Mumbai: In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
The bank will announce partnerships with e-commerce firms, following which buyers on the site will get a ‘pay later’ option. The ‘pay later’ facility will be available to even those who have not availed of any loan in the past and for small amounts of up to Rs 20,000. These borrowers should make a bullet repayment after a month.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider. For instance, any customer who has made a few purchases using the cash-on-delivery option will be eligible for credit. “By using the ‘Pay later’ feature, customers can build their credit profile slowly. This will help them to avail secured credit in future,” said Bagchi. According to Bagchi, more than 50 parameters would be used to establish the credentials of the buyer. “Today, due to technology, it is possible to establish creditworthiness in many ways. The traditional Western method of looking at financial data provides details of past behaviour, whereas it is possible to build surrogates that can predict behaviour,” said Bagchi.