The emergence of Credit Line on UPI represents a significant leap forward in the financial landscape. This pioneering financial offering promises to reshape the lending landscape, providing individuals and businesses with seamless access to pre-sanctioned credit lines from banks, coupled with the convenience of UPI. Since its introduction in September last year, fintechs have been quick to capitalize on this breakthrough. As this transformative wave continues to gain momentum, we anticipate the following disruptions taking shape, bringing in a new era of financial accessibility and innovation.
1. UPI In-store EMI: Redefining Consumption Finance
In the realm of financial innovation with Credit Line on UPI, UPI In-store EMI stands out as a groundbreaking B2B2C strategy. By first targeting offline merchants, this strategy aims to acquire consumers through subvention partnerships and tech integrations with banks and brands. The central goal is to enhance affordability, rewards, and approval rates for end consumers, serving as the linchpin connecting these four crucial players.
The consumer experience unfolds seamlessly through a streamlined process:
- A cashier-sent SMS link containing cart details and amount directs to one-time onboarding on the application.
- Consumers can explore a list of credit options for payment, complete with details on reward, tenor, EMI amount, no-cost or not, and interest rate.
- Enticing options for new credit lines or cards are presented, complete with approval likelihood and purchase rewards, creating an all-encompassing in-store experience.
This innovative approach, akin to traditional in-store lender desks, democratises access across various lenders. The rewards for the above purchase come from subvention budgets held by banks and brands, as well as budgets held by banks for new user activation, inactive user resurrection, and driving line usage and spends.
2. Boost for BNPL and MSMEs
RBI’s proposal to allow UPI transactions via pre-sanctioned credit lines is being seen as a positive move for Buy Now Pay Later (BNPL) and MSMEs by broadening access to credit and credit-based transactions. The linking of loan accounts to UPI bypasses the need for physical infrastructure and allows inclusion of borrowers who don’t have access to cards1.
For the merchants and MSME/SMEs who already use UPI for paying and receiving money, expanding their businesses becomes much easier using the collateral-free, on-tap credit line. Broadly, this bridges the gap of as large as Rs 15-20 lakh crore in the MSME/SME credit system, enhancing overall economic growth in rural and semi-urban areas2.
3. Fintechs Betting Big on UPI Credit Lines
Fintechs are confident that Unified Payments Interface (UPI) credit lines will pick up. Firms such as Jupiter, EaseBuzz, and PayU are betting on bringing a credit card-like payment experience for consumers on UPI. This move is likely to drive growth and further expand the reach of credit accessibility in the market3.
In conclusion, Credit Lines on UPI open up exciting avenues for businesses, consumers, and fintech players alike. As this ecosystem evolves, we can expect even more innovative solutions to emerge, transforming the way we access and utilize credit. 🚀📈