Slice updates terms, will levy 36% interest if repayment not done in one instalment

Rajan Bajaj, Founder and CEO of Slice

Tiger Global-backed fintech startup Slice has said customers will be charged a 36 percent interest for repayments in more than one instalment, a departure from its earlier interest-free offering of “Pay-in-3”.

The updated terms of use for credit products come into effect on June 27, the company said in a mail to its customers.

Moneycontrol was the first to report on  May 25 that the company had taken the first step in moving away from its core interest-free product by restricting the feature to only a few customers.

While Slice's interest-free feature was meant to extend credit to unserved customers not catered to by bank credit cards and was named the "challenger card", the latest change make the product is not very different from a credit card.

The move to charge interest on repayment models, other than the single instalment, signals a more conservative approach amid a tough growth environment, with a focus on a profitable business model as startups look to reduce cash-burn amid a slowdown in funding.

"In case of loan transactions initiated through Slice Card, no interest is charged to you in case you choose to make complete payment of the said transaction amount before the 1st EMI due date," the updated terms said.

"If you make payment in more than one EMI, or after the 1st EMI due date, interest amount will be calculated at 36 percent per annum, starting from the date of disbursal till the date of repayment."

The revised terms also come at a time when the company's business model is under question after the Reserve Bank of India (RBI) issued told fintechs  that loading of credit lines into prepaid payment instruments (PPIs) is prohibited as per norms.

Slice issues credit lines from its partner non-banking financial company (NBFC) lending partners. These credit lines are distributed through a prepaid card issued by its partner bank SBM Bank India or through Paytm Payment Bank's wallets, or gift vouchers.

Despite the RBI clarification, Slice has not stopped issuing credit lines through these means, awaiting further clarity from the regulator.

Various industry bodies including the Digital Lenders Association of India (DLAI) and the Payments Council of India (PCI) have or are in the process of making representations to the regulator for further clarity.

Slice's rivals Uni and PayU's LazyPay, along with OlaMoney Postpaid, Jupiter's Edge and EarlySalary, too, have been impacted by the RBI move.

The updated terms of use detail the parties involved in the product and clarify that the loan is disbursed by one of Slice's financing partners including its own NBFC Quadrillion Finance, DMI Finance,  Northern Arc Capital or Vivriti Capital.

The change in its core product has led to a consumer backlash, with multiple customers posting comments about their disappointment with the interest-free 'Pay-in-3' product being withdrawn on Google Play in the past month.

On June 24 the company's app was red-flagged by Google Play Protect saying it was unsafe and suggested users uninstall it.

Slice reached out to customers, saying the notification was an "isolated case of technical glitch caused by insufficient information relayed with the app update on Slice UPI, which has been resolved."

Slice 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.

Founded by IIT, Kharagpur alumnus Rajan Bajaj in 2016, the company currently has 12 million registered users.