Fintechs are rolling out BNPL cards; should you get them?

Fintechs that offer them such as Slice and Uni Cards usually have tie-ups with non-banking finance companies at the back end. Slice issues credit via Quadrillion Finance, a wholly-owned subsidiary, while Uni Cards has a tie-up with Liquiloans. In addition, for issuing the PPIs, both fintechs have tie-ups with State Bank of Mauritius and Uni Cards also has a tie-up with RBL Bank.

This new BNPL card model has begun to compete with credit cards. Slice says it has 5 million registered users and is shipping more than 200,000 cards per month, which puts it only behind two banks in the country. The company recently made headlines for raising $220 million from investors, which values it at over $1 billion, as per media reports. Nitin Gupta, founder of Uni Cards, declined to talk about borrower numbers. However, according to Gupta, Uni Cards has disbursed an amount of ₹120 crore in November up from just ₹80 lakh, which it disbursed in June when it was founded.

Both companies allow customers to either pay back their card bills at the end of the month without interest (akin to banks) or to pay back in three instalments over three months without any interest. A slight difference is that Uni Cards allows customers to choose the repayment tenor per transaction rather than on an overall basis, it says. Since the 3-month interest-free payment plan is more favourable than a single month, customers opting for it give up cashbacks and rewards that they would otherwise get. In case of Uni Cards, this comes to a cashback of 1%, while Slice talks about cashback of up to 2%.

Uni Cards focuses more on existing credit card holders (those with at least 1 year of credit history) and high-end customers, while Slice looks at both existing and new to credit customers. The latter offers credit limits as low as ₹2,000 for new borrowers. Uni Cards allows customers to withdraw 20-25% of their credit limit into their own bank account and spend it from there. Customers who move this money to bank accounts can also withdraw it as cash. For this kind of transfer, the company does not levy any interest but the interest-free period is reduced to 1 month. This is more favourable than banks, which levy charges from the day of a cash withdrawal, said Gupta. Slice also allows emergency bank transfers but levies some charges on them.

Both fintechs have tie-ups with Visa, but their cards cannot be used for international transactions. “With the Slice card, we have no concept of minimum due payment. Customers either pay the money without interest in 3 months or they pay in equal instalments over a longer period," Rajan Bajaj, founder and CEO, Slice. The company plans to launch a UPI app that allows its customers to also route their UPI payments through the Slice platform. For Uni Cards, customers who don’t pay by the due date can have a revolving balance, akin to credit card outstanding or they can convert purchases to EMIs.

The pay-in-3 model offers a longer interest rate-free period than most banks. However, you do give up cashback of 1-2% of your spend by opting for it. Beyond this period, the fintechs levy interest rates that could go as high as 30-40% per annum on revolving balances. The rates are a little lower on EMIs, but not by a big margin (15-20%). You can get a more favourable deal if you are unable to pay by converting your purchase to EMIs.

The cards, as with credit cards, are best suited for users who are able to pay back their bill on time. Some of the fintechs like Uni Cards seem to offer a better deal with cash withdrawals. Up to a certain limit, these can be done without incurring interest costs if the money is repaid at the end of the month. In case of credit cards, cash withdrawals trigger immediate interest bills.

You should note that international spends have not been enabled by fintechs so far. Credit cards on the other hand do enable international spends and this gives them a major advantage. Some international businesses only enable credit card payments, making these a necessity for consumers.