Paytm enters lending domain, launches short-term credit product with ICICI Bank

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After Paytm Gold, Paytm seems to be kicking in its strategy of being a full stack financial player, moving from prepaid wallets to now introducing lending through Paytm Postpaid.  

On Thursday, Indian multinational bank ICICI Bank and Indian payments platform Paytm jointly launched ‘Paytm-ICICI Bank Postpaid’, their interest-free, short-term digital credit product.

Through this partnership, Paytm plans to enable access to instant credit for its customers for everyday commerce use-cases, ranging from movies to bill payments, flights to physical goods.

Image Source: Paytm

The Paytm-ICICI Bank Postpaid is a digital credit account with instant activation online. There would be no transaction, joining or hidden administration fees, the company said.

Based on the credit score of the customer, the bank offers upto 45 days interest-free credit limit. It ranges from Rs 3,000 to Rs 10,000, extendable upto Rs 20,000 based on the repayment history.

Paytm-ICICI Bank Postpaid will also offer a quick checkout to customers with the Paytm Passcode.

The backend is powered by the credit assessment algorithm, for real-time credit assessment for customers. The financial and digital behaviour of the customer, including credit bureau check, purchase patterns, frequency of purchase is taken into account to ascertain the creditworthiness of a customer within seconds.

As a start, Paytm-ICICI Bank Postpaid will offer the credit limit to select customers of the bank using the Paytm app. It will shortly be available to non-ICICI Bank customers using the Paytm app.

Once the credit limit is set up for a customer, a consolidated bill is generated on the first day of the next month, which has to be paid by the 15th day of the same month. Customers can use their Paytm Wallet, debit card or internet banking of any bank for an easy repayment of their dues.

Speaking on the occasion, Anup Bagchi, Executive Director, ICICI Bank said,

“We are now witnessing two distinct new trends: One, many customers—who are new-to-credit and, therefore, do not have a credit history—are looking for short-term credit. Two, millions of young Indians are now buying products online. We have combined these two insights to bring out a novel proposition of giving short-term credit to people, completely online and instantly.”

While, Vijay Shekhar Sharma, Founder and CEO, Paytm said,

“It’s common for us to ask a trusted friend for money for frequent expenses and promise to pay later. These exchanges are based on trust that you will pay back as soon as you have access to money. We believe our customers are sincere with their payments and Paytm Postpaid will play a major role in helping them pay for their daily expenses on time. This will democratise access to credit including those with less disposable income. We are happy to launch credit in a digital way to the masses in the form of Paytm Postpaid with ICICI Bank as our first partner.”

Paytm is not the first Indian wallet to enter the short-term credit market. In August, MobiKwik announced its partnership with NBFC Bajaj Finance to empower consumers to avail credit facility through the wallet, enabling them with an instant purchase and payment option.

They created a separate app, ‘Bajaj Finserv Wallet’, and the joint entity is offering loans at zero-percent EMI.

At present there are other players in the market, like ePayLater, claiming to have more than two million users on board, and Simpl, which is giving short-term credit for instant purchases to users.

But what is interesting in Paytm's case is their full-stack approach (of launching services like bus and movie ticketing) and synergies with e-commerce entity Paytm Mall, which might result in sales gaining a boost.