Scope of instant short-term credit on digital payment platforms

Abstract

The Indian payment industry has been through a transformation phase which is driven by the progressive regulatory policies, increased smartphone penetration and increasing use of mobile internet. People have started using digital payment platforms have eased cashless transactions. With the increasing number of digital payment options, customers in general, don’t keep enough balance in these wallets. As a result, they must either recharge their wallet in between their shopping experience or may have to switch their mode of payment. To overcome this hurdle these digital wallet platforms are trying to provide an option of instant credit disbursement which may help in solving this problem and integrate wallets into the routine shopping experience of customers more seamlessly. Our primary research revealed that their exists inefficiencies in the current credit schemes and wallet applications can design credit schemes which are much easier to access. Instead of designing operationally complex schemes in order to control default rates, a very minimal credit scheme for a short term can be offered indiscriminately to all users. The scheme can be made viable by proper pricing as customers are indifferent to interest rates in short term. The scheme is much more compatible with wallets’ user convenience value proposition to their customers, and will have much higher utilization. The scheme will further provide data on credit worthiness of users not covered till now by the traditional banking systems. The scheme not only has the potential to deliver a positive ROI, but also has a for cross functional impacts like increasing wallet usage.