The credit landscape has changed with the increasing adoption of digitization among banks and financial institutions. The traditional form of loan still prevails, especially in the top transaction.
However, CIBs have launched a few products whereby clients can get loans without collateral, paperless and faster for a lower amount.
One of the recent products is’FoneReady‘, which was designed to provide small, short-term loans to customers of the bank through a mobile banking app of the bank in question.
The product was developed by F1 Soft International, a fintech company in Nepal. Currently, customers of Nabil Bank, Laxmi Bank and Kumari Bank can use this service.
What is FoneLoan?
FoneLoan is a digital loan product through which one obtains a loan up to Rs. 1,000,000 to Rs. 2,000,000 without going through the bank. Customers can get the loan in real time as soon as they apply for the loan.
“We have been doing transactions at the same bank for many years, but we have to submit a series of documents and visit the banks constantly whenever we need a loan. And this happens, despite submitting a KYC when opening a bank account ”, says Sagar Sharma, Sales and Marketing Manager, F1 Soft International.
Thus, FoneLoan was designed to provide easy loans to targeted bank customers without any hassle, he says.
Currently, FoneLoan only applies to salaried or regular income-based people who have an account in the bank in question. Banks analyze the eligibility of each customer with software called ‘Decision Analytics’.
What is decision analysis?
Banks use this software to verify the eligibility of their customer. Decision analysis studies the transaction history and other relevant factors of all clients with a salary account in the bank.
Based on the analysis, the tool generates individual scores. Only customers who meet the threshold score set by the bank will be eligible to apply for FoneLoan.
According to bank officials, one of the main criteria is the credited monthly salary. Apart from this, the bank checks the average account balance, withdrawals, loan status, loan repayment history, and customer transaction behavior.
According to bank officials, the business intelligence software also assesses the amount limit for each eligible person based on their salary amount and deposit history. The amount that the customer can borrow will appear when requesting a loan.
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Over time, if the customer’s bank transaction savings account progresses positively and the customer repays the FoneLoan on time, the score can improve and the customer can cross the minimum threshold set by the bank.
How does FoneLoan work?
Smart FoneLoan – Laxmi Bank
You must have the Laxmi Bank ‘Mobile Money’ banking application. If the customer is eligible, a “Smart FoneLoan” feature will be present in the mobile application.
The customer can click on the icon and register with his e-mail address. You have to check the email and come back to the application. They receive an OTP number and then the option “Apply for a loan” appears in the application.
Once the customer applies, he has to fill in the required loan amount, repayment date, interest rate and others. The eligible customer obtains the loan in real time. The maximum loan limit is Rs 2,000,000 and the interest rate is 15%.
According to Madhu Krishna Poudyal, assistant, card channel and digital bank, Laxmi Bank, the loan processing fee is Rs.250.
Nabil FoneLoan – Bank Nabil
The customer must have the “Nabil SmartBank” mobile banking application. The “FoneLoan” icon will appear in the app if someone is eligible for the loan.
The user needs to click on the FoneLoan icon and register. Then they are given an OTP number. The loan will be approved immediately and the customer will receive the amount in real time.
The maximum loan limit is Rs 1,000,000 and the interest rate is 15%. The customer has to pay 0.75% of the loan amount as a processing fee when applying for the loan, said Binay Regmi, deputy general manager of Nabil Bank.
Regmi says the customer must have a transaction history of at least six months to be eligible for the loan.
Kumari FoneLoan – Kumari Bank
The customer must log into the ‘Kumari Smart Mobile’ banking application. The eligible customer will have access to the “Apply for a Kumari Loan” icon.
A repayment date must be selected, not exceeding 30 days from the disbursed loan. The customer will receive a four-digit OTP code which he will receive by SMS and click on “Confirm”. The amount will be credited immediately to the customer’s account.
The client can take out a loan of up to Rs 1,000,000. The interest rate is 12% per month.
“The loan processing fee is Rs 200,” says Anish Pradhan, head of digital banking, Kumari Bank.
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Nature of loan
The lending process is completely digital and the physical presence of the customer in the bank is not required.
“The client does not need any documents, including a salary certificate, because the banks identify the eligible ones through the software” says Sharma, F1 Soft International.
The eligible client gets the loans instantly because the loans are pre-approved.
The concept may look like a credit card, but there are few distinct features.
The customer can only use the credit during the purchase. But unlike a credit card, in FoneLoan the loan amount is credited to the customer’s savings account, which allows the customer to use it for any purpose. Also, in terms of FoneLoan, the customer cannot take out multiple loans, which is what happens with credit cards.
Each FoneLoan must be fully settled before applying for another loan. As the relocation process is completed each time, there is no limitation in taking out the loan multiple times.
Thanks to this service, the customer can obtain a micro-credit from Rs 5,000 to 2,000,000.
The relocation period for the FonePay loan is 30 days. According to bank officials, early repayment of the loan is not allowed at this time. But, if they are ready to pay within 30 days, they should set the date when applying for the loan.
For example: if a person wishes to pay the costs in 15 days, it must be mentioned when applying for a loan.
In the event that the loan is not fully paid by the due date, the outstanding amount will be considered past due and the customer will be required to pay daily interest and late fees in some cases.
“The client has to pay Rs 300 per month as a late charge if the loan is not paid on the due day” said Pradhan, Kumari Bank.
Likewise, Kumari Bank customers also have to pay Rs 300 per month as a late fee, according to the bank’s Paudyal.
Nabil Bank has not charged any late fees so far.
Sending a ANP to the user E-mail is the security measure applied in the platform. “This helps verify identity and ensures a sense of security,” Sharma explains.
This service is available in mobile banking, so one needs to log into their mobile banking security protocols to apply for the loan.
In total, 1,600 individuals have already taken out loans from these three banks for a total amount of Rs 25 million until mid-day on March 1.
Although in the first phase the target customers are limited to salaried people, FonePay and banks plan to expand the services to the other customer who has a passive source of income including rental, retirement and other income.
According to bank officials, they are now analyzing the feasibility of such loans by analyzing customer repayment behavior.
They say they will move on to phase two and extend eligibility to the aforementioned criteria only when they ensure good trading behavior in phase one.
“Although the bank has targeted the niche customer, we are working to educate the customer to repay their loan on time, to become responsible so that the banks can keep their trust”, Sharma said.
Apart from this, F1 Soft also plans to expand its services to other commercial banks. “We plan to introduce this platform in 6 to 8 banks by this fiscal year 2020/2021. We aim to reach 20 banks by the end of the next fiscal year 2021/2022, ”said Sharma.
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