Digital payment players are setting the stage for recurring payments to start on Unified Payments Interface (UPI) and doubling down on partnership with lending platforms to process their EMI payments. Payment majors like Paytm, PhonePe and Google Pay have already partnered with lending platforms like Bajaj Finance, Tata Capital, Indiabulls Consumer Finance and others to process their EMI payments.
This is the starting point since eventually recurring payments will happen via UPI and these applications will be ready to process those transactions. The Reserve Bank of India gave a go-ahead for recurring transactions on UPI up to Rs 2000 in January this year. Bankers believe this will soon be expanded beyond Rs 2000, once the system stabilises.
Besides EMI payments, the apps are also looking for mutual fund transactions and partnering with fund houses to process their monthly systemic investment plans.
“NPCI is working with banks to test the recurring payments system on UPI; these are still initial days but a few of the banks might start going live in the next couple of months,” said a senior banker who spoke on condition of anonymity.
PhonePe said that they are working with more than 35 lenders to process their EMI payments. They have plans to add more lenders for the convenience of their consumers.
“We currently do not support recurring payments for loan EMIs; however, this is a feature we are planning to add,” said a PhonePe spokesperson.
PhonePe requires consumers to go through a four-step process to pay their EMIs. First select EMI payments from the home screen, then select the lender, enter details about the loan account and then authenticate the transaction. The process flow is similar in other payment apps as well.
Industry insiders Moneycontrol spoke to said that all payment apps want a share of the recurring payments pie, since it has multiple benefits. First, it will lock customers to a platform and increase stickiness. Second, it will also give platforms visibility of the EMI payment habits of consumers. After all, this means greater visibility on the consumer’s behaviour.
Emails sent to Paytm and Google Pay for comments did not elicit any response till the time of publishing this report.
A look at the Paytm app showed there are more than 70 lenders for whom repayments can be done via the app. For Google Pay, there are around 15 lenders.
While the current process is clumsy, the banker quoted above said that once recurring payments go live on UPI, borrowers will get a debit notification 24 hours before the debit happens and they have to just authenticate the transaction to go through. This will make EMI payments smooth.
“Our experience with borrowers is that if given all the payment options and a smooth repayment experience, the chances of defaults are substantially reduced,” said the founder of a fintech lender which accepts payments from all the major UPI apps.