After the Reserve Bank of India recently forbade the sector from loading credit lines onto wallets and other similar prepaid payment instruments (PPIs), the number of prepaid cards issued by fintech companies like Slice, Uni, and LazyPay has fallen below 100,000.

Due to a lack of legislative certainty, card-based fintech firms Uni and PayU-owned LazyPay have fully halted issuing new prepaid cards (through its LazyCard product).

To maintain company continuation, both of these organizations, however, continue to offer support to current cardholders and are seeking for new lending alliances.

Slice, a unicorn fintech company situated in Bangalore, continues to gain more clients in collaboration with SBM Bank. However, issuances have significantly decreased as it confers with the regulator on the best course of action.

The only lender sponsoring fintech companies is SBM Bank in India, as other significant lenders like RBL Bank have withdrawn from such alliances.

The government has lately been encouraged to intervene to address the consequences of the current RBI instruction, according to the Payments Council of India (PCI), a business organization that falls under the larger umbrella of the Internet and Mobile Association of India (IAMAI).

Over 10 million active prepaid cards were estimated by PCI, and over Rs 3,500 crore worth of transactions were made using these cards in May alone. These cards are used to dispense credit lines.

The pause in card issuances is having an impact on the co-branded market as well, as participants wait for the regulator's final instructions on digital lending.

In new partnerships, the business models of card-based fintech companies will change. In these agreements, they may be able to charge banks merely an origination (fee) fee while remaining DSAs (direct selling agents). However, since the RBI wants banks and other regulated organizations to maintain control, revenue lines would be affected.

The fintech companies are actively debating whether these more recent models are permitted with banks and the RBI.

Many of these card-based fintech companies may transition into traditional cash lending app providers if there is no clarity because, even in co-branded partnerships, the bank will control everything from pricing to the user demography, giving these companies little leeway.