India’s central bank cracks down on fintech startups | Hacker News Reader

India’s central bank cracks down on fintech startups

techcrunch.com

14 pointsjmsflknr6 comments

All these self proclaimed fintech startups are nothing more than modern day loan sharks. They all follow the same modus-operandi.

1. Acquire VC funding

2. Pump funding into aggressive discounts and cashbacks to entice credit-weak people to take loans

3. Collect interest and penalties

4. Profit

In many cases people are not even aware they are taking loans. You're just buying some shoes or tickets and you see a PayLater with 20% cashback on the app. It's not until much later when you need a home loan or an education loan when your bank tells you your credit score is shit because you have been taking loans to buy movie tickets and what not.

Giving loans without collateral definitely falls into an ethical grey area. Giving loans to people without them even realizing is definitely evil. I expect India is not alone in this regard. Just these last 2 years I've come across so many "fintech" launch posts here. They take different forms whether it's pay day, pay advance, pay later, but they all follow the same modus operandi, enticing someone who shouldn't be taking a loan into taking them.

I was expecting this to happen sooner or later. Banking is heavily regulated service in India and the barrier to entry/exit is very high unless you have political influence/connections.

Think its also Indian banking regulators aversion to leverage and individual debt. These bnpl companies have been playing very fast and loose with their lending standards. As the economy cools down, there might be defaults. RBI seems like its trying to preempt the threat, as it did with crypto.

BNPL startups have crazy amount of marketing, trying to get people addicted to debt

I don’t know what the regulations are in India, but in the US, the Truth in Lending regulations kick in if you’re asking for repayment in five or more instalments.

That’s why BNPL companies offer four instalments so they can skirt around the regulations

2 of the 3 globally dominant BNPL providers started off outside of the US with 4 instalment payments from the outset so this seems unlikely.

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