RBIs move on Paytm: Impact on lenders originating through Fintechs

1 Feb 2024 , 10:17 AM

Until now we had asset quality concerns for lenders, who relied on FinTech led sourcing models. However, with this regulatory crackdown, analysts at IIFL Securities think there are likely to be implications and lessons for Paytm’s lending partners. 

• Lenders may look to stop / curtail incremental disbursements
• Collections for disbursed loans may experience higher delinquencies
• Will have impact on growth, new customer acquisition and profitability (high margin loans)
• Highlights perils of building businesses purely through Fintech partnerships 
• Organic, in-house sourcing creates franchise value in the long run

 

Illustrative lists of NBFCs originating through Fintech partnerships

• Lenders that lend through Paytm may immediately stop / curtail incremental disbursements. Collections for already disbursed loans should continue but may experience higher delinquencies if Paytm were to scale down its collection team, or if the borrowers perceive their repayment obligations as ‘not necessary’
• This will not only impact growth and new customer acquisition for the lenders, but will also have higher impact on profitability (high margin, short tenure loans)
• This also highlights perils for businesses built purely through such partnerships. It exposes lenders to vulnerabilities and constraints of FinTech partners apart from lack of ‘customer ownership’ in the true sense, which can facilitate cross sell of other products.
• More importantly, this also brings forth the importance of organic, in-house sourcing that creates franchise value in the long run.