Kumari Bank, a commercial bank in Nepal, has introduced a Buy Now, Pay Later (BNPL) service, which allows customers to get a loan on EMI instantly right from their mobile banking app.
The concept of instant loans via a mobile banking app is not new. About a year ago, several banks, including Kumari Bank, had already launched the service, named ‘Foneloan‘, in association with F1 Soft, a fintech company in Nepal. The service, however, did not previously offer the loans on an EMI basis; instead, the loans had to be paid back within 30 days.
But now, for the first time in Nepal, with the Kumari Bank’s Foneloan Buy Now, Pay Later service, customers have the option to take a loan for up to 12 months and return it through EMI, all without the need to visit the bank.
Previously, we could do everything except take out a loan using the mobile banking app. So that’s how Foneloan came to be. The response was positive, however, the loan repayment period was only 30 days. So, we come up with ‘Buy Now, Pay Later’.
— Subash Sharma, CEO, F1Soft International
Who can use Kumari Foneloan BNPL service?
The Kumari Foneloan BNPL service is currently only available to customers with payroll/salary accounts. The bank stated the service will be available for normal savings accounts soon.
For the EMI model, the customer can take out a loan of a minimum of Rs. 15,000 and a maximum of Rs. 2,00,000. The customer can choose to pay the loan in 3, 6, 9, or 12 monthly installments. However, not everyone is eligible for a loan of up to Rs. 2 lakh.
The bank uses its own analytics software to determine the loan limit and loan tenure for each customer. The customer’s loan amount and tenure cannot exceed the limit set by the analytics software.
According to Kumari Bank, the software analyses each customer’s account automatically, looking at transaction history and other relevant details to give individual scores. Customers that fulfil the bank’s minimum credit score will be eligible to apply for a Foneloan.
The main factors that determine a customer’s eligibility include average monthly salary/deposit, withdrawals and balance, continuity and variance in salary/deposit, status of existing loans, history of previous loans, and so on.
How to Use Foneloan Buy Now, Pay Later?
A Kumari Bank customer must have a mobile banking subscription to avail the Foneloan. You can download the app from the Play Store or App Store and activate the mobile banking service.
The Kumari Foneloan Buy Now, Pay Later service will soon replace the traditional way of taking out small loans in Nepal because of the convenience of being able to get a loan and pay on EMI in just a few seconds via phone.
— Anish Tamrakar, Chief Digital Banking, Kumari Bank
The BNPL service can be used while paying for a product or service at any merchant that accepts Fonepay QR. While paying, simply scan the Fonepay QR code with the mobile banking app, and select the ‘Buy Now, Pay Later’ option.
Then you can choose the loan type and tenure, after which the loan is executed and the payment to the merchant is made immediately. The customer must repay the bank within one month or in EMIs, depending on the loan modality.
Additional information on EMI settlement, interest, and other charges
The bank takes 0.75% of the loan amount as a loan processing charge. The EMI is calculated with 15% interest.
The EMI amount is automatically debited from the customer’s account on the EMI repayment date and the EMI is settled. However, if the customer’s account balance is insufficient, the EMI amount will be declared overdue.
Overdue EMI amounts are subject to daily interest, a 2% penalty interest rate, and late fines of Rs. 300 each installment.