Paytm, PhonePe make most of digital adoption to disrupt BFSI space

Paytm launches instant personal loans 24x7 all year round in under two minutes, PhonePe unveils Term insurance

At a time when Covid-19 pandemic has accelerated digital adoption, a slew of startups in the fintech space are disrupting the financial services and banking industry.

Alibaba and SoftBank-backed digital financial services startup Paytm has introduced ‘Instant Personal Loans’ on its platform to facilitate access to credit services to the masses. The service can be availed 24X7, round the year even on public holidays and weekends. Paytm is the technology and distribution partner for NBFCs (nonbank financial companies). It would help them expand the reach and adoption of loan services to salaried individuals, small business owners and professionals. 

The loans would be processed and disbursed by NBFCs and banks. This move will bring 'new to credit' customers into the ambit of the formal financial market. It will also empower individuals from small cities and towns who do not have access to traditional banking institutions.

“We aim to make Instant Personal Loans accessible to the self-employed, new to credit individuals and young professionals who need short to medium term personal loans to manage urgent expenses,” said Bhavesh Gupta, CEO, Paytm Lending. “We will continue to innovate and digitise as many services that help in bringing 'new to credit' users into the formal economy."

Paytm has digitised the entire process for loan application and disbursal with no physical documentation requirement. This unique service proposition is built on Paytm's cutting-edge tech platform which enables banks and NBFCs to process loans end to end in less than 2 minutes. It comes with a flexible repayment tenure of 18-36 months and EMI (equated monthly instalment) is determined accordingly. During the beta phase, Paytm disbursed personal loans to over 400 selected customers. The company is now aiming for over 1 million users by fiscal year-end to avail the personal loan services from the platform. Paytm is offering instant loans up to Rs 2 lakh to salaried individuals, small business owners and professionals.

Paytm is valued at around $16 billion. It has raised total funding of $3.5 billion from investors including Alibaba, SoftBank and billionaire investor Warren Buffett's Berkshire Hathaway.

Paytm’s rival Walmart-backed PhonePe has launched ‘Term Life Insurance’ plans on its platform, in association with ICICI Prudential Life Insurance Co Ltd. With this launch, PhonePe said millions of its users can now protect their families from financial turmoil in the event of an untimely demise. The premiums start from as low as Rs 149 per annum. This policy can be availed instantly on the PhonePe app without any health check-ups and paperwork through an all-digital customer experience.

India’s population has an insurance penetration of just 2.73 per cent. Lack of awareness, confusion about the myriad paperwork and sub-optimal experience with the hassle of a health check, have been the key reasons for this problem. This is especially true for Indians in tier-2 cities and beyond. PhonePe which has more than 250 million user base aims to improve awareness and penetration of term life insurance products and solve this industry-wide issue.

“Insurance as a product has remained largely unpenetrated in India especially in the geographies, age and income groups that need it the most,” said Gunjan Ghai, vice president and head of insurance at PhonePe. “Prohibitive costs of creating awareness and then the cost and effort of distributing the right ticket size term insurance product are largely responsible for this issue.” 

All of PhonePe’s users aged 18 to 50 years and earning Rs 1 lakh per annum or above can avail this policy instantly on the platform. Furthermore, without the hassle of the usual health check-up, and with zero paperwork, this policy insures the user for a sum ranging from Rs 1 lakh to Rs 20 lakhs, depending on the premium amount. It can be renewed seamlessly upon expiration on the PhonePe app. 

PhonePe is raising $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors including Tiger Global, led by Walmart.

Another fintech firm BharatPe is gearing up to become a preferred bank for small merchants and offer the entire portfolio of banking services. The products that it plans to launch in the next 12-24 months will be in line with this vision. BharatPe is planning to raise over Rs 5,000 crore in debt funding in next 2 years to build its lending business.

Experts said that ‘financial services’ is becoming the next big battleground for technology players such as PhonePe, Amazon, Google and Paytm. They are eyeing Indian financial services market, which could touch around $340 billion in the next few years.

Infographics:

Paytm:

1 million, the number of customers Paytm’s aim to provide instant loans using tech.

2 minutes, it would take for users to secure loans 24X7, 365 days a year.

Rs 2 lakh, the instant loan offered by Paytm to salaried individuals and small business owners.

PhonePe:

250 million, the PhonePe’s user base that the firm is targeting to offer Term Life Insurance.

18 to 50 years, the age group of users that can avail this policy instantly.

$340 billion, the financial services market in India in the next few years.