A storm of controversy has engulfed travel-focused fintech startup Scapia as numerous customers took to social media platforms to express their dissatisfaction over a sudden reduction in the credit limits of their cobranded credit cards, effective January 10, 2024. The credit cards were issued to Scapia’s customers in collaboration with Federal Bank, leading to an outcry among those affected.
Several irked customers vented their frustrations on social media platforms, including X (formerly Twitter) and various online fintech forums, decrying the unexpected and substantial reduction in their credit limits. This move, effective from January 10, 2024, impacted the travel spending capabilities of these customers, who deemed the decision as unethical and unacceptable.
Despite queries sent to Scapia on the matter, no response has been received at the time of publishing this story. However, a spokesperson for Federal Bank attributed the credit limit reductions to the bank’s credit card usage guidelines. The spokesperson stated, “Our credit limits for all products, including credit cards, are determined by various factors. As part of our periodic review, we have revised limits for some customers as per the bank’s credit card usage guidelines.”
Customers claimed that the significant cuts in their credit limits rendered the cobranded credit cards useless, leading to widespread frustration and concern among Scapia’s user base.
Scapia, founded by Anil Goteti, a former senior VP at Flipkart, has garnered significant attention in the fintech space. Within five months of launching its cobranded credit card, the startup secured over $32 million in funding in two consecutive rounds, with the latest round concluding in November 2023. The company boasts backing from notable investors, including Elevation Capital, Matrix Partners, and Binny Bansal-led Three State Ventures.
The controversy surrounding Scapia’s credit cards is not the first of its kind in the Indian fintech landscape. The RBI had previously cracked down on cobranded credit cards, urging Non-Banking Finance Companies (NBFCs) to cease loading credit on such cards in June 2022. The central bank’s measures aimed to curb the rapid growth in the PPI credit sector.
Customers affected by Scapia’s credit limit reductions expressed their dismay over the lack of intimation or advance notice about the decision. Some even claimed that Scapia had halted the issuance of credit cards to new users.
This incident raises broader concerns about the practices in the Indian fintech ecosystem related to extending credit lines, an issue that regulatory bodies, including the RBI, have been monitoring closely.
The latest controversy at Scapia underscores the challenges faced by fintech startups in maintaining transparent communication with customers and adhering to industry standards, especially in matters related to credit offerings.
Statement from Federal bank is as follows.
“We are here to help. Kindly share your concern in detail so that we can understand better and assist you accordingly. Please share your concern via message from the below link so that we can assist you further.”
