Simple Credit Line Management System
Terminology
The following table contains Simple Credit Line Management System(SCLMS) related terminologies used in the article:
| Term | Description |
|---|---|
| Credit Limit | The credit facility extended to the account of a user. For example, if an account has been assigned a credit limit of USD 1,000, the account can spend up to USD 1,000 over and above the PPI account balance. |
| Credit Limit Balance | The unused credit limit that the account has. For example, if the account has a limit of USD 1,000 and USD 200 is utilized, the credit limit balance will be USD 800. |
| Audit Logs | Record of the usage of credit limit maintained for reporting purposes |
| Account States | Active - credit limit for account is active Inactive - credit limit for account has been deactivated, reversible state Disabled - credit limit for account has been deactivated, non-reversible state |
Simple Credit Limit Management System
Simple Credit Limit Management System(SCLMS) is a Fusion Offering that helps fintechs assign a credit limit to the account of a user. SCLMS facilitates Just in time funding to the account of the user.
For example User A has been assigned a credit limit of USD 1,000. His balance in the account is USD 200. Now he/she wishes to transact for USD 800. The transaction amount (USD 800) - Balance of account (USD 200) i.e the difference (USD 600) would be transferred Just in Time to the account of the user.
Given the balance of the account is now equal to the transaction amount, the transaction will be successful. JIT Funding is implemented with the help of
Interceptors
Along with the assignment of the credit limit, the CLMS also supports increasing and decreasing the credit limit balance.
For example
User A has been assigned a credit limit of USD 1,000 for a month. At the start of the month, both his credit limit and the credit limit balance are USD 1,000. During the month he consumes USD 900 of his credit limit. Now the credit limit is USD 1,000 however the credit limit balance is USD 100. After the month ends, he repays USD 900 and the additional interest that he owes to the fintech. The fintech then restores his credit limit balance to USD 1,000.
| Credit line extended for USD 1,000 | User makes a transaction of USD 10 | User pays back the credit line consumed |
|---|---|---|
| Credit Limit = USD 1,000 Credit Limit Balance = USD 1,000 |
CreditLimit = USD 1,000 Credit Limit Balance = USD 900 |
Credit Limit = USD 1,000 Credit Limit Balance = USD 1,000 |
Use case
Let’s look at a use case of implementing a credit limit given to users by a Finetch.
1. Assign Credit Limit to Account
Fintech uses Assign Credit Limit to Account API to assign limits to accounts based on their logic. Assume User A has USD 1,000.
Input parameters
ifiID: Required. Unique identifier of the IFI.accountID: Required. Unique identifier of the account.creditLimit: Required. The limit of credit facility extended to the account of an Account.
2. JIT Funding
User A has a balance of USD 200 in account and credit limit of USD1000. He attempts to do a transaction of USD 800. CLMS orchestrates Just in time funding from the VBO Funding account to the user account of USD 600 ( transaction value - the balance of account ). The transaction is successful. Credit limit balance changes to USD 400. This step is orchestrated by CLMS using Interceptors and A2A transfer API.
3. Credit Limit Balance Usage
Across the month user, A utilizes USD 300 of his credit limit balance. User A has used USD 900 of his credit limit balance during the month. His current credit limit balance is USD 100.
4. Increase Credit Limit Balance
At the end of the time period allowed to account holder, Fintech Increases the credit limit balance from USD 100 (current credit limit balance) to USD 1,000 using Increase Credit Limit Balance API.
Input parameters
ifiID: Required. Unique identifier of the IFI.accountID: Required. Unique identifier of the account.creditLimit: Required. The limit of credit facility extended to the account of an Account.
5. Update Account Limit
The fintech decides to increase/decrease the assigned credit limit to user based on business logic. It can change the credit limit to USD 1,000 or USD 800 using Update account Limit API.
Input parameters
ifiID: Required. Unique identifier of the IFI.accountID: Required. Unique identifier of the account.creditLimit: Required. The limit of credit facility extended to the account of an Account.
6. Decrease Credit Limit Balance
The fintech can also use Decrease Credit Limit Balance API to reduce the credit limit balance. Typically used in JIT Funding in non-card transactions. JIT Funding in such cases is orchestrated by Fintech.
Input parameters
ifiID: Required. Unique identifier of the IFI.accountID: Required. Unique identifier of the account.amount: Required. The amount by which the credit limit balance should be decreased.
7. Get all Audit logs for a Credit Account
Fintech can view Audit logs for an account using View Audit logs for Account Input parameters
ifiID: Required. Unique identifier of the IFI.
8. Get all Credit Audit logs
The fintech can view Audit logs for all accounts.
Input parameters
ifiID: Required. Unique identifier of the IFI.
Note : Currently the CLMS only intercepts card payments. The ability to intercept payments on other channels is part of our roadmap.