Lending

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/08/Credit-Line-on-UPI-Blog.webp" alt="M2P Fintech" title="" id="ltp5fvkp0" width="100%" height="253"><a class="link" href="https://m2pfintech.com/blog/upi-the-driver-of-economic-growth-and-inclusion/">Unified Payments Interface</a> (UPI) has transformed India’s payment landscape, propelling the nation into a <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless</a> era. With over 40% of all payments now happening via UPI, it is evident that this innovative platform has captured the wallets of millions. &nbsp;Previously, UPI payments were limited to savings accounts, overdraft accounts, prepaid wallets, and RuPay credit cards.  Now the scope of UPI is expanding with the addition of credit lines as a funding account. &nbsp;In a significant move on 4th September 2023, the <a class="link" href="https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-allows-pre-sanctioned-credit-lines-through-upi/articleshow/103365816.cms?from=mdr">Reserve Bank of India (RBI)</a> announced the approval of pre-sanctioned Credit Line on UPI.&nbsp;This new initiative enables banks to offer credit lines that borrowers can use seamlessly for transactions via UPI. Lenders can also instantly offer flexible borrowing options to a vast user base.  This groundbreaking solution not only enhances the convenience of digital transactions but also empowers both banks and customers with greater financial flexibility.&nbsp;This blog will delve into what a credit line on UPI entails, how it operates, and the benefits it brings to businesses and customers.  &nbsp;<h2 class="heading-node" id="qyke717g7" style="text-align: left">What is Credit Line on UPI? &nbsp;</h2>A <a class="link" href="https://www.linkedin.com/feed/update/urn:li:activity:7166799790159196160/">credit line on UPI</a> is a pre-approved loan that, once enabled by your bank, can be accessed directly via any UPI app. This feature allows customers to utilize pre-approved borrowing limits offering easy and hassle-free credit access. By integrating this credit line into their UPI accounts, customers can simplify their financial management, reducing reliance on multiple credit cards and digitizing the entire process. &nbsp;<h2 class="heading-node" id="p1n7nxnt4" style="text-align: left">Key Features of Credit Line on UPI &nbsp;</h2><ul class="list-node" id="qnrqfdezg"><li>Instant Access to Credit: Seamlessly make payments without waiting for fund transfers.&nbsp;</li></ul><ul class="list-node" id="70n9jtw7z"><li>Flexible Repayment Options: Choose to repay the credit amount in full or through convenient installment plans.&nbsp;</li></ul><ul class="list-node" id="ru959qesn"><li>Secure Authentication: Transactions are secured with a UPI PIN to prevent unauthorized access. &nbsp;</li></ul>These features enhance the convenience, security, and flexibility of accessing credit via UPI, making it a valuable financial tool for users. &nbsp;<h2 class="heading-node" id="7o05js768" style="text-align: left">How Does Credit Line on UPI Work? &nbsp;</h2>Step 1: Apply for a Credit Line on UPI &nbsp;Visit your bank or apply online to get an UPI credit line, depending on how your bank offers onboarding services. You might want to submit additional documents or consents to your bank for their <a class="link" href="https://m2pfintech.com/blog/steps-in-credit-underwriting-why-using-an-alternative-source-of-data-and-behavior-metrics-will-be-of-help/">underwriting</a> process. &nbsp;Step 2: Bank Review &amp; Approval&nbsp;Your bank will evaluate your application and supporting documents to determine your creditworthiness and offer a credit limit. Once approved, you’ll receive a notification from the bank. &nbsp;Step 3: Link to your UPI App&nbsp;Once approved, navigate to a UPI app of your choice and add the credit line much like the process of adding your bank account. Simply click on ‘Add Credit Line,’ select your bank, and verify to complete the process.&nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/08/credit-line-UPI-01.webp" alt="M2P Fintech" title="" width="100%" height="253">Step 4: Start using your Credit Line&nbsp;With your credit line linked to UPI, you can begin making payments using the credit line seamlessly. The same credit limit as your bank account will be available for transactions with merchants both online and offline.  &nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/08/credit-line-UPI-02.webp" alt="M2P Fintech" title="" width="100%" height="253"><h2 class="heading-node" id="kktisyq6h" style="text-align: left">Benefits of Credit Line on UPI &nbsp;</h2><ul class="list-node" id="d3ycpdm3p"><li>Risk Reduction: Real-time UPI transaction data enables banks to make better-informed lending decisions and monitor credit usage effectively. &nbsp;</li></ul><ul class="list-node" id="6qhrrqub4"><li>Stronger Customer Loyalty: Offering innovative credit solutions enhances customer satisfaction and deepens relationships. &nbsp;</li></ul><ul class="list-node" id="3vvh60cnq"><li>Inclusivity for Non-Credit Card Holders: Access credit without needing a physical card, broadening financial inclusion for a wider demographic. &nbsp;</li></ul><ul class="list-node" id="toow0omzo"><li>Higher Activation/Consumption of credit: Increased revenue from interest and fees, while strengthening customer relationships and providing valuable data for tailored services. It also enhances the brand reputation, attracts new clients, and offers a competitive market advantage. &nbsp;</li></ul>Though credit line on UPI offers numerous benefits for businesses to innovate and refine their financial services, selecting the right tech stack solution provider is essential.  &nbsp;<h2 class="heading-node" id="fzaani4f4" style="text-align: left">M2P’s New Age Credit Stack&nbsp;</h2>M2P serves as your ultimate solution for enabling credit line functionality on UPI that comes along with our unified <a class="link" href="https://m2pfintech.com/blog/why-switch-to-a-new-age-credit-card-system/">credit stack</a>. Our platform empowers financial institutions with flexible lending solutions across various channels, ensuring widespread customer access.   &nbsp;With the ability to distribute credit seamlessly, our platform facilitates higher credit utilization and enables multiple credit lines for different brands and partners. Designed for speed, scalability, and customization, this tech stack stands as the benchmark for credit card operations.  &nbsp;<h2 class="heading-node" id="8wmlgg24s" style="text-align: left">Why M2P's Credit Line on UPI? &nbsp;</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/08/credit-line-UPI-03.webp" alt="M2P Fintech" title="" width="100%" height="253"> &nbsp;Credit Line on UPI can also be used for a variety of financial needs.&nbsp;<h2 class="heading-node" id="8og40vtwd" style="text-align: left">Use Cases of Credit Line on UPI &nbsp;</h2>As the use of credit lines on UPI expands beyond everyday expenses and small-ticket purchases, businesses are increasingly recognizing the untapped potential for more specialized applications:&nbsp;<h3 class="heading-node" id="tj8dw64iz" style="text-align: left">Vehicle Loan Financing&nbsp;</h3><ul class="list-node" id="fmrg3289t"><li>Simplified Application Process: Streamline the application process for vehicle loans, making it more accessible to a wider number of borrowers. &nbsp;</li><li>Faster Disbursal: Funds can be disbursed directly to the vehicle seller via UPI, accelerating the loan process.&nbsp;</li><li>Flexible Repayment Options: &nbsp; Offers flexible repayment terms, such as monthly installments or balloon payments, to suit different financial needs.</li></ul><h3 class="heading-node" id="pe6dn5bmv" style="text-align: left">Travel Financing</h3><ul class="list-node" id="b9jujo1og"><li>Pre-Approved Credit for Travel Expenses: Travelers can use credit lines on UPI to book flights, hotels, and activities without worrying about upfront payments.</li><li>Emergency Funds: Offers a safety net for unexpected travel expenses, such as medical emergencies or flight cancellations.</li><li>Convenient Repayments: Travelers can conveniently repay their credit using UPI, even while on the go.&nbsp;</li></ul><h3 class="heading-node" id="tygr0uj1c" style="text-align: left">Loan Against Securities&nbsp;</h3><ul class="list-node" id="08rde4fpj"><li>Leverage Assets for Credit: Individuals and businesses can use their assets, such as property or securities as collateral to obtain credit lines through UPI.</li><li>Quick Access to Funds: Provides faster access to funds compared to traditional loan processes.</li><li>Easy Repayment Options: Borrowers can choose from various repayment terms and interest rates based on their financial situation.</li></ul>M2P’s Credit Line on UPI is a future-ready credit stack which is designed to empower businesses with a comprehensive lending framework, perfectly aligned with the evolving business landscape.&nbsp;Ready to empower your business with <a class="link" href="https://m2pfintech.com/credit-line-on-upi/">Credit Line on UPI</a>? &nbsp;<a class="link" href="https://m2pfintech.com/contact-us/">Get in touch</a> with our experts today .<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.

How Credit Line on UPI is Redefining Access to Instant Credit?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/01/Wordpress-banner.webp" alt="M2P Fintech" title="" id="y3bfs4cs3" width="100%" height="317">The co-branded credit card market is witnessing a meteoric rise. Valued at $12.34 billion last year, the market is projected to skyrocket at 9.61% to reach $25.72 billion by 2030. The surge is driven by the potential of co-branded credit cards to deliver innovative solutions, unlock new markets, and strengthen customer relationships.Banks and fintechs collaborate strategically with distribution partners/brands to roll out <a class="link" href="https://m2pfintech.com/credit-cards/" target="_blank" rel="noopener">co-branded credit cards</a>. These partnerships give banks the leeway to focus on customer acquisition, retention, and experience while fintechs take care of the <a class="link" href="https://m2pfintech.com/blog/solving-for-ntbs-credit-card-issuance-challenges/">credit card issuance</a> and operations.Are co-branded credit cards the next big opportunity for banks?We’ll analyze it in this blog. &nbsp;But before getting there, let’s look into the rise of co-branded credit cards.Rise of Co-branded Credit CardsCo-branded credit cards came into existence in the mid-80s when a leading airline partnered with a bank to issue a gold Mastercard. From then on, businesses across industries collaborated with banks to issue co-branded credit cards that rewarded customer loyalty.Carrying the logos of the collaborating entities, these <a class="link" href="https://m2pfintech.com/blog/why-switch-to-a-new-age-credit-card-system/" target="_blank" rel="nofollow noopener">new-age credit cards</a> combine features of a rewards card and store card. These hybrid cards grant users access to discounts and additional rewards such as points that can be utilized in subsequent purchases from the affiliated retailer or service.Today the landscape of co-branded cards is expanding beyond traditional banks and retailers. &nbsp;Fintechs entering co-branded partnerships deliver immense benefits and opportunities to banks.How Co-branded Credit Cards are an opportunity for banks?Co-branded credit cards offer more than just financial transactions. Their benefits extend to brand loyalty, market expansion, greater revenue streams, and more.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2024/01/Benefits-of-Cobranded-credit-cards-2-1.webp" alt="M2P Fintech" title="" id="ftio41j98" width="100%" height="380">Brand Loyalty&nbsp;Co-branded credit cards are practically loyalty cards that can incentivize customer spending, encourage repeat purchases, and foster loyal customers.&nbsp; Through co-branding partnerships, banks can focus on exclusive perks and rewards programs tailored to specific customer segments, while fintech partners handle the <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/" target="_blank" rel="noopener">credit card processing</a>, operations, and management. This strategic alignment sets banks apart from the competition and helps build trust and loyalty through hyper-personalized experiences.&nbsp;Faster Reward Redemption&nbsp;Co-branded partnerships help simplify and quicken rewards redemption. With seamless operation and optimized resource utilization, banks can rely on co-branded tie-ups to enhance customer experience and loyalty.&nbsp;Cost-effective Distribution&nbsp;In co-branded partnerships, banks can leverage partners’ distribution strategy and network for enhancing market share and acquiring new customers. In growing markets, especially where credit penetration is relatively low, co-branded partnerships can help banks reach out to a wide range of customers in a shorter lifecycle. Banks can also experiment with new segments and support their co-brand partners in building credit products for specific use cases. &nbsp;Greater Visibility &amp; Reach&nbsp;Co-branded credit cards are potent tools for banks to broaden their reach by leveraging partner brand networks. Through strategic collaboration, banks access the partner's customer base to reach demographics beyond traditional channels. Featuring joint branding enhances visibility, attracts new customers, and boosts the bank's market presence.&nbsp;&nbsp;Data Analytics&nbsp;Co-branded partnerships provide banks with valuable transaction data that unveil customer spending patterns, preferences, and behaviors. Analyzing the data enables tailored marketing, promotions, and rewards. Integrating the insights gathered with partner loyalty programs enhances data-driven decisions that strengthen the bank's ability to build lasting customer relationships.&nbsp; Customization&nbsp; Co-branded partnerships enable personalization of credit card rewards and discounts to customer preferences and spending patterns. This enhances customer experience and fosters a special connection between the bank and its customers. &nbsp;Diverse Revenue Streams&nbsp;Co-branded partnerships help banks diversify revenue streams. Beyond standard fees and interest charges, these collaborations open avenues to co-branded marketing and sponsorships. These enable income through joint advertising and revenue-sharing. This dynamic strategy creates financial stability, supports growth, and nurtures a mutually beneficial ecosystem.&nbsp;Co-branded Partnership Live Examples&nbsp;HDFC &amp; Swiggy&nbsp;HDFC joined hands with Swiggy to offer a co-branded credit card that caters to people’s culinary needs. Using the card, users can earn quick rewards and discounts on Swiggy orders and gain access to exclusive perks, such as invitations to food festivals and offers at premium restaurants and holistic dining experiences.&nbsp;ICICI &amp; Amazon&nbsp;&nbsp;ICICI Amazon cobranding card partnership creates a haven for e-commerce enthusiasts. Their co-branded credit card unlocks a world of special discounts, cashback, and reward points for Amazon purchases. Customers can even gain access to exclusive prime benefits, early sales, and other online perks, enhancing their shopping journey with every click.&nbsp;Kotak Bank &amp; Myntra&nbsp;Kotak Bank and Myntra collaborated to deliver a co-branded credit card tailored to customers' fashion and lifestyle aspirations. Customers can enjoy tailored rewards, discounts, and early access to Myntra sales, allowing them to stay ahead of the curve.&nbsp;&nbsp;Federal Bank &amp; Scapia&nbsp;&nbsp;Federal Bank and Scapia embarked on a journey to simplify customer travel. Their co-branded credit card offers exciting features like zero forex markup, unlimited domestic lounge access, and reward points for travel-related expenses. It's the perfect companion for the modern traveler who prioritizes convenience and value with every mile.&nbsp;HDFC &amp; Apple&nbsp;HDFC and Apple joined hands to present co-branded credit cards to tech enthusiasts. The card will feature exclusive discounts on Apple products and rewards for digital purchases and Apple services. This partnership seamlessly combines cutting-edge technology with financial expertise, ensuring that every tech purchase becomes a rewarding experience.&nbsp;SBI &amp; Reliance Retail&nbsp;SBI Card and Reliance Retail collaborated to introduce the 'Reliance SBI Card,' a lifestyle-focused co-branded credit card that redefines the shopping experience. Catering to diverse spending needs, from mass to premium segments, this co-branded card promises a comprehensive and rewarding shopping experience for customers.&nbsp;All the partnerships discussed above are samples of successful co-branded credit card collaborations between banks and fintechs.&nbsp;However, choosing the right partner for a co-branded credit card solution is crucial to achieve success.&nbsp;How to Choose the Right Partner for a Co-branded Credit Card Solution?&nbsp;The key to surpassing customer expectations lies in choosing the perfect co-branding partner.&nbsp;To start off, ensure your partner’s cobranding goal aligns perfectly with your business objective and customer needs. Then, make sure your fintech partner satisfies all the considerations below.&nbsp;<ul class="list-node" id="ockyxepxb"><li>Preset operational model for issuing banks and co-brand/fintech partners.</li><li>Regulatory-compliant platform ensuring seamless compliance for issuing banks.</li><li>Developer-friendly credit card stack fostering innovation for co-brand entities.</li><li>Faster Go-to-Market (GTM) with a pre-certified credit card platform.</li><li>Standardized program operations and accounting practices for streamlined processes.</li></ul>Fast-track your Co-branded Card Launch with M2P&nbsp;<ul class="list-node" id="h7d2cs2cp"><li>Launch a co-brand program in just one-third of the typical time.</li><li>Streamline the onboarding process by integrating product details and conducting due diligence concurrently.</li><li>Standardize reporting, accounting, and dispute management operations.</li></ul>Ensure Secure Co-branded Operations<ul class="list-node" id="ujwrd7drg"><li>Construct a secure and controlled platform for fintech operation by streamlining program operations, regulatory compliance, infrastructure, accounting, and KYC.&nbsp;</li></ul><ul class="list-node" id="p3rus3qbz"><li>Choosing from multiple infrastructure options that align seamlessly with your unique compliance policies. Opt for a setup that best suits your needs and risk management strategies.&nbsp;</li><li>Building PCI-compliant Product SDKs, offering a regulated product that protects sensitive financial data.&nbsp;&nbsp;</li><li>Auditing during co-brand partner onboarding becomes faster, as the framework is already set aligning to regulator and bank policies.&nbsp; &nbsp;</li></ul>Co-branded credit cards are a win-win for both banks and merchant partners, where they create a synergy that goes beyond transactions. This powerful collaboration is not just an opportunity for banks; it's a strategic gateway to a future where financial success, customer satisfaction, and inclusive growth converge.&nbsp;&nbsp;Want to know more about implementing a Co-branded Credit Card Solution?<a class="link" href="https://m2pfintech.com/contact-us/" target="_blank" rel="noreferrer noopener">Get in touch</a> with our experts today.<a class="link fui-Link ___1rxvrpe f2hkw1w f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1lqvz6u f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1rxvrpe f2hkw1w f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1lqvz6u f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1rxvrpe f2hkw1w f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1lqvz6u f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">X</a> for insightful fintech bytes curated for curious minds like you.

Why Co-branded Credit Cards are the Next Frontier for Banks

Why Switch to a New Age Credit Card System?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/MicrosoftTeams-image-2.webp" alt="M2P Fintech" title="" width="100%" height="370">The microfinance industry has been witnessing stellar growth over the last decade. The sector grew&nbsp;16.5 times, from ₹ 17 thousand crore in 2012 to ₹ 2.85 lakh crore in 2022. With a market share of&nbsp;37.53 %, NBFC-MFIs stand as the leading financial provider in this sector.Thanks to the proven model of&nbsp;Joint Liability Groups (JLGs), the Microfinance Institutions (MFIs) witnessed phenomenal growth in the past decade. This model enabled doorstep access of financial services to the underserved population, mainly women.In addition to the JLG model, the Government of India initiatives listed below have also aided the growth of MFIs.•&nbsp;Pradhan Mantri Jan Dhan Yojana (PMJDY) - This&nbsp;government scheme was the primary reason for millions of Indians to have a bank account.•&nbsp;Jan-Dhan Aadhaar-Mobile (JAM) trinity -&nbsp;Helps Indians to link their Jan Dhan account, Aadhaar card, and Mobile number.•&nbsp;India Stack -&nbsp;Comprises of paperless, cashless, and consent layers that help lenders to collaborate with Fintechs and create products based on customer needs.•&nbsp;Aadhaar Penetration -&nbsp;Aided the shift of the traditional banking system to a digital model for enabling technology players with&nbsp;electronic Know Your Customer (eKYC) and authentication services.<h2 class="heading-node" id="q0wu2iefn" style="text-align: justify">Challenges Amid Growth</h2>The above factors are accelerating the microfinance penetration. But the industry is witnessing cracks due to the challenges in the current model of borrower engagement – the&nbsp;High Touch Model (HTM).In contrast to the&nbsp;Low-Touch Model (LTM), the&nbsp;HTM&nbsp;has high engagement level between the loan officer and the borrower. This may look encouraging from an aerial view. But this model is one of the main reasons for the&nbsp;high attrition rate of the loan officers&nbsp;and the increase in Operational Expenses (OPEX). According to a KPMG report by MFIN, this model does not offer borrowers the necessary value proposition to attend group meetings and maintain group dynamics post-adoption of the cashless collections.This led the <a class="link" href="https://m2pfintech.com/micro-finance/" target="">microfinance</a> players to move towards a more efficient model – the&nbsp;Tech-Touch Model (TTM).<h2 class="heading-node" id="awrgve7ov" style="text-align: justify">Tech-Touch Model – Amalgamation of Low-Touch and High-Touch Models</h2>The Tech-Touch Model strikes a perfect balance between the&nbsp;efficiency and cost savings of a low-touch model and the personalization and support that high-touch model offers. In addition, it is an advanced version, extending the best of both worlds – automation and self-service tools from the low-touch model and customer engagement from the high-touch model.Many MFIs are gradually adopting the tech-touch model to digitize their loan sourcing, management, and collection processes. By leveraging the benefits of the TTM, lenders are on the path to&nbsp;Digital Microfinance.<h2 class="heading-node" id="bxz4bwal3" style="text-align: justify">What does Digital Microfinance Entail?</h2>Digital <a class="link" href="https://m2pfintech.com/blog/how-technology-is-revolutionizing-microfinance-lending/" target="">Microfinance</a>&nbsp;is the hot, new buzzword in the microfinance realm. As the name suggests, it is the use of digital technologies to disburse micro loans to low-income individuals.With TTM at its core, digital microfinance can&nbsp;digitize, automate,&nbsp;and&nbsp;streamline&nbsp;the loan processes such as loan disbursement, loan management, and collections. By digitizing these processes, MFIs can significantly reduce the time and cost associated with traditional loan origination methods.Usually, loan sourcing is the primary step before loan origination. First, the loan officer responsible for loan sourcing goes to the self-help groups and collects the borrower’s details. Then, he collects all the requisite borrower information and takes it to the branch office, consolidates the borrower details, and assesses the borrower's creditworthiness.&nbsp;All these steps can take up to 3 days. Not to forget the vast volume of paperwork they handle.It can be seen that the conventional way of loan sourcing can be time-consuming and inconvenient. That is why it is crucial for MFIs to opt for digital methods and start exercising digital microfinance.<h2 class="heading-node" id="ktaa2g4jl" style="text-align: justify">Digital Microfinance – Road to Productive &amp; Effective Loan Originations</h2><a class="link" href="https://m2pfintech.com/loan-origination-system/" target="">Loan origination</a> is a critical process for lenders. From initial credit assessment, approving/denying loan applications, to disbursing the right loan amount to the right borrower, <a class="link" href="https://m2pfintech.com/blog/top-5-loan-origination-software/" target="">loan origination</a> can be quite tricky. It is even trickier to originate accurate loans in a matter of minutes/seconds.Digital Microfinance accelerates loan originations by employing digital methods for&nbsp;<a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/" target="">KYC</a> verification, bank account verification, borrower credibility check, borrower credit assessment, performing Compulsory Group Training, etc.<h3 class="heading-node" id="7unu5k1rx" style="text-align: justify">Expedite Loan Sourcing via Digitization</h3>With digital tools like our&nbsp;LoanBook application, loan sourcing becomes a piece of cake for the loan officers.Here’s how.The LoanBook application comprehensively digitizes all the work carried out by the loan officer, starting from loan sourcing to management and collections.Using the application, the loan officer adds every member of the JLG into the system along with their details. After entering the basic information, the officer can verify the borrower's details.In<a class="link" href="https://m2pfintech.com/blog/5-key-factors-for-selecting-an-ideal-loan-origination-system-los-partner/" target=""> loan origination,</a> the LoanBook application can help the MFIs expedite the following:<h4 class="heading-node" id="4l1ebhq7t" style="text-align: justify">✔&nbsp;EKYC Verification</h4>EKYC verification for the borrower can be done either by validating their fingerprint or through OTP verification or Iris scan.<h4 class="heading-node" id="mm2hs7a2h" style="text-align: justify">✔&nbsp;Penny Drop Verification</h4>The credibility of the borrower’s bank account is verified by dropping a penny into their bank account.<h4 class="heading-node" id="smh6cnj2g" style="text-align: justify">✔&nbsp;Geo-tagging</h4>At the time of sourcing, the field officers can use this feature to tag the location of the borrowers and the self-help groups (where center meetings are conducted). Geo-tagging also eases the loan collection process by quickly pointing to the borrower's location.After completing eKYC, the loan officer adds the details of the borrower’s family members and specifies the loan amount required by the borrower. This is where our inbuilt Embedded Business Rule Engine (BRE) comes into the picture.With LoanBook, the time taken for loan decisions reduces to 3 minutes from 3 days.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/MicrosoftTeams-image.webp" alt="M2P Fintech" title="" width="100%" height="467">Many enterprise MFIs are working closely with us and are already on the road to Digital Microfinance. They have simplified their loan origination process, reduced the Turn Around Time (TAT) from weeks to days, and mitigated their OPEX. These MFIs have unlocked a new model for optimizing their loan sourcing process, scaling their profitability, and increasing financial access to women in rural and underserved markets.Do you want to originate faster loans?<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1" target="">Schedule a demo</a>&nbsp;with us.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.&nbsp;Follow us on <a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.&nbsp;

Digital Microfinance – The Next Wave in MFI

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/02/Cracking-Tokenization-for-Tabby-Blog-Banner-V3_Fintech-trends-banner-1.webp" alt="M2P Fintech" title="" width="100%" height="253">Buy Now, Pay Later (BNPL) has taken the e-commerce world by storm in the past few years. Driving a 30% increase in conversions and an 85% rise in average order value, BNPL has earned merchant confidence and customer trust.With 97% smartphone penetration, the UAE is one of the avid adopters of BNPL and contactless payments in the Middle East. Tabby Pay is a leading BNPL platform in the UAE that caters to over two million buyers and 4000 top brands and small businesses. Tabby issues virtual cards that customers can activate and use on the Tabby app for free. Shoppers can add the card to their favorite digital wallet and tap at the POS terminal to divide their payments into installments.&nbsp;But one key issue plagued Tabby’s operation.It was card data security.Let us quickly give you more context on the challenge.&nbsp;&nbsp;As a tech-savvy population, the UAE residents are not fans of using physical cards while shopping. Contactless cards and mobile wallets like Apple Pay are preferred options for a frictionless payment experience.In fact, over 80% of consumers in the UAE prefer using iPhones and other Apple services and gadgets over Google and Android. So, when they receive a new card from Tabby, they add it to the Apple wallet on their iPhones to tap and pay using NFC.&nbsp;Now, security is a critical concern in this digital era. Even though contactless payments have one of the lowest fraud instances, there is still a fair possibility of card data and sensitive information getting stolen and misused. Data breaches could cost companies millions and billions in losses.&nbsp;&nbsp;To avoid these vulnerabilities and to keep cardholder data safe, Tabby&nbsp;enabled tokenization for Google, Android, and Apple wallets. Now Tabby’s payments run on M2P prepaid stack. And we also handled the responsibility of tokenization for the BNPL player.&nbsp;<h2 class="heading-node" id="4yxyxvp76" style="text-align: left">What is Tokenization?</h2>Tokenization is a security process that helps protect&nbsp;card data by masking the card account number with a single use randomized alphanumeric character of the same length called a token. Associated with a card, platform, or device, the payment tokens are issued in real-time and used during payment, after which they are discarded. To know more about payment tokenization, <a class="link" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/">click here.</a>&nbsp;In mobile wallets, a single card can have multiple unique tokens associated with specific shopping channels and issuing banks. Token Service Providers (TSPs) play a significant role in managing the lifecycle of a token via statuses such as requested, active, inactive, suspended, and ended.&nbsp;<h2 class="heading-node" id="n5xh14nzp" style="text-align: left">How M2P Cracked Tokenization for Apple Wallet?</h2>M2P acted as the Issuer Token Service Provider (ITSP) and processed the authentication layer for Tabby, which included demographic checks, card authentication, and issuer configuration. Our ITSP solution has been designed to do all the heavy lifting of the tokenization process and makes life simpler for the issuer when it comes to program management, technology, security, compliance, reporting, and token Life cycle management, among many others. Even the rules were made configurable as per issuer convenience.Handling tokenization protocols for Google and Android wallets is simpler when compared to Apple wallets. The Apple wallet tokenization process is complex and challenging as there are multiple stringent protocols that are difficult to understand and comply with.&nbsp;To activate tokenization for prepaid cards, we had to enable seamless integration between the card payment network - Visa, BNPL player - Tabby, and the digital wallet provider - Apple/Google/Samsung. As backend integrations are our stronghold, we managed the process without hassles. Our existing Visa certification gave us further edge in managing tokenization with ease.&nbsp;Here is a glimpse into how tokenization would happen every time a customer adds the Tabby Card to the Pay wallet.&nbsp;<ul class="list-node" id="05pae3esr"><li>When a customer adds a Tabby card to their Apple/Google/Samsung wallet, the request is sent from Visa’s in-app SDK in the Tabby Mobile Application to the Visa network. For this, all the secure data required for the request is sent as a secure message from M2P to Tabby with a unique message identifier.&nbsp;</li><li>Visa, the Token Service Provider, identifies the Bank Identification Number (BIN) from the payload (through their Visa SDK) and sends it to the issuer processor.&nbsp;</li><li>M2P is the Issuer processor (also, a token service provider) that authenticates the card details along with the identity of the cardholder.&nbsp;</li><li>Then, M2P instructs Visa to issue or not issue tokens. Visa acts in accordance to the instructions and sends the token information to the digital wallet to store&nbsp;</li><li>M2P keeps Tabby updated on everything (every step involved in the token creation process as a notification) happening throughout the process.&nbsp;</li><li>The tokenized cards can now be used by cardholders without their card information getting exposed.&nbsp;</li></ul>The process is done only for the first time when the customer adds the card to any digital wallet/ wearables. Once complete, the cardholder can use the card for any purpose with total and seamless control over the card.&nbsp;M2P ITSP solution not only makes the tokenization process simpler but also helps Tabby provide the necessary reports to Apple and Visa on all the required information by the latter.&nbsp;If you want to know more about tokenization, and how it can help your business?&nbsp;Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.&nbsp;<a class="link" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech" target="_blank" rel="noopener">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Cracking Tokenization for BNPL Player Tabby

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/11/BNPL-Issuer-Th.webp" alt="M2P Fintech" title="" width="100%" height="296">The global ecommerce payments industry is constantly evolving to adapt to the ever-changing needs of the customer. With the pandemic fueling digital commerce, flexible payment options have become an element of convenience in online shopping. What started with basic debit/credit card payments now includes internet banking, e-wallets, Buy Now Pay Later (BNPL), EMI, and more. Among these, <a class="link" href="https://m2pfintech.com/blog/factors-and-psychology-behind-the-great-bnpl-allure/" target="_blank" rel="noopener">BNPL</a> is one of the most popular payment choices as it enhances the customers’ purchasing power.<h2 class="heading-node" id="vhq15h9fq">BNPL Footprint in India</h2>India is a budget-driven country, and BNPL is where financial inclusion meets budgeting. The country’s association with <a class="link" href="https://m2pfintech.com/blog/bnpl-the-rising-fintech-star/" target="_blank" rel="noopener">BNPL</a> has been on an upward trajectory since 2021, owing to the rising adoption of ecommerce platforms among the country’s large youth demographic. Currently, India has around 20–25 million BNPL users, and it is likely to reach 100 million by 2026, given the magnitude of its demand and inclusivity.&nbsp;<h2 class="heading-node" id="8dowitkj2">Challenges for BNPL Issuers</h2>In recent years, competition in the BNPL space has intensified, with incumbents going beyond their horizons to develop new, sustainable business models and traditional payments companies deploying their own models to stay relevant in the market. This not only unlocked the purchasing power and helped customers manage their finances by accessing affordable and low-cost credit, but also expanded the market for BNPL products. On the other hand, the vying put significant pressure on the <a class="link" href="https://m2pfintech.com/blog/six-profitable-bnpl-business-models-to-unlock-infinite-value/" target="_blank" rel="noopener">BNPL</a> companies to scale quickly. The role of BNPL lenders does not stop with just issuing credit lines to consumers. They ought to partner with fitting merchants and large aggregators to offer appropriate payment plans, empowering smooth transactions and superior customer experience. Let’s look at the challenges that every <a class="link" href="https://m2pfintech.com/blog/how-can-lenders-overcome-challenges-in-deploying-bnpl-solutions/" target="_blank" rel="noopener">BNPL</a> issuer must manage/address immediately.<ul class="list-node" id="8qvy9xw6r"><li>Onboarding of multiple merchants and aggregators</li><li>Customizing solutions for each merchant based on ticket size and lending rules</li><li>Managing end-to-end transactions such as billing, settlements, and refunds</li><li>Understanding the payment flow to increase the success rate</li><li>Handling schemes, promotions, and subventions</li><li>Analyzing and managing risks</li><li>Integrating multiple stakeholders to enable a number of checkout options</li></ul>Partnering and working with a fintech that has a deep understanding of the market can help BNPL issuers set up the right mix of merchants and aggregators, which is the key to make BNPL work at checkout.Keeping this in mind, we at <a class="link" href="https://m2pfintech.com/buy-now-pay-later/" target="_blank" rel="noopener">M2P</a> built a robust Merchant Acquiring &amp; Payment Processing Platform. The platform is an exemplification of features that help improve checkout financing, boost merchant experience, promote sustainable growth, and amplify the acceptance rate of BNPL at checkout.<h2 class="heading-node" id="ub1c3819a">Merchant Acquiring &amp; Payments Platform</h2>Our Merchant Acquiring &amp; Payments platform comes integrated with our BNPL stack that allows issuers to onboard merchants (online or offline) and payment aggregators instantly and integrate on checkout flow to go live in minutes. The platform is designed to scale with the best payment flows for higher customer acceptance and to support end-to-end checkout experience for all types of BNPL products like checkout EMIs and one-click payments. In addition, it offers complete transparency and control to the issuers in the merchant acquiring and payment processes.&nbsp;Thus, creating a win-win situation for all.&nbsp; Here is a quick overview of what our platform can do.<ol class="list-node" id="hj8oxq8fg"><li>Frictionless and Instant Onboarding: The platform enables automated DIY onboarding with built-in validations and operations that comply with the maker-checker workflows to establish frictionless, real-time onboarding. It facilitates instant DIY and assists onboarding for all types of merchants (online or offline) and Payment Aggregators. This allows merchants across geographies to do business on a single platform.</li><li>&nbsp;Supports all credit products: The platform supports all credit products on merchant checkout, like low-ticket convenience spends and EMI. This creates a robust interoperable shopping environment that renders flexible and smooth checkout experience, thereby augmenting customer loyalty, resulting in lesser cart abandonment, improved average order value (AOV) and transaction size, and increased sales. Such interoperability will significantly increase profits by creating new revenue channels for all parties involved. &nbsp;</li><li>&nbsp;Easy developer integration: Developer friendly <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/" target="_blank" rel="noopener">APIs</a>, SDKs and plugins with a dedicated test environment to ensure merchants go live in minutes with minimal development effort. &nbsp;</li><li>&nbsp;Feature packed merchant dashboard: The platform empowers merchants to manage transactions, refunds, settlements, reconciliations, disputes, and much more from one single dashboard. This substantially improves operational efficiency and supports easy reconciliation.&nbsp;</li><li>&nbsp;Secure &amp; Compliant: The platform is <a class="link" href="https://m2pfintech.com/blog/pci-dss-a-quick-guide-to-its-levels/" target="_blank" rel="noopener">PCI DSS</a> Level 1 Compliant and regular internal security audits are carried out to ensure that the systems are compliant, and data is safe. It has an in-built fraud and risk management module to protect your business and customers from fraudulent activities.&nbsp;</li><li>&nbsp;Reduces cost and time: Traditionally, reports are manually generated, involving extensive manpower, time, effort, and money. Our platform’s automated billing, settlement reports, and reconciliation reports will reduce the operational cost and time consumed in monitoring and generating the reports. In addition, it also radically reduces the cost and a resource drain entailed in integrating payment methods into a merchant’s checkout. &nbsp;</li></ol><h2 class="heading-node" id="lat8t529s">What differentiates M2P's BNPL solution from others?</h2>Our BNPL stack comes with an in-built Merchant Acquiring &amp; Payment Processing system. It is a meld of seamless onboarding and merchant management system, integrated payments, refund processing, and risk governance. It facilitates multiple merchant or payment aggregator onboarding, merchant KYC, approval, and bank account addition workflow to assist in settlement and reconciliation. In addition, it enables merchants to run campaigns, cashback and rewards integrations for each transaction, dispute management and refunds management, and merchant plug-ins. Our transaction risk management runs a dynamic MCC/MID check for each transaction, limit management per merchant, and velocity checks for transactions. It also provides a comprehensive fund settlement and report module to generate T+1 settlement with merchants and detailed MIS reports and analytics based on the user behavior. In retrospect, with only 4% of the total population opting the pay later option, India's BNPL journey has a long way to go. Nevertheless, given the flexibility and inclusivity, the sector is steadily gaining ground in the country's financial ecosystem. It gives merchants of all sizes a chance to expand their customer bases to increase their average order values and sales. Want to be a market leader in BNPL? Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a><a class="link" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noopener">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights directly to your inbox. &nbsp; Follow us on <a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.

Simplifying Acquisitions and Payments for BNPL Issuers

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/11/co-lending-blog-02.webp" alt="M2P Fintech" title="" width="100%" height="661">Co-lending has been the buzzword in the BFSI sector since the RBI announced its new <a class="link" href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11991" target="_blank" rel="noopener">Co-lending Model</a> (CLM) in November 2020. While CLM was principally designed to bridge the gap between geographical limitations and lending opportunities, plus to expand credit distribution for priority sectors, financialists reckon it might just be the answer to the country's multi-trillion-dollar liquidity issue.&nbsp; Before we jump into why co-lending can be the solution, here is a quick intro to co-lending.&nbsp; For beginners, co-lending is an arrangement between two or more lenders to jointly loan out money to their target audience. RBI's guidelines necessitate banks and NBFCs to share the risk in a ratio of 80:20 (i.e., 80% of the loan with the bank and 20% with the non-banks). So, banks will lend to the NBFCs, and the NBFCs will lend to the priority sectors. And fintechs will serve as the cardinal technology layer for banks and NBFCs to achieve their co-lending objectives.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/11/co-lending-blog-04-1.webp" alt="M2P Fintech" title="" width="100%" height="502"><h2 class="heading-node" id="2w795jbxr" style="text-align: justify">Co-lending backstory</h2>Although co-lending has been in the Indian market since 2012, it’s the disruption of BFSI by fintechs and new-age NBFCs between 2018 and 2022 that turned co-lending into a well-heeled business. Today, every leading business wants a piece of this pie.&nbsp; MSMEs play a pivotal role in India's socioeconomic development. According to the <a class="link" href="https://www.ibef.org/industry/msme/infographic" target="_blank" rel="noopener">Ministry of MSME</a>, India is home to about 7.9 million MSMEs and account for about 29% of the GDP. However, with the pandemic curbing the global market and slowing down domestic trade, the sector was one of the most impacted by the capital crunch, high-risk perception by banks, and all-time high inflation rates. Subsequently, over 65% of MSMEs were temporarily shut down for three or more months in FY21, and more than half of the companies witnessed a decline of about 25% in revenues. These circumstances made it clear that the MSMEs needed a helping hand in surviving the impact. What's more?&nbsp; A sizeable chunk of India's population falls outside the purview of formal financial systems. This population comprises self-employed small-scale entrepreneurs, women entrepreneurs, farmers, and other small borrowers. According to recent reports, the country has a 365 million underbanked/underserved population, creating an 8 lakh crore market for small-ticket loans. Wherefore, the government was obliged to set up a robust economic model to reach and cater to the monetary needs of this population, who serve as the backbone of the country's economy.&nbsp; In the wake of this condition, the RBI re-christened its co-origination framework as the Co-lending Model in 2020, with the prime objective of enabling frictionless collaboration of banks and NBFCs to increase the flow of credit in the MSME (Micro, Small, and Medium Enterprises), EWS (Economically Weaker Sections), LIG (Low-Income Group), and MIG (Middle-Income Group) categories, where banks take a backseat in lending owing to higher operating costs and credit risks.<h2 class="heading-node" id="kuxw2jr3b" style="text-align: justify">Why Co-lending?</h2>The priority sector has embraced economic hardships due to the pandemic and its repercussions. Industry experts believe the renewed co-lending model has great potential to significantly transform the sector. For one, banks can leverage the market outreach, loan origination, and servicing acumen of NBFCs, and NBFCs can bank on improved liquidity and profitability. In addition, per RBI's circular, NBFCs are the single point of interface for customers. They are responsible for loan origination, fund routing, servicing, and collection. Given their extensive reach at the grassroots level, better last mile connectivity, and customer relationship, NBFCs have established themselves as being more effective than banks in handling loan recovery/collection. Therefore, this approach is expected to augment the timely servicing of debt by the borrowers.Under the renewed co-lending model, the banks' finances and NBFCs' (customer reach and) capabilities meld with fintechs' technology. If exercised in the true spirit, RBI can score a hat-trick. 1. Render tailor-made and affordable financial solutions at the grassroots level 2. Catalyze the upraise of the priority sector from its economic hardships 3. Drive financial inclusion and accelerate the overall economic development of the country Learn more about the features of co-lending and why it is the future <a class="link" href="https://finflux.co/blog/co-lending-is-the-future-heres-why/">here</a>.<h2 class="heading-node" id="m5m618l46" style="text-align: justify">Advantages of Co-lending</h2>The fundamental goal of the co-lending model is to act as a seamless medium for large banks to extend their services to borrowers and MSMEs in the remotest regions, which are otherwise inaccessible. Further, the co-lending model opens up unique liquidity windows for market players, boosting their confidence, and enabling sustainable growth. For customers, co-lending helps build their portfolio. Under the co-lending guidelines, FIs can loan to many potential businesses that banks reject due to the absence of credit history. This facilitates them to rebuild a good credit history and qualify for other loans. Besides, NBFCs increase financial literacy among their underserved/unserved customers by educating them about co-lending and its terms and conditions.<h2 class="heading-node" id="5s7psfhby" style="text-align: justify">What's in it for Lenders?</h2>Extended reach&nbsp; NBFCs have a broader customer portfolio. They are capable of reaching out to potential customers in rural/remote areas who are underserved in banking and digitalization. NBFCs usually collaborate with fintechs to set up digital platforms that help them cater to the needs of borrowers across multiple geographies. Banks can take advantage of this to widen their customer base and provide the economically weaker strata with the funds they require. NBFCs have the advantage of having increased access to funds. Operational efficiency The digitalization and robust technology layer have led to superior quality services. As the entire co-lending process, from application to disbursal, is fully automated, it reduces the human effort and time consumed in processing a loan. This, in turn, strikingly lowers turnaround time for all processes. The digital approach has helped banks expand their scope into new segments while reducing the cost of capital for NBFCs. This implies low customer acquisition cost, more loan applications, lesser underwriting costs, disbursing more loans, and gaining more market share. Hence, the boost in operational efficiency. Shared risk&nbsp; CLM gives banks the opportunity and flexibility to partner with one or more lenders. According to the model, the risk is divided between the entities in the agreement. In this setting, banks benefit from an added sense of security and minimize the effects of loss. On the other hand, the primary challenge of NBFCs in India is the lack of established mechanisms to reduce the risk of defaults. Under the co-lending partnership, the losses on the loans/bad debts are shared between the partner banks and NBFCs. Thereby incurring a lesser loss. Improved credibility New-age companies looking to enter the lending business can build credibility for their brand through partnerships with major banks. Similarly, banks can tie up with established NBFCs to instill brand awareness. Want to implement a seamless automated lending process tool? Look no further. M2P’s core lending suite is what you need. Our core lending system takes care of the entire lending lifecycle without requiring any manual intervention.<h2 class="heading-node" id="dfkrvinwm" style="text-align: justify">How will NBFCs benefit from M2P’s Core Lending Suite?</h2>We are the only player in the industry to have a comprehensive product suite required for lending under one roof. Our core lending suite helps manage the entire loan lifecycle, including <a class="link" href="https://m2pfintech.com/loan-origination-system/" target="_blank" rel="noopener">loan origination</a>, <a class="link" href="https://m2pfintech.com/loan-management-system/" target="_blank" rel="noopener">loan management</a>, financial accounting, marketplace integration, app-based lending, <a class="link" href="https://m2pfintech.com/blog/steps-in-credit-underwriting-why-using-an-alternative-source-of-data-and-behavior-metrics-will-be-of-help/" target="_blank" rel="noopener">alternative data-based credit scoring</a>, dashboards, reporting, and analytics. <a class="link" href="https://m2pfintech.com/" target="_blank" rel="noopener">M2P’s lending program</a> is composable and built on Open API infrastructure, enabling you to develop customized programs and applications. We help you disburse credit in any form– cards, line, check-out EMI, embedded form, OD form, regular EMI, and asset-based​. In addition, our lending program has a robust LOS that allows you to configure custom workflows and change parameters on-the-fly without altering the code. With optimized TCO at all stages, constantly upgraded (quarterly) system, and bank-grade security, be market ready with our core-lending suite in a trice. To get down to the brass tacks of our system or for a demo, write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a> We will deep dive into how co-lending programs can be implemented using the Finflux platform, in the upcoming blog. Watch out this space for more insights.<a class="link" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noopener">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights directly to your inbox.  Follow us on <a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you. &nbsp;

Focus: Rise of Co-Lending Model

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/Surrogates-1.webp" alt="M2P Fintech" title="" width="100%" height="253">If you are in the credit card issuance business, then this is an article you must read.<a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">Credit cards</a> have been a growing industry in India, with 7.36 crore card users. The issuance side is leaping at 19%, and card spending is growing at 48% YoY.3 primary levers that drive credit card growth are as follows.<ul class="list-node" id="cjmc3066q"><li>Current Account Savings Account (CASA) base for Existing to Bank (ETB) issuances</li><li>Co-branded card partnerships</li><li>New to Bank (NTB) issuances through sourcing partners</li></ul><h2 class="heading-node" id="h4y2sbeks" style="text-align: left">Challenges in NTB card issuance</h2>Though the market is moving towards instant credit card issuance, it still takes 3-5 days to provide hard approvals, complete <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/" target="_blank" rel="noopener">KYC</a>, and disbursal of cards. Instant origination is only possible when the assessment/decision becomes instant across touchpoints like branches, websites, apps, and partners. While this can be possible for issuing credit cards to ETB customers, the real challenge lies in issuing cards to NTB customers. Current origination systems are inadequate to meet the market’s needs.Credit cards require a unique origination system built for <a class="link" href="https://m2pfintech.com/blog/steps-in-credit-underwriting-why-using-an-alternative-source-of-data-and-behavior-metrics-will-be-of-help/" target="_blank" rel="noopener">instant underwriting,</a> on-the-fly policy changes, central catalog management, and managing partnerships from a central point. This system will address the challenges in issuing cards to NTB customers - Instant Underwriting, Instant KYC, and Instant Issuance.<h3 class="heading-node" id="jfhywlxy5" style="text-align: left">What if there is a platform that accelerates instant card issuance?</h3>M2P’s Surrogate Platform is the fastest way for banks to issue credit cards to NTB customers by assessing the first-party data, such as the customer’s <a class="link" href="https://m2pfintech.com/blog/pros-and-cons-of-payroll-cards/" target="_blank" rel="noopener">payroll,</a> existing credit cards (if any), and average quarterly balance through the <a class="link" href="https://m2pfintech.com/blog/account-aggregator-101-democratizing-data-access-and-sharing/" target="_blank" rel="noopener">Account Aggregator framework.</a><h2 class="heading-node" id="m43pr1zsg" style="text-align: left">How does the platform work? (In case of a payroll-based surrogate)</h2><ol class="list-node" id="v31o5850k"><li>The customer enters their personal information on the bank website, and basic bureau checks are done.</li><li>They provide consent to retrieve payroll from HRMS.</li><li>The platform verifies employment, income, and personal information.</li><li>The credit limit and eligible cards approved for the customers are displayed on the website.</li><li>The customer is verified for CKYC, after which the virtual credit card is issued instantly.</li></ol>And all of this happens within 3 minutes.Through this surrogate program, payrolls of over 1.5 crore salaried individuals from Tier-A and Tier-B companies can be sourced easily for card issuance. Beyond payroll, surrogates like the Card-for-Card and AQB are some of the commonly used surrogates.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/Surrogates-img1.webp" alt="M2P Fintech" title="" width="100%" height="253"><ul class="list-node" id="liluf9587"><li>Card for Card (C4C) –The C4C surrogate helps banks issue new credit cards based on the customer’s existing credit card. The customer’s card statement is used for assessing their creditworthiness. What’s new with this program is that banks can run customized policies for credit user segments like revolvers, transactors, etc.</li></ul><ul class="list-node" id="5gzb34ztf"><li>Average Quarterly Balance (AQB)– This model reduces friction for uploading documents with the help of the Account Aggregator model to get the AQB information like the nature of the accounts owned, credit &amp; debit transactions in the account, investments made by customers, insurance premium payments, etc. And instantly issue cards based on this information.</li></ul>Depending on the bank policies, more than 20 surrogate programs can be used for issuing cards.The surrogate programs listed above can be suitable for issuing credit cards for all types of customer profiles as follows.<ul class="list-node" id="idrs7ace6"><li>New to Bank (NTB) – Customers with no previous relationship with the bank. These customers can be instantly issued a credit card based on their payroll.</li></ul><ul class="list-node" id="5n5tj4bc0"><li>Existing to Bank (ETB) – Customers who hold an account of any nature with the bank.&nbsp;</li></ul><ul class="list-node" id="kzoxkr562"><li>New to Credit (NTC) – Customers with no credit product.</li></ul><ul class="list-node" id="uzr6tgb0k"><li>Existing to Credit (ETC) – Customers who have availed of any credit product like loans, overdrafts, etc.</li></ul><ul class="list-node" id="xpyvrs7pi"><li>New to Credit Card (NTCC) – Customers who have loans or any credit product but do not have credit cards.</li><li>Existing to Credit Card (ETCC) – Customers who already have credit card(s).The C4C surrogate program will help issuers expand this customer base.</li></ul><h2 class="heading-node" id="f15od0nlm" style="text-align: left">6 reasons why you need a Surrogate Program</h2>Surrogate platforms enable card issuers to expedite credit decisions, increase their customer base and enhance <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/" target="_blank" rel="noopener">seamless onboarding</a>. By enrolling with the surrogate platform, card issuance not only becomes simple and trustworthy but also super quick (within seconds).Here are 6 key reasons why issuers must leverage M2P’s surrogate platform.<ul class="list-node" id="x08edig6n"><li>Instant card issuance</li></ul>Issue a virtual card in minutes and enable customers to initiate an online transaction right after card issuance.<ul class="list-node" id="myllssvm8"><li>No code BRE</li></ul>Customize the Business Rule Engine (BRE) catering specifically to the target customers, thus resulting in a win-win situation.<ul class="list-node" id="qieiiihr5"><li>Funnel transparency</li></ul>Easy single-point visibility across all touchpoints.<ul class="list-node" id="gal14twhz"><li>Retargeting campaigns</li></ul>Rejected customers can be retargeted via campaign teams.<ul class="list-node" id="wzokl3pbo"><li>Single window for onboarding marketplace partners</li></ul>Completely manage your sourcing partners with the help of this platform so that banks don’t have to spend bandwidth for <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/" target="_blank" rel="noopener">API integrations</a> with partners.<ul class="list-node" id="0fngg5ic7"><li>User experience</li></ul>Provide a seamless experience that requires minimal or no effort on the end customer’s part.Leading banks in selected locations have started adopting our surrogate platform. Do you also want to transform your credit card issuance game?Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/" target="">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/" target="">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech" target="_blank" rel="noopener">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Resolving NTB Credit Card Issuance Challenges

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/banner_1_1.webp" alt="M2P Fintech" title="" width="100%" height="253">Reserve Bank of India (RBI) released the latest Digital Lending (DL) guidelines on September 2nd, 2022. This notification confirmed the implementation of the recommendations specified in Annex-1 of the RBI press release**, published a few weeks ago.&nbsp;Before deep diving into these guidelines, let us understand the RBI’s role as a regulator in the Indian economy. &nbsp;<h2 class="heading-node" id="xttnnf4sw">Brief history of RBI</h2>A book by Dr. B. R. Ambedkar sparked the idea of setting up a central banking institution for India. Subsequently, on April 1, 1935, RBI started its operations based on the RBI act of 1934. The act provides the statutory basis for the functioning of the bank. Yet, RBI remained a private institution till it was nationalized in 1949. Since then, RBI has been regulating, moderating, and monitoring the financial aspects of the country’s fiscal and economic position.The primary functions of RBI include the following.<ul class="list-node" id="z3s3llbmp"><li>Monetary Authority – Implementing and monitoring monetary policies</li><li>Currency issuance – Producing, managing, issuing, and exchanging quality currency notes and coins</li><li>Regulator &amp; Financial administrator – License issuance, bank mergers, branch expansion, and liquidity of assets</li><li>Managing foreign exchange – Maintaining Rupee value outside India, managing Indian FOREX reserves, and helping foreign trade payments</li></ul>Other than these, RBI’s role also includes stabilizing India’s financial reserves. They work with players such as financial institutions, regulatory bodies, fintechs, and government agencies to ensure the smooth flow of financial services.&nbsp;To summarize, all private and public banks are monitored by RBI to build trust and safety among their users.&nbsp;In the last eight years, fintechs, online/mobile banking, and other technological advancements have modernized the financial ecosystem worldwide. Digital transformation in financial services is on a rapid growth spurt. And in recent years, digital lending has been a prominent topic in the industry with its share of pros and cons. &nbsp;<h2 class="heading-node" id="ti82051sp">So, what is digital lending?&nbsp;</h2><blockquote class="block-node" id="p26pelwhr">According to RBI reports, Digital Lending (DL) is “A remote and automated lending process, majorly using seamless digital technologies in customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service.”&nbsp;</blockquote>Now that the definition clearly states what constitutes digital lending, let's see who the players are and their roles in the DL realm.&nbsp;<h2 class="heading-node" id="dklhgur4h">Key players in the DL arena</h2><ul class="list-node" id="ibj6ivuxn"><li>Borrower- End customer who is the recipient of the loan amount.</li><li>Lenders- Traditional players include Non-Banking Financial Companies (NBFCs) and Banks. They can be further divided into:<ul class="list-node" id="vt0pd5crw"><li>Balance sheet lenders- Those who have a record of the loan in their books</li><li>Marketplace lenders- Those who connect borrowers and balance sheet lenders</li></ul></li><li>Lending Service Providers (LSPs)- They are the fintechs that carry out one or more of the lender’s activities like acquiring potential borrowers, disbursement, and collection among several others. LSPs could either be in or out of the regulatory purview of the financial regulator.&nbsp;</li><li>Fringe lenders: They are shadow and unlicensed lenders who do not come under the purview of any registered entity. Monitoring these lenders is difficult as they do not have a proper identity trail.&nbsp;</li></ul>The key players listed above contribute to the remarkable growth of the industry.&nbsp;<h2 class="heading-node" id="ir07p6kz3">Steady growth prospects</h2>The pandemic era witnessed phenomenal growth in online transactions. There was a significant rise in digital lending platforms and applications. As a result, applying for and borrowing money from a digital lender got simplified, thus giving rise to thousands of Digital Lending Applications (DLAs).&nbsp;Digital Lending (DL) recorded one of the highest growth in India, from $9bn in 2012 to around $110 bn in 2019. &nbsp;By 2023, the value of the digital lending industry is expected to reach $350 Bn dollars.&nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/inner-image_1-copy-2.webp" alt="M2P Fintech" title="" width="100%" height="253">When we talk about DL, First Loss Default Guarantee (FLDG) is the term we hear quite often. It is one of the many triggers of RBI's DL regulation.Let's get a quick glimpse into what FLDG is.<h2 class="heading-node" id="e7ha4q7hp">What is FLDG?</h2>We'll start with a simple example. In trading communities, family businesses are carried on from one generation to the next. When entrepreneurs emerge in these situations, loans are given to them based on the family's credibility. The reason is that if they do not make a payment, the lender can recover it from the borrower’s family.Likewise, in the case of First Loss Default Guarantee (FLDG), whenever a borrower defaults, a third party (fintech, in this case) comes in to compensate the lender. This mechanism is FLDG.&nbsp;Here's how FLDG works.<ul class="list-node" id="9gs2tjgn2"><li>Typically, fintechs partner with financial institutions by proposing to widen their customer base by targeting a particular customer segment</li><li>They zero in on that niche and turn them into leads using different marketing strategies</li><li>NBFCs agree to take on these loans on their books with a threshold of guaranteed interest</li><li>This guaranteed interest will be backed by the FLDG arrangement between the lender (NBFC) and LSP (fintech)</li></ul>Few NBFCs were renting out their licenses through FLDG. This enabled LSPs to build a proxy portfolio which some industry experts claim to be a risk to the lending system.&nbsp;<h2 class="heading-node" id="111xwkfi9">Need for RBI Working Group</h2>While FLDG contributed to the industry's increasing volume, several unregulated entities came into the picture. They exploited customer data and resorted to illicit collection activities. Many borrowers faced serious trouble as they were unaware of the real nature of these entities. An alarming rise in customer complaints resulting from the actions of the unregulated entities placed digital lending on RBI’s radar.&nbsp;To address and streamline the same, RBI set up a Working Group (WG) to understand the risks and set up necessary controls in the DL industry.&nbsp;<h2 class="heading-node" id="fcp9tkbk8">What did the Working Group find out?</h2>On January 13, 2021, RBI set up a WG consisting of thirty-six stakeholders. The purpose was to study the DL industry and its activities in detail and to implement the right regulatory approach.The WG surveyed and studied the industry and presented a report (containing two annexures) to RBI on November 18, 2021.&nbsp;The report’s findings were based on the following pillars.<ul class="list-node" id="motjl864k"><li>Discussions with the stakeholders</li><li>Survey and data analysis</li><li>Review of extant regulatory / Supervisory framework and industry practices</li><li>Review of global practices and literature</li></ul>After considering the recommendations, RBI officially announced the implementation of the DL guidelines on September 2, 2022.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/inner-image_1-copy.webp" alt="M2P Fintech" title="" id="f425sz7ha" width="100%" height="253"><h2 class="heading-node" id="6avlwzuzi">&nbsp;DL guidelines implemented</h2><h3 class="heading-node" id="9x0k6ukoy">Annexure – I</h3>The following recommendations were accepted by RBI for immediate implementation.<h3 class="heading-node" id="xwx0cvy12">Customer Protection</h3><ul class="list-node" id="tsdlck58x"><li>Loan disbursals and payments should be between the borrower’s bank account and the lenders without any third-party pool account involved</li></ul><ul class="list-node" id="r68myhycc"><li>Regulated Entities (REs) should directly pay the fees and charges to the Lending Service Providers (LSPs) instead of charging the borrower directly</li></ul><ul class="list-node" id="29mxi1vhz"><li>Before the execution of the loan contract, the borrower must be given a standard Key Fact Statement (KFS)</li></ul><ul class="list-node" id="23dbqwzho"><li>Contents of KFS – Annual Percentage Rate (APR), Recovery method, Grievance addressal, cooling-off/ look-up period&nbsp;</li></ul><ul class="list-node" id="avc3zqm4a"><li>Any change in credit limit must require the borrower’s explicit consent</li></ul><ul class="list-node" id="ty03qxa1h"><li>Borrowers must be given the option of exiting digital loans during the cooling-off period by paying the principal and the applicable APR without any penalty</li></ul><ul class="list-node" id="mciab4cid"><li>All borrower’s complaints should be resolved by a RE and LSPs engaged nodal grievance redressal officer</li></ul><ul class="list-node" id="hve36i3x7"><li>The borrower can escalate it to the RBI if the complaint is not resolved within 30 days</li></ul><h3 class="heading-node" id="dd7ts6i9g">Technology and Data</h3><ul class="list-node" id="h4tyt70ye"><li>Data collection should be done with the borrowers' explicit consent with audit trails &nbsp;</li><li>DLAs should collect only specific data of the borrowers pertaining to <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">Know your Customer (KYC)</a> and onboarding</li><li>Borrowers must be provided with consent to accept, deny, or delete the data collected by the DLAs/LSPs</li></ul><h3 class="heading-node" id="6kpyid9pl">Legal and Regulatory</h3><ul class="list-node" id="27yjfnlrz"><li>Any lending sourced through DLAs (of the RE or the LSP employed by RE) must be disclosed to Credit Information Companies (CICs) by REs</li><li>If REs are using the FLDG model, they shall adhere to the provisions of the <a class="link" href="https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12165">Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021, dated September 24, 2021</a></li></ul><h2 class="heading-node" id="t9hkboftc">WG recommendations accepted in principle</h2><h3 class="heading-node" id="3r58jerkf">Annexure – II</h3>The following recommendations were accepted in principle but require further examination.&nbsp;<h3 class="heading-node" id="tga9u9bap">Customer Protection</h3><ul class="list-node" id="bwn63txc9"><li>Any time a RE or LSP looks at or asks for credit information from a CIC, the borrower will be notified by email or text message&nbsp;</li></ul><h3 class="heading-node" id="nn4390fg9">Technology and Data</h3><ul class="list-node" id="3xoi0979d"><li>Banks will keep an eye on accounts often used from a different or overseas IP address that doesn't match the account holder's KYC profile&nbsp;</li></ul><ul class="list-node" id="nd7vb0o1c"><li>Baseline technology standards to be laid down by RBI primarily include secure application logic and an auditable log for every user action</li><li>REs should ensure that the underwriting algorithms are well-researched and auditable enough to point out discrimination factors&nbsp;</li><li>Artificial Intelligence (AI) used by digital lenders should be ethical and focus on protecting customer interests, security, and privacy</li></ul><h3 class="heading-node" id="28bmw3gy5">Legal and Regulatory Framework</h3><ul class="list-node" id="oktvcvrxo"><li>A Self-Regulatory Organization (SRO) to be set up which will focus on framing a code of conduct for recovery and a model standardized LSP agreement for Balance Sheet Lenders</li></ul><ul class="list-node" id="age2sbmui"><li>While the recommendation concerning FLDG is still under examination, REs must ensure financial products involving third-party compensation for defaulters should comply with the Master Direction – Reserve Bank of India (Securitization of Standard Assets) Directions</li></ul><h2 class="heading-node" id="qu1um5gxv">Conclusion</h2>The latest guidelines emphasize the importance of protecting borrowers by curbing the misuse of digital lending apps. The REs are given time until November 30, 2022, to develop systems and processes that are compliant with the ruling.Undoubtedly, fintech-led digital lending will certainly undergo changes. The larger perspective is to protect the customers and the economy from unscrupulous practices and uphold the trust of the banking system.&nbsp;Reference**: <a class="link" href="https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/DIGITALLENDINGF6A90CA76A9B4B3E84AA0EBD24B307F1.PDF">Annexure 1 of RBI press release</a>Want to know more about digital lending? Write to us at&nbsp;<a class="link au lg" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

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