Slice introduced itself as India's best card challenger on its website. It is apparently emerging as one. After raising $220 million in Series B last month, Slice turned into a unicorn. It issuing 2,00, 000 every month, trailing only HDFC Bank and ICICI Bank, and has a waiting list of over a million users.
Uni raised $18.5 million in a seed round with no product in hand, just like Slice, another startup, Uni is making its mark and has found a disruptive workaround in the form of pay-later in October 2020. In the month of November, the amount of the money was 120 crore by Uni. The startup says it is seeing a 40 per cent month-on-month growth.
Let's find out how pay-later are different from cards. India has just 66 million cards in circulation. In October 934 million debit cards were in circulation. It is not easy to get a credit card in India as banks are very conservative in this segment.
They prefer customers with high credit scores and full-time salaried jobs.
If you are a student, a freelancer, a self-employed person or a blue collar worker, you can rest assured that banks would ignore you. Pay-later cards are promising to change all of this.
These startups are helping millennials build credit scores for the first time by focusing on millennials who are digitally active but without a credit history. For this, Slice is issuing cards with a credit limit as low as Rs 2,000 which is increased dynamically as users spend more and get consistent in repayment.
Nitin Gupta, Uni's CEO and co-founder, told Business Standard that its existing card is designed for people to tide over short-term liquidity issues. The startup will launch a product that will focus on customer segments that don't have access to credit today, a product that depends on credit scores to choose its customers.
Pay-later cards don't have revolving interest unlike credit cards. Interest is charged from the date of the transaction in case of late payment. There is no interest fee on purchases made in pay-later in case of partial payment.
A pay-later card gives greater flexibility and simplicity in repayment, which is what the companies are projecting as their selling proposition. While Slice allows its customers to split their monthly spends equally over three months with no additional charges, Uni goes a step further by doing this at the transaction level. Uni customers can choose the transactions they want to pay in full and split the rest over three months.
Intech companies rely on banks and NBFCs to underwrite the loans while they take care of the tech platform that rides on flexibility and transparency.
The business comes with its fair share of risks in the form of non-performing assets and the true test of their underwriting process will only be known in the medium term. We can expect such innovative lending companies to increase the total addressable market for their cards and other credit products from traditional financial institutions in the future.