Fintech Companies' Supply Of Prepaid Cards Is Drying Up

After the Reserve Bank of India (RBI) recently forbade the industry from loading credit lines onto wallets and other similar prepaid payment instruments (PPIs), prepaid cards issued by fintech companies like Slice, Uni, and LazyPay have fallen below the 100,000-mark, as per information by numerous industry officials.

Due to a lack of legislative clarity, card-based fintech firms Uni and PayU-owned LazyPay (through its LazyCard product) have fully stopped issuing new prepaid cards, they noted. To maintain company continuity, they claimed that both of these companies continue to offer service to current cardholders and are seeking to establish new partnerships with lenders. Before the RBI's order in June, according to two industry insiders, the fintech sector issued a total of between 500,000 and 700,000 new prepaid cards in May.

"So far in July, fresh card issuances by these fintech companies have decreased to a level that is one-tenth of what it was before the RBI requirement. But consumer acquisition keeps going. New issuances will slow down until the restrictions are clear, according to a fintech executive.

On June 23,  some players, including Jupiter, KreditBee, and EarlySalary, promptly halted new transactions on their prepaid cards in response to the RBI circular. Slice, a fintech unicorn with headquarters in Bengaluru, keeps gaining new clients in collaboration with SBM Bank. However, sources claimed that as it discusses with the regulator on the best course of action, issuances have substantially decreased.

By the end of May, Slice had issued up to 200,000 cards per month on average, up from 20,000 at the beginning of the year. The sole lender encouraging fintech businesses is SBM Bank in India

According to a PayU spokesman, the company no longer accepts new LazyCard users. The company had cross-sold nearly 100,000 LazyCards every month to its current Lazy clients, the representative said, adding that support for existing customers "continues and in compliance with the latest rules from RBI."

Over 10 million active prepaid cards were estimated by PCI, and over Rs 3,500 crore worth of transactions were made using these cards in May alone. These cards are used to dispense credit lines. As companies wait for the regulator's final recommendations on digital lending, the effect of the slowdown in card issuances is also being seen in the co-branded market, sources noted. The business models for card-based fintech companies will now develop in new collaborations, where they may be able to charge banks merely an origination (fee) while still being DSAs (direct selling agents). However, since the RBI wants banks and

The fintech companies are actively debating whether these more recent models are permitted with banks and the RBI.other regulated companies to maintain control, revenue lines will be affected, according to a source in the fintech sector.