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Tag: phonepe

  • Cashfree and Razorpay will End Collaboration with Juspay

    Payment aggregators Razorpay and Cashfree also intend to end all third-party collaborations and integrations with payment orchestration systems like Juspay in response to PhonePe’s lawsuit. Cashfree intends to stop using third-party routers and orchestrators for integrations. According to a statement from a Cashfree Payments representative, the brand can expedite feature release and provide better support and merchant experience by providing direct integration. According to a statement from Razorpay, it will stop integrating with any third-party payment orchestration systems and instead provide its clients with payment gateway services via direct integrations. Razorpay will halt all integrations via third-party routing services going ahead. Through its own direct integrations, the business will provide payment gateway services to our clients. According to a Razorpay representative, the company feels that direct integrations are the only way to guarantee that its most recent innovations quickly reach its clients and improve their operations and experiences.

    Pine Lab Continuing with the Collaborations

    Pine Labs, a provider of digital payment solutions, seems to have remained loyal to Juspay and stated that it will keep collaborating with other orchestration service providers. Collaboration and open architecture are crucial in the technology industry. Amrish Rau, the founder and CEO of Pine Labs, told a media outlet that the company will keep promoting this and that its online platform will keep collaborating with other orchestration platforms to give customers and merchants the greatest possible experience. Online retailers may handle several bank agreements using a single payment gateway thanks to payment orchestration solutions. In short, based on their greater success rate at the moment, these systems enable a merchant to route transactions to the appropriate payment aggregator. Sheetal Lalwani, the chief operating officer (COO) and cofounder of Juspay, informed a well-known media site that the two platforms’ exit will not affect the company’s operations. He claimed that merchants are the source of the company’s income and that some payment aggregators are depriving their clients of options.

    The construction of a full-stack payment system by Juspay to handle payments for the Open Credit Enablement Network (OCEN) and other commercial payment use cases was covered by a media outlet on December 14, 2023. Sheetal Lalwani, a co-founder of Juspay, had previously stated that he would not go up against other payment aggregators directly.

    Why Payment Aggregators Are Shifting Business Operations?

    A month prior, the digital payments juggernaut PhonePe allegedly ended all third-party integrations and agreements with payment aggregators, including Juspay. The move, according to PhonePe at the time, would allow it to control the whole value chain and reduce reliance on external parties. Although they are still in the early phases, Razorpay and Cashfree have also developed their own orchestration platforms, Optimiser and FlowWise, respectively. Vimal Kumar and Ramanathan RV founded Juspay in 2012, and Lalwani joined them later. Juspay is a technological platform that integrates payment gateways to give merchants an enterprise-grade, end-to-end, secure, and dependable payment stack.

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  • The Cofounders of PhonePe have Announced a $1 Million Grant for Alma Mater SPIT to Spur Innovation

    On December 21, 2024, the Sardar Patel Institute of Technology (SPIT), one of Mumbai’s top engineering schools, held its Annual Alumni Reunion in the SP Jain Auditorium on Bhavan’s Campus in Andheri West. About 300 graduates, including prominent figures from the business and technological sectors, were invited to celebrate the 25th anniversary of the 1999 graduating cohort and their professional achievements.

    At the ceremony, 1999 batch alumni Sameer Nigam, CEO and PhonePe founder, and Rahul Chari, CTO and PhonePe founder, announced a $1 million donation. In order to enable students to create innovative solutions and lead successful endeavours, the grant will improve infrastructure, encourage creativity, and develop an entrepreneurial attitude in them.

    SPIT Recognises Contributions of PhonePe Founders

    Both the PhonePe founders received the prestigious alumni award in recognition of their outstanding achievements to society and industry. PhonePe’s user-friendly, seamless platform has completely changed the digital payments landscape in India. Millions of people nationwide now have access to financial inclusion because of PhonePe’s reputable brand and visionary leadership.

    Rahul Chari, co-founder and CTO of PhonePe, spoke at the reunion and said that he has a particular place in his heart for being a member of the first graduating class of Computer Engineering when he thinks back on his time at SPIT. With the office for their first business situated within the institute itself, this is where he and his co-founder Sameer really started their entrepreneurial career. His ability to develop PhonePe has been greatly influenced by the solid foundation he established at SPIT, as well as the priceless insights he learnt from the outstanding teachers and peers he studied with. In order to assist SPIT in becoming a genuinely outstanding institution that continues to inspire and empower the upcoming generation of innovators and leaders, he hopes that other alumni will also participate in their own unique way.

    The Sardar Patel College of Technology is committed to the motto, ‘Students First, Alumni Always,’ and aims to become the leading engineering college in Maharashtra by 2030, according to Dr. B.N. Chaudhari, the institute’s principal. Only one in a million people becomes a donor, but one in ten succeeds, and one in a hundred becomes great. Rahul Chari and Sameer Nigam’s $1 million contribution is much appreciated by the institute; it is a game-changing move that will spur the expansion of the college and its student body.

    About SPIT

    The Bharatiya Vidya Bhavan came up with the concept of starting an engineering college in Mumbai in 1957. On August 19, 1962, Sardar Patel College of Engineering was officially opened. It began offering self-financed engineering courses in 1995 and operated as Sardar Patel College of Engineering (Unaided-wing) from 2005 to 2008, offering master’s degrees in electronics, computer engineering, and information technology.

    Both industry and the field of engineering education have highly regarded these courses. The Sardar Patel College of Engineering, Unaided Wing of Bharatiya Vidya Bhavan was founded in 2005 in its new facility under the name and design of the Sardar Patel Institute of Technology. It is affiliated to Mumbai University.

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  • PhonePe Terminates its Collaboration With Juspay

    The leading digital payments company, PhonePe, has cancelled its collaboration with Juspay, a payment orchestration platform, stating that it intends to integrate payment solutions for its merchants directly. With this change, the fintech company, which is sponsored by Walmart, will be able to provide its merchant clients with an integrated payment flow from transaction origination to final settlement.

    More than 40 million retailers are part of the Bengaluru-based company’s network. One of PhonePe’s primary functions as a payment aggregator is to offer its merchants best-in-class success rates via its solutions. According to a statement from a PhonePe representative, the company has chosen not to sell its solutions through any payment orchestration platforms since it can consistently accomplish this for merchants that are directly integrated with the business.

    Opting for Direct Integrations

    The spokesman also stated that the business will only use direct integrations in the future to provide its solutions to retailers. In February of this year, Juspay, an online payment aggregator (PA), was given the final approval to function as a PA. The main goal of partnerships between digital payment firms and payment orchestration platforms, including payment aggregators, is to increase transaction success rates.

    These platforms assess available gateways and procedures, taking into account a number of factors that could affect a transaction’s success, including reliability, prices, and speed. At any given moment, they direct transactions via the most effective payment gateway. In essence, the platform is in charge of rerouting the transaction to a different payment gateway in the case that the primary gateway goes down, avoiding service interruptions.

    Juspay Largest Payment Orchestration Platforms in India

    According to a media report, Juspay, which is supported by Softbank, makes up about 15% of PhonePe’s payment gateway business. It is one of the biggest platforms for payment orchestration in the nation. As of March 31, about 88% of the company’s revenue came from its payment platform integration division. If other payment platforms decide to follow suit and break up their partnerships with payment orchestration platforms, this might have an effect. 

    But in February of this year, Juspay also obtained the authorisation to function as a payment aggregator. It might soon begin to compete with businesses it previously collaborated with, like PhonePe and RazorPay.

    PhonePe is on the Rise

    In 2023, PhonePe raised around $1 billion from investors including Tiger Global, Walmart, and General Atlantic. Together with efficient cost control, this large investment enabled PhonePe to reduce its losses in FY24 and surpass INR 5,000 crore in revenue.

    According to the company’s consolidated annual report, which is available on its website, PhonePe’s operating revenue increased by 73.8% to INR 5,064 crore in the fiscal year that ended in March 2024. Payment service revenue continued to be PhonePe’s main source of income, but a $195 million funding round helped the company generate an extra INR 661 crore in interest income, mostly from investments and deposits. As a result, PhonePe’s overall revenue increased from INR 3,085 crore in FY23 to INR 5,725 crore in FY24.

    Employee perks accounted for 46.45% of total expenses for tech company PhonePe, up 16.4% from INR 3,096 crore in FY23 to INR 3,603 crore in FY24. Of the INR 1,876 crore in ESOP expenses included in this number, only INR 288 crore were paid in cash; the remaining amount was paid in non-cash. Payment processing fees increased 74.8% to INR 1,166 crore in FY24, in tandem with its expansion. Moreover, overall costs increased by 31.3% to INR 7,756 crore in FY24 due to expenditures for advertising, IT, licenses, legal, and other overheads.

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  • For Diwali, Payments Giant PhonePe Introduces a Firecracker Insurance Plan

    On October 21, 2024, PhonePe announced a partnership with Bajaj Allianz General Insurance to provide reasonably priced insurance protection against firecracker-related mishaps during Diwali for a certain time. For a payment of INR 9, which includes goods and services tax (GST), the insurance coverage includes a sum insured of INR 25,000. The coverage will begin on October 25, 2024, and run for 10 days, ending on November 3, 2024. Only the policyholder is covered for hospitalisation, day care, and accidental death under the plan. These policies will no longer be available for purchase after November 3, 2024.

    With coverage for up to four family members—the user, their spouse, and up to two children—the plan is available for purchase via the PhonePe app.

    Versatility and Accessibility

    The insurance plan is offered for sale until the conclusion of the Diwali season and goes into effect on October 25, 2024. Users who purchase insurance after this date will be covered for the remaining days of the 10-day term starting on the date of purchase. Because of this flexibility, users can choose to participate whenever it is most convenient for them without sacrificing vital protection during the festivities.

    Launched with the knowledge that consumers are financially covered against accidental death and hospitalisation expenditures, users nationwide may now celebrate the celebration with peace of mind. The CEO of PhonePe Insurance Broking Services, Vishal Gupta, commented on the launch, stating that the company is thrilled to debut PhonePe’s Firecracker Insurance in time for the holiday season. Families may celebrate with peace of mind, free from worries about mishaps or unforeseen financial hardship, thanks to this coverage’s vital protection. The company wants to make insurance accessible and reasonably priced so that everyone may take part in the celebrations in safety.

    How to Enrol for the Plan?

    • The customer must first choose Firecracker Insurance from the homepage under the Insurance section of the PhonePe app.
    • The user will then be able to read the details of his plan, which include the benefits of his plan, an amount insured of INR 25,000, and a fixed premium of INR 9.
    • The customer will then be able to see the insurer’s details and obtain a comprehensive summary of the benefits of the plan.
    • Finally, to finish the procedure, the customer must enter the policyholder’s information and select “Proceed to Pay.”

    About PhonPe

    The PhonePe Group is one of the major financial technology companies in India. August 2016 saw the release of its flagship product, the PhonePe digital payments app. In a short time, the business has grown quickly to become the top consumer payments app in India. Due to its dominance in digital payments, PhonePe Group has grown into new consumer tech companies like Pincode and Indus Appstore as well as financial services like insurance, lending, and wealth.

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  • Jar and UPI Payments Giant PhonePe Announce New Digital Gold Daily Savings Program

    The leading UPI payments company PhonePe has announced a collaboration with microsavings startup Jar to launch a new feature on its app dubbed “Daily Savings.”

    With the use of this function, users can save money in 24K digital gold by making daily donations that range from INR 10 to 5,000. With little incremental investments in digital gold, the program seeks to assist people in forming a persistent savings habit.

    Run by Jar’s Cutting-Edge Technological Solution

    Jar’s integrated Gold Tech solution powers the “Daily Savings” function, making investing in digital gold easier. It takes less than 45 seconds to complete the full transaction. Jar’s technology was previously only available to its own users, but thanks to this partnership, PhonePe users can now utilise it as well. Users of PhonePe may now effortlessly send and receive money while taking advantage of automated daily contributions thanks to this arrangement.

    The use of Digital Gold on PhonePe‘s platform has increased significantly in recent years, according to Niharika Saigal, Head of InApp Categories, Consumer Payments. PhonePe is excited to present Daily Saves, a product that uses 24K Digital Gold to enable small, regular savings. People can gradually work towards reaching their financial objectives by starting small and saving regularly.

    Digital Gold Savings Made Easy and Safe

    A further goal of PhonePe and Jar’s relationship is to meet the growing need for easy and safe ways to invest in digital gold. Jar’s Gold Tech stack effortlessly interacts with PhonePe, which boasts over 560 million registered users, enabling hassle-free saving and transaction for users.

    Compared to traditional savings, digital gold has a number of benefits, including the removal of the requirement for physical storage and the associated security risks. The user’s account contains digital storage for the acquired gold, which is backed up by real gold kept in safe deposit boxes.

    Users’ Convenience and Adaptability

    Users now have greater freedom in managing their funds thanks to the new Daily Funds function. They are free to stop or stop making daily donations at any moment, and they can exchange the gold for cash at any time.

    Users can also use Jar’s proprietary brand, Nek, to turn their digital gold savings into jewellery. This gives their funds an additional level of usefulness and increases accessibility for a larger group of people.

    By providing PhonePe with Jar’s Gold Tech platform, the company is allowing the payment gateway to easily include gold savings into their services, according to Nishchay AG, Jar’s founder and CEO. He was enthusiastic about the partnership. This is a big step forward for Jar since it makes gold savings more accessible than ever before by providing straightforward, scalable financial solutions to both individuals and organisations.

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  • PhonePe’s New Credit Line on UPI Feature

    A new feature called “Credit Line on UPI” has been introduced on PhonePe’s platform. This feature gives customers the ability to link their pre-approved credit lines to UPI, which enables them to make payments without any hassle. Users now have the ability to control their monthly costs using short-term financing while simultaneously making purchases from millions of different retailers thanks to this unique alternative.

    The Reserve Bank of India (RBI) made the decision to broaden the scope of the Unified Payments Interface (UPI) to include pre-approved credit limits, which will result in an increase in the usefulness of UPI applications. Because users may now link their credit lines to UPI on PhonePe, they are able to make payments in a manner that is both more flexible and more efficient.

    Win-Win Situation for Both Consumers and Merchants

    Additionally, retailers who are using the PhonePe Payment Gateway (PG) are able to provide their clients with an additional payment option throughout the checkout process. This option is available to both consumers and merchants.

    Both friction and cart abandonment are reduced as a result of this, which ultimately leads to an increase in sales. Simply integrating with PhonePe PG is all that is required for merchants to add ‘Credit Line on UPI’ as a payment option in order to make this offering available.

    How does UPI’s Credit Line Work?

    The ‘pre-sanctioned credit line at banks through UPI’ is an innovative financial solution that is aimed to alter the landscape of lending, as stated on the website of the National Payments Corporation of India (NPCI). With the use of this product, people and businesses are able to have access to pre-approved credit lines from financial institutions. Through the facilitation of the supply of low-ticket, high-volume retail loans, it promotes economic growth and enhances financial inclusion.

    By utilising cutting-edge technology such as data analytics and artificial intelligence, financial institutions are able to recognise prospects for credit lines for clients and merchants who are engaged in major UPI-based digital payments.

    According to the website of the National Payments Corporation of India (NPCI), “Since the customer is going to use UPI, which involves the customer being always connected and available in real time, the banks are able to begin with low-ticket credit lines and work their way up based on consumer behaviour and repayment patterns from there.”

    How Can One Use UPI to Access His Credit Line?

    Through the use of the same UPI wires that millions of Indians are already familiar with, the credit line on UPI operates. To access it, users can do the following:

    1. Users are able to link their Credit Line on UPI by selecting the bank from whom they obtained the Credit Line and clicking on the profile area located in the upper left corner of the home page of the PhonePe app.

    2. When the user clicks on the bank, the Credit Line that is related with their enrolled telephone number will be connected on UPI.

    3. Once the user has successfully linked it, they will be needed to set a UPI PIN.

    Following the completion of this step, the Credit Line option will be displayed as a payment instrument on the payment page while the user is in the process of making a payment.

    Recently, Karnataka Bank and Navi Technologies, a business that provides financial services, made an announcement on the launch of a credit line on UPI. Karnataka Bank will be one of the early users of this next-generation credit product as a result of the private sector lender’s strategic agreement with Navi, which will allow them to extend credit lines to customers.

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  • The Implementation of a 30% UPI Cap Is Highly Doubtful

    With just over four months to go until the deadline, industry insiders have expressed doubts about the proposed 30% market share cap in the Unified Payments Interface (UPI) category, according to multiple media sources. Multiple newcomers to UPI have been informed, informally, that the limit is not going to be implemented. As a result, they have begun to reassess their growth and investment strategies, according to those briefed on the situation.

    According to earlier media reports, new players in the UPI industry are holding off on making large expenditures until they have a better understanding of the market share rule. UPI payments are dominated by PhonePe and Google Pay.

    However, the National Payments Corporation of India (NPCI), which oversees the UPI railway, has not received any official word from the government regarding its stance.

    Customers’ Choice

    Reportedly, the regulator is of the opinion that new entrants have not been able to reduce the dominance of the top two UPI services, therefore it is left with few choices regarding the implementation of the December 31st deadline.

    In response to enquiries, neither NPCI nor the ministry of electronics and IT provided any information. Implementing this law (market cap) will require significant planning, according to several experts. It cannot be done in a day due to the disruptive nature of the process.

    The Growth Trajectory

    Both the government and NPCI are deeply committed to the expansion of UPI, which reached 14 billion monthly transactions in May. If people keep using the same two or three platforms, what options do we have? So many new entrants are able to set up shop, but they haven’t made a dent just yet.

    In July, out of the 14.4 billion UPI transactions, more than 85% were processed through Walmart’s PhonePe and Google Pay. Google Wallet had 5.3 billion transactions, whereas PhonePe had 6.9 billion. With 1.1 billion UPI transactions, Paytm (One 97 Communications) came in third, and Cred (142 million payments) came in fourth.

    The Reserve Bank of India (RBI) placed restrictions on Paytm Payments Bank in February, making arguments about the market share ceiling more prominent. Paytm is the third largest UPI operator. On February 5, a prominent media outlet said that Paytm’s problems will cause users and businesses to switch to the two most popular applications.

    Why the Cap Cannot Be Implemented?

    To prevent the UPI ecosystem from becoming overly dependent on only one or two platforms, NPCI first proposed a market share cap. In December 2022, NPCI delayed implementation for two years following multiple rounds of negotiations and requests from key corporations operating such apps.

    Some industry executives and specialists in the field have voiced concerns that imposing a market share cap might cause systemic disruption and be technically challenging to achieve.

    Conversely, NPCI has been facilitating the development of UPI solutions by numerous consumer internet platforms with huge user bases, enabling them to become third-party application providers.

    Flipkart, the e-commerce platform that was once PhonePe’s parent company, Groww, Slice, and the Tata Neu superapp are all part of this group. Another company that has introduced its UPI offering through the plug-in channel is Swiggy, a food and grocery delivery firm that has partnered with banks. Similarly, Ola Consumer is in the process of planning a same system.

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  • Google Pay, PhonePe, and Other Companies to Participate in RBI’s Digital Currency Pilot

    According to a media agency, several prominent fintech companies have decided to participate in the digital currency pilot program run by the Indian central bank. These companies include Google Pay, PhonePe, Cred, Mobikwik, and AmazonPay.

    According to sources who spoke with the news agency, the corporations will accomplish this by providing e-rupee transactions.

    Notably, the digital currency pilot program was launched by the Reserve Bank of India (RBI) in December 2022.

    At first, the only financial institutions authorized to sell e-rupee through their mobile apps were the central bank. However, fintechs were also permitted to offer e-rupee transactions after RBI’s permission in April of this year.

    Then, rumor has it that fintech companies are requesting the central bank clarify the norms of interaction with banks so they can implement use cases for central bank digital currency (CBDC).

    Fintech companies are reportedly collaborating with the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), and the domestic payment authorities in preparation for the e-rupee’s launch in the coming three to four months, according to a prominent news agency’s report.

    According to the research, the number of digital currency transactions has dropped significantly from over 1 million per day last year to about 1-2 lakh each day.

    Use Cases for Retail CBDCs

    This news arrives as reports surface that banks are collaborating with fintech entrepreneurs on a range of fronts to launch retail use cases for Central Bank Digital Currency (CBDCs).

    The first round of the CBDC retail trial for NBPSOs is testing two significant use cases. One involves corporate cost management and the other involves subsidy payments for agricultural supplies.

    Banks are presently focussing on deploying these use cases, and they will now also collaborate closely with fintech firms to support the CBDC trial.

    Following the beginning of the Central Bank Digital Currency (CBDC) experiment in December 2022, RBI deputy governor T Rabi Sankar announced in April that 2.2 crore transactions had been handled.

    What is CBDC?

    The Reserve Bank of India (RBI) has created CBDCs, a digital token equivalent to the Rupee. Using distributed ledger technology (DLT), it could one day replace physical currency with digital transactions.

    The CBDC pilot has been serving both the wholesale and retail sectors since its start in 2022, and an increasing number of institutions are rushing to become a part of it.

    The country’s Central Bank unveiled new features, like the ability to make CBDC retail payments offline and using user-defined algorithms, in February of this year to boost CBDC sales.

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  • PhonePe and Google Pay Are Losing Ground to Newcomers in the Online Payment Space

    As smaller companies gained headway in India’s unified payments interface in June, the share of total transactions processed by Walmart Inc.-owned PhonePe and Alphabet Inc.’s Google Pay declined slightly. From 48.67% in May to 48.37% now, PhonePe’s percentage of all UPI transactions has decreased.

    According to data issued by the National Payments Corporation of India, Google Pay’s fraction decreased from 37.18% last month to 36.76%. The total number of transactions processed by the UPI network in June was 13.88 billion, down 1% from the previous month.

    New Entrants Giving a Tough Run to Established Players

    Many new companies have recently entered the UPI payments market. More than 80% of the market is controlled by PhonePe and Google Pay, but new competitors are threatening their supremacy.

    For example, in June, there was a 17% increase to 75 million UPI transactions on the apps of Axis Bank Ltd. and a 20% increase to 35.7 million transactions on the Navi app. Another UPI payment option is super.money, which was introduced by Flipkart, a subsidiary business of PhonePe and an eCommerce giant in India. The JioFinance app, developed by Mukesh Ambani’s Jio Financial Services, also joined the competition, allowing users to access the growing financial scene in India.

    Paytm Comes to a Standstill

    Paytm, which was experiencing a regulatory setback, managed to maintain its 8% market share from the previous month, which indicates that the market loss that has been occurring since the beginning of the year has come to a standstill.

    After the Reserve Bank of India issued an order earlier this year to come close to shutting down Paytm’s banking unit, the company’s net loss for the first quarter of the fiscal year, which ended in June, more than doubled to INR 8.39 billion, which is equivalent to $100 million.

    Cred Becomes the Fourth-Largest Player in the Game

    Based on the information provided by the NPCI, CRED has established itself as the fourth largest player in the processing of UPI payments. It is interesting to note that it has exceeded Amazon Pay, WhatsApp, and BHIM, and it has handled more than one-third of the total value of transactions that Paytm has processed in the past month.

    Praveena Rai, the chief operating officer (COO) of the National Payments Corporation of India (NPCI), has stated that the Unified Payments Interface (UPI) is gaining approximately 6 million new users each month.

    In addition, the NPCI has established a lofty objective of reaching one billion transactions per day within the next several years.

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  • How RBI’s Strict Scrutiny Changed the Demographics of P2P Lending?

    Following a “scrutiny” of “select NBFC-P2P companies” from June to September 2023, the Reserve Bank of India (RBI) discovered “multiple violations” of the regulations established in October 2017, when the licensing standards were published, to welcome these companies to the Indian financial market.

    It was preceded by the RBI’s March 2016 release of the initial P2P lending draft for stakeholder comment. In addition to meeting the criteria for being “fit and proper” to operate P2P platforms, a minimum of around 2 crore net-owned money is required according to the licensing standards.

    Although not all of the approximately 25 licenses issued by the RBI have gone live, some of them have. Approximately one-third of the fifteen entities that went live have now gone dark. According to analysts, the industry’s outstanding loan book is estimated to be over 6,000 crore, and four companies control more than 90% of the market.

    A loan of approximately 10 lakhs could be made at the outset. The amount increased to over 50 lakhs in December 2019. Through P2P platforms, a lender can distribute this funding to numerous borrowers. But regardless of how many lenders there are, a borrower cannot receive more than ~10 lakh. The maximum amount that a lender can lose due to a single borrower is around $50,000. (A minimum of 20 lenders are required in the event that a borrower requests ~10 lakh.)

    Platforms that facilitate peer-to-peer (P2P) lending allow users to pool their savings in escrow accounts and then lend those funds to other users or small businesses without requiring collateral.

    Why Is RBI So Irritated?
    Industry Adopting a ‘Wait and Watch’ Policy

    Why Is RBI So Irritated?

    Lenders can access their money before loans are fully processed on P2P platforms. This implies that over the remaining time of the loan, a different lender will take over for the first one, without the lenders on the platform having to say anything. The “deposit-taking” feature of these NBFC-P2Ps is the root cause of loan replacement.

    Loan contracts on the platform must be signed by both the lender and the borrower in accordance with RBI regulations. But instead of that, platforms are only giving out loans to people who have lenders’ whole approval. The standards for licensing are being violated here.

    The standards that control the transfer of money are another source of worry. In order to reinvest the funds, these platforms are moving the repayments from the borrower’s escrow accounts to the lenders’ escrow accounts. Repayment funds must be sent from the borrower’s escrow account to the bank account of the lender.

    P2P platforms have been issued a stern warning by the RBI, urging them to immediately cease these actions. They risk regulatory and supervisory measures if they do not.

    Number of Peer to Peer Non Banking Financial Companies in India as of January 2022, by City
    Number of Peer to Peer Non Banking Financial Companies in India as of January 2022, by City

    Industry Adopting a ‘Wait and Watch’ Policy

    P2P Lending Platforms
    P2P Lending Platforms

    The official explained that new alliances take substantial time, technological, and legal resources to be integrated, thus the industry is simply taking a “wait and watch” approach rather than rapidly expanding.

    Liquiloans has partnered with a number of prominent P2P lenders, including Cred, Avail Finance, Uni, and BharatPe; LenDen Club has partnered with PhonePe, Karza, and BharatPe. The general pace of business has decreased, even though partnerships are still continuing. Since October, corporations have been consistently engaging with the RBI, therefore experts do not see this trend continuing.

    During an occasion, RBI deputy governor M. Rajeshwar Rao reportedly stated that NBFC-P2Ps’ actions did not seem to comply with regulatory norms. The majority of the lenders on these sites probably don’t have the training or education to properly assess the dangers of lending money.

    While the RBI first published comprehensive rules for the market in 2017, 2019 saw the introduction of certain updates to those rules. However, the central bank has been providing platforms with guidance on several aspects of compliance over the past 12 to 18 months.

    The Department of Regulation at RBI has been approached by these businesses to clarify several important matters. A decision on these practices is also required by the Department of Supervision.

    The peer-to-peer lending market is currently valued at an estimated 7,000–8,000 crore rupees. About twenty P2P licensing systems can be found in India. They are all NBFCs that have registered with the RBI.

    Payouts, processing fees, and platform fees all contribute to the platforms’ bottom lines. The maximum amount that a lender can put on a platform is Rs 50 lakh. One borrower is limited to an investment of no more than Rs 50,000.

    At no point in time should a borrower’s total loan amount exceed Rs 10 lakh. This loan has a maximum maturity term of 36 months. An annual interest rate of 36% is charged by some sites.

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    Conclusion

    The Reserve Bank of India’s intensified scrutiny of NBFC-P2P companies has revealed multiple violations of established regulations, including issues with loan processing, fund transfers, and compliance with licensing standards.

    Despite partnerships and engagement with the RBI, concerns persist regarding the industry’s compliance and operational practices. The conclusion underscores the need for stringent regulatory oversight and enhanced industry compliance to sustain the integrity and stability of the P2P lending market in India.

    FAQs

    Which is the largest P2P lending platform in the world?

    Lending Club is the world’s largest P2P platform.

    Yes, P2P lending is completely legal and fully regulated by RBI in India.

    Which P2P lending is best in India?

    Some of the most popular P2P lending platforms in India are LenDenClub, Faircent, Lendbox, etc.