Tiger Global-backed fintech unicorn Slice has launched Unified Payments Interface (UPI) on its platform as it looks to tap into the trillion-dollar payments market in India, which acts as a key customer acquisition funnel.
Until now, Slice only provided credit line-linked Visa cards with a focus on new to credit and subprime millennial customers. While UPI payments do not yield any revenue to fintechs as they fall under the zero-MDR policy, which mandates that merchants should not be levied any charge on accepting payments via this mode, they open up a larger customer base, which fintechs then leverage to cross sell other offerings.
To be sure, UPI sees over 550 crore monthly transactions and in 2021-22 (FY22) the total value of UPI transactions topped $1 trillion.
In an interview with Moneycontrol, Slice founder and CEO Rajan Bajaj said that Slice has over 10 million customers on its waitlist and UPI will allow all to use the app. However, the credit line will be extended only to a select few customers.
Interestingly, Slice’s strategy is the opposite of many fintech players such as Walmart Inc's PhonePe, Google Pay, Paytm among others, which started as payment apps first and then diversified to various financial services including lending.
“If you start with just payments there is no clarity on the business model. We wanted to first have a strong business model and then offer more payments products using our free cash flow,” Bajaj said.
UPI transactions are dominated by three players – PhonePe, Google Pay and Paytm Payments Bank -- with PhonePe alone enjoying a market share of 47 percent in monthly transactions.
Google Pay and Paytm Payments Bank have a share of around 35 and 15 percent respectively.
Bajaj said, “We have put in all our efforts to save even a single second for the customer. We are going to completely shift our focus from just providing credit to an exclusive set of customers to providing overall payments going forward. Strategically this is a priority that we want to focus on for the coming years.”
Slice had first revealed its plans to launch UPI on its app in September 2021.
Bajaj also said that after UPI, Slice plans to offer tap and pay, direct merchant checkout and will work with the National Payments Corporation of India (NPCI) to allow customers credit lines in their wallets through UPI.
Slice had turned into a unicorn, or a private company with a valuation of $1 billion or above, in November 2021 after it raised $220 million led by Tiger Global and Insight Partners. Back then, the company had said that it issues 200,000 cards per month, just behind leading banks like HDFC Bank and ICICI Bank.
According to multiple industry sources, the company is in talks to raise another round of funds with an eye on doubling the valuation to $2 billion. Existing investors Tiger Global and Insight Partners are likely to participate in the round.
Bajaj, however, declined to comment on it but said that the company will turn profitable in the next few months.
Slice will be impacted by the upcoming digital lending norms by the Reserve Bank of India as a report by RBI’s Working Group on digital lending suggested that all loan servicing, repayments, etc. should be executed directly in a bank account of the balance sheet lender, and not the fintech partner.
A fintech lawyer who did not wish to be named said, “Now that a lot of payments players are lending themselves, pure-play lending fintechs have realised that they need to acquire more customers through payments as well. Plus if the recommendations of the Working Group are considered then fintech lenders will need to start building a customer base of their own.”
In a recent Master Direction on credit and debit cards, RBI said that for co-branded cards like Slice, the role of the co-branding partner entity shall be limited to marketing and distribution of the cards. Additionally, the co-branding partner shall not have access to information relating to transactions undertaken through the card.
Once it comes into effect in June, these norms can be a setback for players like Slice.
Bajaj said, “We will work with our co-branding partner State Bank of Mauritius India and comply with the norms. We work closely with RBI through our in-house NBFC Quadrillion Finance. There is some time for the new norms to come into effect, so if we have to make any changes we will figure that out closer to time.”Founded by IIT Kharagpur alumnus Bajaj in 2016, the company currently has five million registered users. In its Series A round, Slice had raised $20 million from investors Gunosy and Blume Ventures.