Card-based fintech players stop onboarding new users, continue services for existing ones 

Following RBI's directive to non-bank PPI issuers to not load their wallets and cards from credit lines, fintech companies have stopped onboarding new customers but are continuing to offer services to their existing customers. 

“One in four of our customers used it to pay for medical reasons. One in six customers used it to pay school or college fees. It causes chaos if the services suddenly stop. So we stopped new onboarding the day this certification came up. But the existing customers have been catered to because they also rely on this product for their daily lives in some ways. We are figuring out if a new solution can emerge,” said a fintech founder on the condition of anonymity. 

The central bank has been approached for clarity over the directive, said people aware of the matter. Till the clarity comes, fintech players are considering diversifying their businesses to maintain continuity. For example, selling co-branded credit cards is one of the options. “We can issue co-branded credit cards to customers. We can migrate these customers to a credit card type of product, that's one solution,” said a card-based fintech founder.  

He added, “Majority of these prepaid accounts – more than 90 per cent – have full KYC done for a prepaid wallet, which is the same as the KYC done for a bank.” However, the remaining 5-10 per cent are the ones that are causing a lot of problems, he said. 

According to RBI, PPIs issued by non-banks are allowed to be loaded by cash, debit to a bank account, credit, and debit cards. Fintech players engaged in the PPI-based business model however used it more for extension of credit.  Currently, there are about 1.5 crore Indians who use BNPL today and among those, about 1 crore of them have a BNPL card. 

''The PPI-MD (Master Directions) does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007,'' RBI has directed the non-bank PPI issuers.

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