Slice’s move to change payment terms causes customer backlash

Following Slice’s decision to limit interest-free ‘pay in 3 months’ offering to select customers, users are questioning the fintech unicorn’s differentiation over traditional credit cards. 

Some Slice users also took to social media to say that they will stop using the card once they have paid the bills for the current cycle. “This new update defeats the whole purpose of why we got Slice Super Card! What is the difference between slice and other credit cards in payment terms then, If we have to pay extra interest on any card payment!,” said Chetan Chauhan, (@Chetan_711). 

Another Twitter user, Pavan (@RangeenPanda) said, “Just read that @sliceit_ no more allows you to “slice” your credit card bill without interest. I thought that was their whole product. What’s the point in getting slice over your bank credit card now?” Similarly, Srikant, (@SrikantNXT) summarised the larger customer sentiment in his tweet,“I have done my last payment today. The slice card is no longer a credit card challenger!”

In an update notification on Slice app, the company said starting June 1 paying in full will continue to be interest free and interest will be levied when customers slice the bill in two or more installments. For any other usage in previous billing cycles which were sliced into 2 or 3, any interest charged is being fully refunded by Slice through cashbacks. 

‘Risk profiling must’

Nitin Gupta, CEO and founder of Uni Cards, which also offers pay in 1/3rd card, told BusinessLine, some players offer this credit model to everyone including those with considerably high risk but pay 1/3 rd product should be offered to best risk profile customers where the loss ratio is almost nil. “The customer who would have gotten the personal loans at 20-40 per cent, were getting pay 1/3rd option. Whereas, the pay 1/3rd must have been reserved for super prime customers who get personal loans at 12 per cent and have a CIBIL score over 770. That’s why businesses that offered this feature to prime and subprime customers might have incurred losses,” he added. 

Gupta noted that Uni always reserved its Pay 1/3rd card to super prime customers since the start and hence is not worried about the risk. “we work with partners to offer credit and our partner’s delinquency is 0.2 per cent. Pay 1/3rd works for us, because our customer quality is good and our delinquency is low,” he said.

‘Sustainable model’

Companies like Slice and Uni Card generate revenues primarily from MDR ( merchant discount rate) earned on each transaction and it can sometimes be lucrative for these companies to issue more cards and push for more transactions on the platform to increase growth metrics. 

“However, that in the long run, for a sustainable model, it is important to balance growth with correct risk profiling and a strong collection mechanism. Hence, the initiative by Slice to focus on the creditworthiness of the consumers before issuing a credit line is a step in the right direction,” said Pearl Agarwal, founder and Managaing Director of Eximus Ventures. 

Further, commenting on whether this move will bring a dip in Slice’s user base, Agarwal noted that Slice is targeting two segments — new-to-credit consumers without a credit score and customers who have a credit score but use Slice cards for additional liquidity. 

“The ones without credit scores are expected to continue working with Slice to get access to instant liquidity and build credit history before transitioning to credit cards. Whereas the other segment of customers who have a credit score will prefer existing credit cards for regular purchases and tap into Slice every now and then to be able to access additional pools of liquidity. There could be the movement to credit cards among this segment of users. However, Slice cards still offer zero joining fees or annual charges,” she added. 

Slice did not comment on BusinessLine queries.

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