BNPL on UPI Lite - Yes, why not

 BNPL on UPI Lite - Yes, why not

Product Name – UPI Lite BNPL

Q: What is UPI Lite

Ans: UPI Lite will enable feature phone users to make use of the UPI networks and make use of the UPI networks and make digital payments directly from their bank accounts.

UPI Lite will enable feature phone users to access UPI networks and make digital payments straight from their bank accounts using their phones.

UPI Lite, a new solution in the works at the NPCI, will enable small digital payments, to be made without active internet connections. The RBI, on January 5, allowed digital payments up to Rs 200 to be made without internet connections.

 

 

Q: What is BNPL

Ans: The full form of BNPL is ‘Buy Now Pay Later’. The primary target audience is folks who are not eligible for a full-fledged credit card.

The credit limit for BNPL is very low as compared to a normal credit card limit.

BNPL billing cycle is 15 days and the repayment window is 5 days from the bill generated date

 

Q: How can BNPL work under the UPI Lite model?

Ans: Mandatory – Regulatory guidelines and Aadhaar of the prospective BNPL seeker

BNPL Providers register with NPCI to offer this product

Loan applicant logs into the respective lenders App

Loan applicant requests for UPI Lite BNPL

Information flows to the providers central office and NPCI.

The loan provider central team manually approves the loan

The sanction communication flows to the loan applicant via NPCI

The BNPL is replicated at NPCI end

All the BNPL transactions are recorded at NPCI end too.  

 

 

Safe guards –

Each UPI Lite BNPL Account linked to an Aadhaar

First 18 months – Only one UPI Lite BNPL account per Aadhaar

In case of defaults, respective Aadhaar’s are put in a cooling period of 6 months

Normal UPI Lite account is permitted to cooling list Aadhaar’s

 

The Seven Benefits of BNPL Under UPI Lite are: -

Benefit 01) Open up new opportunities for Banks / Loan Providers / FinTech companies

Benefit 02) Zoom up the UPI transactions in our country

Benefit 03) Opportunity for new to loan customers to benefit from a low value tech-savvy BNPL Product

Benefit 04) Opportunity for consistent users of UPI Lite BNPL to avail other loan products at a reasonable rate of interest

Benefit 05) Opportunity for merchants to obtain working capital based on the UPI Lite BNPL receipts.      

Benefit 06) As Offline transactions are permitted only for proximity mode, the UPI Lite BNPL product will encourage digital transactions at physical merchants instead of online merchants.

Benefit 07) 100% export-oriented finance product. It can be easily replicated in countries, wherever there is a VPA (Virtual Payment Account) for funds transfers

Q: What are the drawbacks of BNPL under UPI Lite?

Ans: No visible drawbacks

Q: What are the chances of fraud under this product?

Ans: Minimal chances of new types of frauds.

Q: What are the possible checkpoints under this product?

Ans: Velocity checks and other checkpoints can be built at the NPCI end, as all the transactions will flow via NPCI only.

Q: What are the proposed charges for this product?

Ans: Setup Charges INR100/-

Default charges INR250/-

Q: How quick can this product be rolled out?

Ans: Once the regulatory guidelines are released, the testing can start off in 2 months.

Q: What are the chances of NPAs under this product?

Ans: The major safety point is the limit of INR2,000/- for a UPI Lite Account. This means the chances of over-lending are NIL. Borrowers need not fear about high limits and consequent challenges in repayment of the BNPL

Q: Can an individual hold multiple BNPL accounts under UPI Lite?

Ans: Not preferred in the first 24 months of the product launch. Based on feedback, the option of multiple BNPL accounts under UPI Lite can be explored. 

Q: Is it mandatory for a prospective BNPL applicant to have an active bank account?

Ans: Yes, an active bank account is preferred.

Q: Can the overdue under this product be recovered from the linked bank account?

Ans: Yes, the same can be done, if the terms and conditions of the UPI Lite BNPL loan cover the same.

Additional Reading -

Unique Headline 03) pymnts.com - India Tests Internet-Free Digital UPI Payments @ https://www.pymnts.com/news/international/2022/india-tests-internet-free-digital-upi-payments/

 

Disclaimer: These are my personal views only. The bottom line is Safe ePayments. Nothing more - Nothing less.