MUMBAI: India”;s most valued fintech, Paytm, is set to harness increased credit demand through the lockdown to extend its foray into micro-credit services for users paying bills and making purchases online. The Softbank- and Alipay-backed digital payments giant said that it has tied up with non-bank lenders Clix Capital and Arthimpact Digital Loans to tap into the digital lending market at a time when traditional lenders are turning risk-averse due to stress in various consumer segments in the aftermath of the lockdown.Paytm will use past transaction data of its users on the application to assign credit limits for loans for daily purchases of grocery and retail goods. The limit can extend up to Rs.1 lakh for “;elite”; customers, according to a Paytm official. The credit line can also be availed by customers making purchases on Paytm Mall, its ecommerce venture, the official said.The plan is to eventually extend the service to most active users over the next few years in stages. “;We aim to provide the postpaid facility to most of our active Paytm users over the course of the next few years,”; said Amit Nayyar, President, Paytm. “;We are entering into the lending space for the long term and aim to build and grow this business strategically.”;The company has also tied up with thousands of neighbourhood store owners and retail outlets, such as Reliance Fresh, Apollo and Croma, to make the service available on online purchase of goods, the official said.This comes at a time when Paytm has been reinventing itself as a full-fledged financial services player, expanding its fleet of services from offering insurance through partnerships to providing value added services to its merchants.In its core digital payments business, Paytm competes with the likes of Google Pay, Walmart”;s Phonepe and Amazon Pay. The impending launch of Whatsapp Pay is set to further increase the competition in the country”;s burgeoning digital payments sector.Paytm”;s dream of owning a lending license is on hold right now as its payments bank can apply for a conversion to a small finance bank only in 2022 as per Reserve Bank of India (RBI) guidelines.The strategy for now seems to be to help customers avail credit through NBFC partnerships. While the final call on underwriting would be taken by the NBFC partners, Paytm said that it will assist the lenders both in risk assessment and collections.”;The eligible users are selected using a machine learning model leveraging the rich transaction data within the ecosystem,”; said Nayyar.While there is no activation or annual fee, the user of the postpaid service will be levied a monthly convenience charge. Payment past due would incur a late fee similar to a credit card bill. Interest on these loans would only apply if they are converted into monthly installments by a customer. While this may seem a risky proposition especially at a time when the pandemic induced economic slowdown has increased default rates across several consumer segments, Paytm described the situation as an opportunity. “;We believe that during periods of stress because most of the lenders become overly cautious, even the users with good credit behaviour don’t get access to credit,”; said Nayyar. “;Paytm is committed to bridge this gap and cater to the demand of consumer credit in the current market scenario.”;

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