How Fintech Cards are different from Bank Credit Cards?
WHAT IS FINTECH?
Fintech is a portmanteau of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. The term encompasses a rapidly growing industry that serves the interests of both consumers and businesses in multiple ways. From mobile banking and insurance to cryptocurrency and investment apps, fintech has a seemingly endless array of applications.
WHAT’S HAPPENING?
While you may be a getting a barrage of phone calls from bank representatives for buying a new credit card, there is a new kid on the block i.e., cards issued by fintech companies. Unlike the usual credit cards, they are not issued by commercial banks. Some of these cards include Uni card and Slice card.
Although some NBFCs also issue their credit cards but they usually join hands with a bank, for instance, Bajaj Finserve issues its super card in conjunction with RBL Bank. As a matter of fact, most of these virtual cards are not typical credit cards. What they do is to offer a credit line. They give a virtual card to use that credit line. After a few days, one gets a physical card as well at an address mentioned in the form.
CREDIT CARD USERS IN INDIA?
Despite all the hype by banks and credit card issuers, Indians have not really embraced credit cards. According to RBI data, almost 62 million credit cards were in use in India in the financial year 2021, corresponding to less than 6% of our total population. Many have argued that the lower card penetration rate is yet one more marker of the true ‘consuming’ class in India, estimated variously at between 120 million to 300 million worthwhile users, depending on product/service category.
Difficulty in getting one has played a role, but users in India may now apply, be approved, and get a credit card ready to use in less than 5 minutes. Thanks to the recent revolutions in data analytics and tremendous development in the Indian Fintech Ecosystem.
FINTECH ECOSYSTEM
Fintech is one of the hottest sectors in India and abroad, and has attracted record amounts of money, Burning heavily on aggressive social media advertising, performance marketing, paying influencers to promote their product, and engaging a celebrity or cricketers for brand endorsement. According to Invest India report, there were 6,636 fintech startups in India as of 2021 and the country’s fintech industry market size was $31 billion in the year and is estimated at ~$150 billion by 2025.
Fintechs may now access and verify applicants’ data with the use of Aadhaar e-KYC using OTP or Offline XML consent, and APIs are available for several validations such as PAN verification, Credit Bureau Check, and so on. That has knocked out a significant part of the cost of verifying potential card users and their creditworthiness. Not only that but there are a few B2B SaaS enterprises, such as Zeta and M2P Fintech, that help fintech companies build products, allowing them to underwrite loans and credit cards more quickly.
HOW FINTECH ARE COMPETING SUCCESSFULLY?
Fintech credit card companies assign a credit limit with the help of their lending partner (which can be a bank or an NBFC) and offer you a prepaid card backed by that credit limit. So, technically, you are getting a prepaid card backed by a loan account created in your name by the fintech companies. With the new RBI circular, even NBFCs may be able to issue a credit card soon, but currently, if you use fintech credit cards such as Slice, Uni, LazyPay, PostPe, and others, There is a high probability that you have a loan account running on your name because they are not full-fledged credit cards.
TARGET CUSTOMERS?
Because fintech firms want to serve the (younger) customer first, the entire focus seems to be on product experience, design, marketing, and making card usage more exciting. Fintech credit card companies are known for their attractive discounts referrals, and cashback on day-to day services we use such as food ordering, recharge, bill payments. They are investing heavily in marketing and partnerships with the goal of acquiring more and more users, and consider the expens
EXERCISE CAUTION
However, card users must be aware of the fact that these cards don't offer you typical features of a credit card such as cash withdrawal and international payments. Whatever you spend online/offline using Slice/Uni cards appears as a consumer loan in your credit history. And missed payments will impact your CIBIL score similar to the credit cards.
IN CASE COMPLAINT
Even if you have made on-time payments, if you discover any difference in your credit reports, such as a late payment, default, erroneous loan or credit card limit, Raise it straight away with your credit card or fintech firm, as well as credit bureaus, and If they do not address it, you have the choice of lodging a complaint with the CMS Desk of the regulator RBI or the Consumer Forum.