Uni to offer co-branded credit cards, loans after RBI norms disallowed pre-paid card offering

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Fintech startup Uni Cards has informed customers of its new products including a co-branded credit card and loans by its lending partners, replacing its earlier core product of offering loans through a co-branded prepaid card.

The Lightspeed and General Catalyst-backed startup's overhaul of its product offerings comes after the Reserve Bank of India's (RBI) digital lending norms dictated that loan disbursals and repayments must happen directly between the bank accounts of customers and the lender bank or non-banking financial company (NBFC), without the presence of a third party account or fintech in the middle.

The norm quashed the model of lending through prepaid payment instruments (PPIs) including wallets and prepaid cards, a move that impacted the business models of players like Uni, Slice, PayU's LazyPay, Paytm Postpaid, and BharatPe's PostPe, etc. The deadline to adhere to these norms is November 30.

In a communication to customers, which was reviewed by Moneycontrol, Uni said that services to the erstwhile prepaid card will be suspended starting December 1, 2022.

Just to be clear, Uni had already announced on August 19 that it had decided to proactively suspend card services on its products - the Uni Pay 1/3rd Card and the Uni Pay 1/2 Card - in the light of digital lending norms that were announced on August 10.

Moneycontrol reached out to Uni with queries on the new products as well as the communication to customers. The startup's responses are awaited.

"Your SBM Bank (prepaid) card will be suspended but do keep it safe with you. Your credit line continues to be active. And hence, Uni Cash works as usual. The quickest way to transfer your credit line to your bank account," read Uni's message to customers.

Uni Cash is a loan product where the company enables disbursals of loans directly to the customer's bank account by the startup's lending partners.

Uni added that it will also offer co-branded Visa credit cards named Uni NX Wave which will offer 1 percent cashback for each transaction, up to 5x rewards at Uni Store, and will come with a zero percent forex markup.

The other new product introduced by Uni is Paycheck Pro, an option for customers to get an interest-free monthly deposit in the middle of the month, ahead of the customer's salary that will be credited at the end of the month. Moneycontrol understands that a deposit of up to Rs 50,000 can be availed by Uni customers, based on their creditworthiness.

This offering is provided by multiple fintechs in a bid to allow customers to manage their expenses in the middle of the month. Customers can repay the deposit amount once they receive their salary.

Uni was founded in 2020 by former PayU CEO and co-founder Nitin Gupta and is valued at $350 million after its Series A fundraising of $70 million in December 2021, led by General Catalyst. Slice and Uni were the worst hit by RBI's norms as lending through prepaid cards has been their core business model.

Following the announcement of the digital lending norms in August, SBM Bank India, which had partnered with most of these fintechs for their prepaid cards and wallets, asked them to stop onboarding new customers for these products.

On October 29, Slice too announced its move to lending directly to customer's bank accounts and not through its co-branded SBM Bank India prepaid card. Slice added that customers can load their own money (and not loans or credit lines) in the flagship prepaid card through a prepaid wallet named Slice Mini and use it for daily transactions, making it more of a debit instrument.

The crackdown also came in the midst of a difficult funding environment for the fintech sector that had raked in millions of dollars over the last two years. Many fintech companies have been looking to further raise funds in 2022, but were not able to do so amid an uncertain macroeconomic environment and RBI’s crackdown.