As the Indian mindset towards credit cards changes from being a debt trap instrument to one that can be used for daily expenditure, a number of new age banks and fintechs are disrupting the banking space by offering innovative products like virtual credit cards.

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In the past few years, fintechs have collaborated with banks in the credit card issuance space to launch products in the untapped markets.

Apart from co-branded cards, fintechs are offering credit cards to individuals and corporates.

Also read: Applying for loans? How to pick between fintechs and banks for credit requirements

HDFC NetSafe, SBI Virtual Credit Card, Kotak Mahindra Bank Netc@rd, ICICI Bank Virtual Credit Card and Axis Bank’s Purchase Control Virtual Card, Oxigen Wallet Virtual Card and FreeCharge Go MasterCard offer digital credit cards in India.

Also read: Explained: Why regulations on fintech cos is advantageous to banks

While all fintechs attract customers through their digital offerings, here’s a look at the pros and cons of a fintech credit card:

The pros

Fintechs conduct digital onboarding, offer cards to customers with minimal or no physical documentation. KYC is often done through the digital medium using DigiLocker, eKYC and video KYC.

Fintechs offer instant virtual cards that can be used on e-commerce portals.

Fintechs like Bangalore-based Slice issue cards to young professionals with no traditional jobs. They target low-income groups.

Those like Delhi-based GalaxyCard provide instant digital credit cards with a ticket size from Rs 1,000 to Rs 25,000. The cards are available to customers within three minutes.

Fintechs offer a wide range of rewards and loyalty programmes like subscriptions and discounts in food delivery, e-pharmacy and edtech.

Replacing virtual cards is easier than physical cards in case they are lost or stolen.

Some fintechs have been working on providing interactive transaction statements which are easy to understand.

Dispute resolution can be conveniently done, with fintechs providing a way to raise and track a dispute. Traditionally, dispute resolution was done through call centres or bank branches.

Also read: Bengaluru-based fintech startup Slice launches card with credit limit starting at Rs 2000; check details

And the cons

While fintechs open up new avenues for the credit industry, they pose the risk of an increase in defaults.

As most fintechs offer virtual cards, they cannot be used at merchant swipe machines like a physical card.

Most fintechs do not allow customers to withdraw cash from a virtual card.

Also read: Explained: Why regulations on fintech cos is advantageous to banks

First Published:Dec 1, 2021 8:35 PM IST