With the economy opening up after lockdown, consumer-focused large online platforms are lining up new loans or credit lines to tap into the growing demand for credit among consumers, even when lending-focused startups are being cautious before issuing new loans.
Digital payments platform Paytm has reworked its lending product Postpaid with an enhanced credit limit of Rs 20,000-100,000 which is being rolled out to 40 lakh consumers in the first phase across 5-7 lakh merchant locations, including kirana stores and popular online and offline retail points. It is issuing the credit through two NBFCs– Clix Capital and Arth Impact. In its old avatar, Postpaid had a user base of about 5 lakh users, the company said.
Similarly, Amazon India, which tested its Pay Later credit line in the middle of the lockdown at the end of April, said it has seen a growth of 6 times in demand from consumers in the last few weeks and it is scaling it further in India. A person aware of the matter said the e-tailer is in talks with top private banks to expand the coverage of the credit among its consumers. This comes when online platforms are looking to boost the purchasing power of consumers amid falling income across households.
For Paytm’s Postpaid, it has now created a tier-based system for offering credit to a range of users starting from consumers who would typically not get bank loans or have credit cards and then customers with a good transaction history. They are called Lite, Delite, and Elite. Lite would have a maximum limit of up to Rs. 20,000 and a convenience fee that will be added to the monthly bill, the Delite and Elite would enable a higher credit limit from Rs. 20,000 to Rs. 100,000 per month with no convenience fees.
“If you are a Delite user, you have to only pay the amount borrowed if it’s paid by seventh of next month, but if you are a Lite user, you will have to pay a convenience fee of 1-3% (of the amount borrowed) when paid by the seventh,” said Amit Nayyar, president, Paytm. He said the interest rate to convert these loans to EMIs, after the seventh day of a month, will be in the range of 15-36% and it would vary from customer to customer based on multiple factors like ‘credit risk’.
As reported by last month TOI quoting McKinsey data, 54% of households in India have faced loss of income due to the broader impact of coronavirus on the economy. These loan facilities can thus nudge the consumers to make purchases using credit facilities as businesses start to reopen.
“Since the launch of Amazon Pay Later, we have seen customer adoption grow 6 times. Early adopters used the funds for high ticket purchases but we have also seen customers buying essentials and paying utility bills,” said an Amazon India spokesperson.
“As we gradually open up from lockdown, we expect a 2 times jump in credit financing products,” a Flipkart group spokesperson said.
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