Travel credit card startup Scapia faces user backlash for reducing credit limits

The move comes at a time when travel credit card startups have been facing turmoil due to regulatory interventions.

Former Flipkart exec Anil Goteti's travel credit card startup Scapia faced user backlash on social media platforms as the firm reduced the credit limits to a set of users by nearly 70-80%, citing infrequent usage.

Sources told Moneycontrol that the credit card startup has received notification from its banking partner Federal Bank to bring down the credit limits by up to 70-80% for inactive users or users who have made infrequent transactions.

"Maybe around 150-200 users so far might have gotten impacted due to the move and this is done only for users who have not even touched their cards or used at least 10% of the limit," A source close to the development said.

Scapia did not comment on the developments.

Federal Bank has said that the move is part of the bank's periodic review and that it has revised limits for some customers as per the bank’s credit card usage guidelines.

"The bank notified these customers whose limit was revised through email and SMS as per our regular practice. These revisions are not permanent and will continue to happen dynamically, reflecting both increases and decreases as per standard industry practices. We remain dedicated to working closely with our co-brand partners and bringing the best experience to our customers," Federal Bank said in a statement to Moneycontrol. 

Several users took it on X (formerly Twitter) and said that the limit had been reduced without much notice.

So @getscapia has started sending mail & sms notifications now for the “revised credit limit”

No matter how much we want to trust the new-gen stuffs, they prove to be not worthy again and again. #Scapia#FederalBankhttps://t.co/JIStnolBmHpic.twitter.com/NTDJbEhTUJ

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— Subhankar (@CenturionGuy1) January 11, 2024

Yeah even I got a msg just now! Reduced limit from 10L to 20K but too late not, Have already requested them to close it.

— planetepica (@planetepica) January 11, 2024

On November 7th, Flipkart's former senior vice president Anil Goteti, had raised $23 million in a Series A funding round led by Elevation Capital and Binny Bansal's fund 3State Ventures and launched the credit cards in the market.

The round also saw participation from its existing investors Matrix Partners India and Tanglin Venture Partners.

Currently, it has a tie-up with Federal Bank for credit cards however the firm also plans to add more banking partners.

"This is a widespread practice by banks. If a user is not using the credit card, the limit will be reduced, " Said another industry source.

The move comes at a time when travel credit card startups have been facing turmoil due to regulatory interventions.

The Reserve Bank of India (RBI) had directed the State Bank of Mauritius (SBM) India to stop all transactions under the Liberalised Remittance Scheme (LRS) which impacted the travel card startup Niyo's global credit card.

Several users expressed concerns citing that their money is stuck in transit.
The RBI on November 16th asked institutions to increase the risk weights concerning consumer credit exposure of commercial banks by 25 per cent to 125 per cent.

Similarly, credit card receivables of scheduled commercial banks, which attract a risk weight of 125 per cent, have been hiked to 150 per cent while NBFCs' risk weights have been hiked by 25 per cent to 125 per cent.

Founded in 2023, Scapia offers a co-branded credit card and an app for customers to turn their daily expenses into rewards. These rewards turn into Scapia coins, which can be utilised to book hotels and flights online.
Scapia's co-branded card promises zero joining and annual fees, offering a zero-forex markup and unlimited domestic lounge access to its users on minimum monthly expenditure.