazyPay have slipped below the 100,000 mark after the Reserve Bank of India recently prevented the industry from loading credit lines on wallets and other such prepaid payment instruments (PPIs), several industry leaders told ET.

Card-based fintech players Uni and PayU-owned LazyPay (through the LazyCard product) have completely stopped giving new prepaid cards due to a lack of regulatory clarity, they added. However, both of these companies continue to support existing cardholders and are working to enter into new partnerships with lenders to ensure business continuity, they said.

Two industry leaders told ET that before RBI’s juniors, the fintech industry issued a total of almost 500,000-700,000 new prepaid cards in May.

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Support for existing users

“In July so far, new card issues from these fintech companies have fallen to a tenth of the level before the RBI mandate. Customer acquisition continues, however. There will be a decline in new issues until there is clarity about the regulations, said a fintech leader.

ET reported on June 23 that after the RBI circular, several players including Jupiter, KreditBee and EarlySalary had immediately stopped new transactions on prepaid cards.

Slice, a Bengaluru-based fintech unicorn, continues to add new customers in partnership with SBM Bank. Sources said, however, that the issues have fallen drastically as it consults with the regulator about the way forward.

At most, Slice issued up to 200,000 cards each month at the end of May, compared to 20,000 at the beginning of the year, the sources added.

SBM Bank in India is the only lender that supports fintech players, like other major lenders such as

have logged out of such partnerships.

Slice did not respond to ET’s inquiries before press time on Monday.

A PayU spokesman said they had stopped bringing in new customers for LazyCard.

“Support for existing customers continues and in line with the latest RBI guidelines,” the spokesman said, adding that the company had cross-sold nearly 100,000 LazyCards per month to its existing LazyPay customer base.

Changes model

The Payments Council of India (PCI), an industry grouping under the broader umbrella of the Internet and Mobile Association of India (IAMAI), recently urged the government to step in to address the fallout from the RBI’s latest directive.

PCI fixed the total active prepaid card industry – where a credit limit is paid – at over 10 million, with transactions worth over Rs 3500 crore processed through these cards in May alone.

The effect of the decline in card issues is also witnessed in the co-branded segment, as players are waiting for final guidelines from the regulator on digital lending, sources added.

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“According to RBI’s circular, the numbers have been down in a small drip … Most of the larger wallet players have slowed down or stopped completely because there is not enough clarity on the regulator’s stand. The decline in numbers is largely driven by a decline in purchases from major players such as Slice, which had reasonable figures for the industry. Card applications have fallen below one lakh, “said another payment manager.

ET reported on July 14 that several fintech companies were exploring options, including co-branding partnerships, paying cash directly to customer accounts or even letting partner banks open bank accounts for customers with an additional debit card.

“The business models for card-based fintech companies will now evolve into new partnerships, where they may only be able to charge a call (fee) from banks, while they are DSAs (direct sales agents). However, revenue lines will be affected as RBI wants banks and other regulated entities will retain control, “said a fintech industry source.

Fintech companies are in active discussions with banks and RBI about whether these newer models are allowed.

“If there is no clarity, many of these card-based fintech companies could become classic providers of cash loan apps, since the bank itself, in partnership with co-brand, will dictate everything from pricing to the user’s demographics, leaving little ceiling for these companies,” said the founder. by a fintech company.