ICICI Bank will be introducing a “pay later” option on e-commerce websites and this will be made available to the non-customers of the bank as well, reports the Times of India. However, the bank’s “pay later” option is different from other products such as PayU’s LazyPay and Simpl. ICICI Bank’s offering is a loan product while products such as LazyPay are underwriting tools.

The ‘pay later’ feature will be offered to customers who have not availed any loan in the past for amounts up to Rs 20,000 and requires them to pay back the loan amount within 30 days following which they will be charged interest similar to credit card rates. So that’s a short-term, high-interest, unsecured loan. The report adds that ICICI Bank will be offering it to customers who have a track record with e-commerce companies and will factor in whether the customer frequently chooses the cash-on-delivery option. The report added that ICICI Bank will be evaluating 50 parameters to build a credit profile. A bank spokesperson declined to give further details or the e-commerce companies it is tying up with.

Why is the bank introducing this?

Last month, the bank introduced a product called Instant Credit Card where certain pre-approved customers of the bank will be able to get a virtual credit card much before the physical card is delivered to them. A physical card will be sent to the customer’s address in 5-7 days. The bank is issuing these new cards with the upcoming festival season in mind, so that customers can start using the virtual credit card (i.e. the credit card number) on shopping sites.

ICICI Bank is looking at increasing its personal loan book and also contending with companies which are innovating faster.

– Newer credit companies: Newer credit companies such as EarlySalary and MoneyTap are targeting salaried customers and typically charge a similar interest rate as credit cards. As such the bank KYC process is more burdensome and customers will look for newer avenues of credit.

– E-commerce sales: Through August to December, e-commerce companies will be running discounts on products. Many users shy away from large purchases such as high-end mobile phones, TVs and home theatres due to the lack of payment plans. Flipkart is now offering EMIs on debit cards on high-value purchases. Banks do not want to lose out on innovation in payments and credit to e-commerce companies. 

Flow-based lending

Meanwhile, the Reserve bank of India (RBI) looking to open a public credit registry incorporating unique identifiers for borrowers: Aadhaar for individuals, and Corporate Identification Number for companies. The RBI was also mooting for cash flow-based lending for borrowers who don’t have formal credit histories in agencies. In cash-flow based lending, transparency of credit information would serve as a “reputational collateral” for such borrowers.