Google Pay, the country’s second-largest mobile payments firm, has partnered with Muthoot Finance to launch gold loans on October 3, marking its entry into the secured loans segment.
“The idea is that look for users who have no choice but to have a collateralised loan, or for users who have access to non-collateralised loans but want to bring the cost of their loan down,” Sharath Bulusu, director of product management for Google Pay told Moneycontrol.
Collateral loans often help customers to reduce their interest, especially for gold-backed ones, he said.
Google Pay has around 200 million active customers in India using the popular Unified Payments Interface (UPI) platform. The app facilitates around 5.6 billion monthly transactions worth around Rs 7.5 lakh crore.
The company has also partnered with Aditya Birla Finance Limited (ABFL) as it plans to double down on credit in India. The non-banking financial company (NBFC) has a wide footprint across the country in terms of geography and economic segments it covers.
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“There's a huge gap in terms of what amount of formal credit needs to enter the system. But at the same time, we have lots of people who don't get access whether they are small businesses or individuals, because they don't have sufficient credit history,” Bulusu said. This often means that borrowers end up paying higher interest rates.
With the two partnerships, Google Pay can service more than 13,500 PIN codes or 70 percent of the country.
According to the company, this will also help in expanding the reach of responsible lending in the smaller towns and cities often plagued by usurious money lending.
“We are making sure that we are doing it responsibly, so risk is well-controlled for the user as well as the lender. So making that match sensibly working with reputed partners, is very important for us. And the second one is inclusion,” Bulusu said. More than 80 percent of these loans go to users in Tier 2 cities and beyond.
According to Google Pay, it also has launched a new Artificial Intelligence-backed "support agent" that will help create awareness about credit. The company has enabled over six crore users to avail their credit report or credit score and a quiz at the end of the report helps them understand the credit products better, it said. The agent can also address customer queries on credit using natural language.
“They don't have to know how to operate some user interface or worry about reading a ton of fine print. So, it can point you to the detailed terms and conditions and let customers know what set of rules apply to say, an early repayment or whatever else,” Bulusu said.
UPI payments do not have a merchant discount rate (MDR) or payment commission for companies that facilitate payments. For most fintechs, the commission earned from lending is a big source of revenue.
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