line of credit: tranche moves to term loans of line of credit after RBI rating

Card-based fintech startup Slice will offer real-time term loans to customers for every transaction, based on user profile, nature of transaction and merchants.

This is a waiver of revolving line of credit to consumers and comes after the Reserve Bank of India (RBI) recently banned fintech companies from loading credit lines on wallets. and prepaid payment instruments.

The credit card challenger unicorn informed consumers of the changes to its credit model through a memo on Tuesday. ET reviewed a copy of the note.

Slice said it would offer a real-time term loan to card customers for each transaction, instead of a revolving line of credit.

The fintech player is calling the new model “Purchase Power,” according to the consumer communication reviewed by ET.

“Buying power is an estimated amount you may be eligible to borrow from Slice,” the company told users, adding that real-time risk underwriting will be supported by its data and technology infrastructure to provide the best possible credit to users at the time of the transaction.

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According to the communication, “Every time you make a transaction with your Slice card, a new approval decision will be made instantly to assess the best amount you can borrow for the purchase. The decision will be determined primarily based on credibility. merchant, risk, fraud checks and your past payments and repayment habits.

Slice also reassured customers that changing its credit model will not negatively impact their credit scores as it will continue to follow the credit bureau reporting process.

Slice did not respond to questions from ET until press time on Tuesday.

While the change may trigger uncertainty over whether a user will get the loan at the point of sale, customers can check their buying power on the app to get an indication of their buying power.

Slice offers several credit features to its prepaid card users, including its “Pay-in -3” offer, interest-free matching monthly installments (EMI), among others. However, with the change in the credit model, all loans issued to card customers will now be term loans, processed in real time.

ET was the first to report on July 18 that Slice’s ongoing fundraiser had been halted following an order from RBI, due to a lack of regulatory clarity in the industry.

On the ongoing fundraiser, Slice had already raised $50 million last month, led by Tiger Global. It was looking to add at least another $50 million to its latest funding round and was in talks with new and existing investors.

The Bengaluru-based company entered India’s long list of unicorns, or startups with a valuation of $1 billion or more, in November last year after raising $220 million in a round led by Tiger Global and Insight Partners. It was valued at around $1.5 billion after the $50 million funding in June.

Following the RBI circular, several fintech companies, including LazyPay, also updated their terms and conditions to reflect compliance.

“The terms and conditions (T&C) are changed in two respects, at present. If someone was a non-banking PPI, it states in its terms and conditions that the money will not be paid into the consumer’s wallet, but rather into his (cash) bank account. Second, the entire overdraft should be viewed as a term loan and not a revolving line of credit,” said the founder of a fintech company that doesn’t did not want to be named.

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