With the Integration of credit lines and access to loans through the unified payment interface (UPI) platforms, companies in UPI space have started seeing signs of a self-sustainable business model, Ambarish Kenghe, vice president of Google Pay, told FE.
The statement from Kenghe assumes significance, given that currently regular UPI transactions are not chargeable but only merchants have to pay 1.1% MDR (merchant discount rate) for payments above Rs 2,000 when received through wallets, credit cards, and debit cards. However, there is an infrastructure cost, marketing costs, and people cost which banks and UPI firms incur to facilitate those transactions.
“The companies can continue to invest in UPI, but unless we (industry) make it self-sustaining, then some day we will see huge costs, and we will run out of fuel,” Kenghe said. According to Kenghe, with RuPay and credit cards getting attached to UPI, and with MDRs, the UPI model has started seeing signs of sustainability.
“When credit lines are attached to UPI, it helps, as consumers time shift their money (demanding money in advance) and there is a fee attached to it,” Kenghe said, adding that companies like Google Pay act as a facilitator of credit and have some commercial arrangements with lenders.
On Thursday, Google Pay announced merchant and personal credit offerings via its app. The company introduced the sachet loans starting as low as Rs 15,000 for merchants with simpler repayment options in collaboration with DMI Finance. The company also enabled a credit line for merchants in partnership with ePayLater, to help solve the working capital requirements of merchants. Further, Google Pay also expanded the portfolio of personal loans with Axis Bank.
In line with the announcement of the National Payments Corporation of India (NPCI) last month, Google Pay will now allow consumers to avail credit lines from banks on UPI and use it to make payments via the app.
“What happens with onboarding more lenders is that different lenders will cater to different kinds of merchants or consumers,” Kenghe said.
“So when you add one more, it opens the scope for another set of people to get loans.”
The company has onboarded ICICI Bank to expand its portfolio of merchant loans.
Given that there is only 8% credit card penetration in India, there is scope for UPI companies like Google Pay to facilitate digital credit. Currently, issues such as a hard assessment to get loans, more paperwork, collection costs, and aversion to credit because of illegal collection practices, are the reasons keeping credit penetration low in the country.