Buy Now Pay Later cards also known as BNPL Cards. BNPL cards are trending in the Fintech segment. This article explains the end to end picture of BNPL card’s Onboarding journey.
Onboarding, as the name suggests, is the function of adding new customers. Onboarding can be done using Physical or digital ways.
- Physical onboarding is done mostly before 2015, Your parents or You will have filled the details on the physical application form, signed it and shared it with the Bank, along with sharing the hard copy of the Photo, address & Identity proof, those mostly includes the PAN Card, Ration card, Voter card, Signed document from gazetted officer.
- Digital onboarding has kick started around 2015, but fast tracked during pandemic. Most fintech organisations started their digital onboarding, where customers have to provide their documents digitally & sign application forms digitally.
In India, UIDAI has enabled customers to sign any documents digitally. UIDAI has also enabled customers with digital address & Identity proof. Refer to list of valid documents as per Government of India. Government accepts the proof of identity (POI) as a Physical Aadhar card or E-Aadhar, so now the question is how an Aadhar number can be converted to E-Aadhar, to enable digital onboarding. Below Sequence diagram depicts how it works.
Fin-Tech Apps, takes a few permissions from customers, those includes
- SMS Reading, This permission enables an app to read your phone messages
- Location, This permission enables an app to identify your customer’s location
Now coming back to flow, Customer enters the Aadhar number on an App, Which is submitted internally/Externally to a Provider that talks to UIDAI to download E-Aadhar. UIDAI will send the OTP to customers to authenticate E-Aadhar download. In case SMS Read permissions are granted then the App will read the OTP from your phone automatically, else the customer needs to provide the OTP on App. Post that E-Aadhar can be downloaded. Few of the popular providers include Karza, signzy. One can perform the direct integration with UIDAI portal too.
The above process is also referred to as Know Your Customer (KYC). Once KYC is completed, Customers will be moved to the next stage, that is referred as the Customer Due Diligence. Customer due diligence is required from a compliance angle, in addition to accessing customers from a risk standpoint.
Fin-Tech App gets the PAN & customer mobile number. Using these details, Fin-Tech backend system calls the Credit Bureau, to get customer Credit score & Assets. An Asset depicts financial instruments a customer has, those includes details of Credit cards, Home loan, personal loans / any other loan types. This report also includes the Credit Inquiry, along with Credit score. Using this report, Fin-Tech can easily identify the customer’s financial history. Few of the popular Credit bureaus include CIBIL, CRIF, Equifax, Experian.
Output of this stage is to figure out the credit limit that can be assigned to the customer. Accessing the accurate credit limit defines the organisation’s success & failure. Credit Limit is the amount of credit/Loan that can be given to a customer, assuming the customer will repay the funds as per agreement.
Once the Customer Due Diligence is completed, Customer proceeds to the next stage, termed as an issuance stage. This stage is required to arrange customer’s funding from NBFC & Card issuance from the Bank.
Fin-Tech backend system will share customer details with NBFC, to onboard on their platform, such that a credit limit can be assigned, which is required during customer transactions. NBFC also registers consumer loan details with the Bureau. This appears as Consumer Loan, in the upcoming bureau statement. Loan agreement will be shared over email, that depicts customer details registered with NBFC along with terms & conditions. Few NBFC include ABFL, DMI, Lendbox, Liquiloans, Northern Arc.
Now funding is available for customers, let’s move to the next step, to issue the Physical card. To achieve this Fin-Tech backend system performs calls to providers (Internal / External) that interact with banks for card issuance. Once a card is assigned & issued, the same is visible on the mobile app. Using this number, Customers can perform the online transactions.
Now the card number is assigned to the customer, Next step is to send the physical card, to enable customers to perform transactions on the retail outlet. Retail outlet includes Petrol Pump, Shopping malls, etc., swipe card on Physical card machine. To complete this process, the Fin-Tech backend system will perform a call to the provider, which talks to the Printing Vendor. This vendor takes care of printing the card & sending the same to the customer ‘s registered address.
With this step, Customer onboarding journey is completed for BNPL Cards.