FoneLoan: short-term loans without collateral | How it works? How to register?


The lending landscape has changed with the growing adoption of digitalization among banks and financial institutions. The traditional form of lending still prevails, especially in the highest transaction.

FoneLoan

However, BFIs have launched a few products through which customers can get collateral-free, paperless and faster loans for a lower amount.

One of the recent products is ‘FoneLoan‘, which was designed to provide small, short-term loans to bank customers through a mobile banking application 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 gets a loan up to Rs. 1,00,000 to Rs. 2,00,000 without going through the bank. Customers can get the loan in real time, as soon as they request it.

“We have been transacting at the same bank for many years, but we have to submit a large amount of documents and visit banks constantly every time we need a loan. And this happens, despite the submission of a KYC when opening a bank account”, says Sagar Sharma, Sales and Marketing Manager, F1 Soft International.

Thus, FoneLoan has been designed to provide easy loans to targeted bank customers without any hassle, he says.

Currently, FoneLoan only applies to salaried or regular income earners who have an account with the bank in question. The banks analyze the eligibility of each client with software called ‘Decision Analytics’.

What is decision analysis?

Banks use this software to verify their client’s eligibility. Decision Analysis studies the transaction history and other relevant factors of all customers with a payroll account at the bank.

Based on the analysis, the tool generates individual scores. Only customers reaching the threshold set by the bank will be eligible to apply for FoneLoan.

According to bank officials, one of the main criteria is the monthly salary credited. Apart from this, the bank checks the average account balance, withdrawals, loan status, loan repayment history and transaction behavior of the customer.

According to bank officials, the business intelligence software also assesses the amount limit for each eligible based on their salary amount and deposit history. The amount the customer can borrow will appear when applying for the loan.

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Over time, if the savings account of the customer’s bank transaction develops positively and the customer repays the FoneLoan on time, the score may improve and the customer may cross the minimum threshold set by the bank.

How does FoneLoan work?

Smart FoneLoan – Laxmi Bank

You must have Laxmi Bank’s ‘Mobile Money‘ banking application. If the customer is eligible, a “Smart FoneLoan” feature will be present in the mobile application.

Smart FoneLoan - Laxmi Bank
Smart FoneLoan – Laxmi Bank

The customer can click on the icon and register with his email address. Check the email and go back to the app. They receive an OTP number, then the option “Request a loan” appears in the application.

Once the client has applied, he needs 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 2,00,000 and the interest rate is 15%.

According to Madhu Krishna Poudyal, Assistant, Cards and Digital Banking Channel, Laxmi Bank, the loan processing fee is Rs 250.

Loan Nabil Fone – Nabil Bank

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.

Nabil FoneLoan - Nabil Bank
Loan Nabil Fone – Nabil Bank

The user needs to click on the FoneLoan icon and register. Then they receive an OTP number. The loan will be approved immediately and the client will receive the amount in real time.

The maximum loan limit is Rs 1,00,000 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, explains 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 in to the “Kumari Smart Mobile” banking application. The eligible client will have access to the “Request Kumari Loan” icon.

Kumari FoneLoan - Kumari Bank
Kumari FoneLoan – Kumari Bank

A repayment date must be selected, not exceeding 30 days from the loan disbursed. The customer will receive a four-digit OTP code which he will receive by SMS and click on “Confirm”. The amount will be immediately credited to the customer’s account.

The client can take out a loan of up to Rs 1,00,000. The interest rate is 12% per month.

“The processing fee for the loan is Rs 200,” says Anish Pradhan, Head of Digital Banking Services, Kumari Bank.

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Type of loan

The loan process is completely digital and the physical presence of the customer in the bank is not necessary.

“The customer does not need any document, including a salary certificate, because the banks identify the eligible through the software”, says Sharma, F1 Soft International.

The eligible client gets the loans instantly as 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 happens with credit cards.

Each FoneLoan must be settled in full before applying for another loan. Since the relocation process is completed every time, there is no limit to taking the loan repeatedly.

Through this service, the client can obtain a micro loan from Rs 5,000 to 2,00,000.

Resettlement

The resettlement period for FonePay loan is 30 days. According to bank officials, prepayment of the loan is not allowed as of now. But, if they are ready to pay before 30 days, they must set the date when applying for the loan.

For example: if a person wishes to pay the fees in 15 days, this must be mentioned when applying for the loan.

In the event that the loan is not paid in full by the due date, the amount remaining to be paid will be considered overdue and the customer will be required to pay daily interest and pay late fees, in some cases.

“Client has to pay Rs 300 per month as late fee if loan is not settled on due day”, says Pradhan, Kumari Bank.

Similarly, customers of Kumari Bank are also required to pay Rs 300 per month as late fees, according to the bank’s Paudyal.

Nabil Bank has not charged any late fees, so far.

Security

Sending a OTPs to that of the user E-mail is the security measure applied in the platform. “It helps verify identity and provides a sense of security,” Sharma says.

This service is available in mobile banking, so one needs to log into their mobile banking security protocols to apply for the loan.

A total of 1,600 people have already taken out loans from these three banks for a total of Rs 25 million until March 1 at noon.

Future plans

Although in the first phase, the target customers are limited to salaried employees, FonePay and banks plan to extend the services to the other customer who has a passive source of income, including rental income, pension and others.

According to bank officials, they are currently analyzing the feasibility of such loans by analyzing customer repayment behaviors.

They say they will move on to the second phase and only expand eligibility for the aforementioned criteria when they ensure good transaction behavior in the first phase.

“Although the bank has targeted niche customers, we are working to educate the customer to repay their loan on time, to become responsible so that banks can maintain confidence in them”, Sharma said.

Apart from this, F1 Soft also plans to extend the services to other commercial banks. “We plan to introduce this platform to 6-8 banks by FY 2020/2021. We aim to reach 20 banks by the end of the next fiscal year 2021/2022,” says Sharma.

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