Card-based fintech in dire straits with PPI lending ban


Fintech firms such as Jupiter, EarlySalary and KreditBee have temporarily stopped customers from making any transactions on their prepaid cards, multiple sources told ET, after the Reserve Bank of India (RBI) recently banned the industry from loading credit lines on prepaid payment instruments (PPIs).

Some partner banks of these card-based fintech firms may also stop supporting their bank PPIs to these platforms after seeking a clarification from the RBI, the people said.

“Our payment services are currently unavailable to comply with the new RBI guidelines. We will share an update as soon as we have one,” Jupiter Edge, the challenger card vertical of Jupiter, said in a statement.

Card-based fintech firms such as Slice, Uni, Kissht (through its Ring card offering) and LazyPay are also likely to be severely impacted, with their business models now questioned, the sources added.

“There is no point taking risk after the RBI’s note on Monday. This is the reason why some of the platforms relying on non-bank PPIs have now stopped new transactions. This may attract RBI ire and penalty on partners firms if they don’t comply with the note,” one of the people said.

The fintech firms, even as they seek further clarity from the RBI, are thinking of ways to work around the regulator’s order.

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Buy-now-pay-later (BNPL) firm LazyPay, part of PayU India, is updating its terms and conditions as per RBI’s note, sources added. The details of these changes are, however, not clear yet.

Some fintech firms are thinking of re-issuing credit cards as bank some partners log out to comply with RBI’s communication, according to one person.

A spokesperson for Jupiter declined to comment while KreditBee and LazyPay did not respond to ET’s queries till press time Wednesday.

“In light of the
recent circular from RBI, we will not be carrying the

card product. This product was very recently launched and is today a very small portion of our business. We continue to remain excited about Ring’s potential and its ability to provide a best-in-class payments and credit solution,” said Ranvir Singh, founder and manager director, Ring, a BNPL card by Kissht.

Partner banks under pressure
While partner banks are facing the heat from RBI’s note as they have been involved in the co-branding exercise, fintech firms have also reached out to partner banks to understand the note’s finer points.

“Amid heightened uncertainty, some of these major bank partners got the note clarified from the RBI and learnt that the notification also applies to bank PPIs. This has led to some banks informing their fintech partners that they will not be providing bank PPI support to them any longer,” said a fintech executive on condition of anonymity.

“At present, it looks like

of Mauritius (SBM), which partners with all the major credit-card fintech firms, is one of the only banking players that will continue supporting the co-branded cards,” the person said.

Slice, which works with SBM, is currently operating as usual.

At present, SBM, RBL Bank, and

are some of the lenders that have partnered with card-based fintech firms to issue co-branded credit cards to consumers.

Some of these banks had also told their fintech partners before RBI issued the note that they would not support the co-branding partnership after June 30.

“The final call will be taken by the partner banks (on bank PPI) and we are looking for clarity,” said the founder of a card-based fintech firm whose business is likely to be impacted.

Industry sources told ET that last year the card-based fintech industry, including companies such as Slice, Uni, and others, had been issuing close to one million cards every month, crossing the average scored by several banks.

“Everyone knew that RBI had a conservative view of the (card-based fintech) sector and now fintech firms are scared of how unpredictable the regulatory environment is turning out to be,” said a fintech executive who did not wish to be named.

Even as the fintech industry comes to terms with the new norms, industry groupings such as The Digital Lenders’ Association of India (DLAI) and the Fintech Association for Consumer Empowerment (FACE) are seeking relief from the regulator, pushing for a deferment of the implementation timeline.

The regulator has been cautious of credit products such as BNPL for some time. In January, it started conducting surveys and sought details on business models, client segment and delinquency rates of BNPL players.

In April, the regulator said non-bank lenders cannot issue credit cards or ‘similar products’ without its approval.



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