Amazon, Flipkart: Good news for Amazon, Flipkart customers. Amazon and Flipkart are now preparing to enter the finance sector. According to a report, both platforms are now preparing to disburse loans. Amazon is preparing to provide loans to small businesses in India, while Flipkart is considering introducing products like buy now, pay later (BNPL). Amazon acquired Bengaluru-based non-bank lender Axio earlier this year. Axio, which currently focuses on BNPL and personal loans, will resume lending to small businesses and offer cash management solutions.
“We see a lot of room for increased credit growth in India, especially among digitally connected customers and small businesses outside the top (cities),” Mahendra Nerurkar, vice president of payments for emerging markets at Amazon, told Reuters. He said the company will “design unique lending methods” for merchants and small businesses to improve their cash flow management and access to capital. Amazon’s plans have not been previously disclosed.
Flipkart will charge this much interest
Flipkart, in which Walmart owns about 80%, registered its non-bank lending arm, Flipkart Finance, in March and is awaiting final approval from the Reserve Bank of India for its business plan. The company’s filing shows two types of planned pay-later offerings: no-cost monthly installment loans for 3 to 24 months for online shoppers, and loans for consumer durables at 18%-26% annual interest rates. Interest rates on loans for consumer durables from traditional lenders typically range between 12% and 22%.
According to a source with direct knowledge of Flipkart’s plans, Flipkart will begin offering these financial products next year. The source was not authorized to speak to the media and declined to be identified. Flipkart and the RBI did not respond to requests for comment.
India’s consumer loan market is projected to grow from about $80 billion in March 2020 to about $212 billion by March 2025, according to data from credit bureau CRIF High Mark, although there have been signs of a slowdown in recent quarters. Consumer loans include unsecured personal loans, credit cards, and loans for consumer durables.
Both Amazon and Flipkart run apps that are among the top 10 platforms used for making payments through India’s Unified Payments Interface (UPI). Their financial goals received a major boost earlier this year when the RBI allowed them to lend directly to customers entirely through their own units. This also opened a major gateway for foreign tech companies to enter India’s financial services market.
“They have a huge potential to make an impact because they have both supply-side and demand-side customer data,” said Rohan Lakhiyar, partner in the financial services risk division at consultancy Grant Thornton India. “But execution will be essential as they expand beyond core retail.” Nerurkar said Amazon has also tied up with half a dozen local lenders to offer fixed deposit savings products to customers on its Amazon Pay platform with a minimum amount of Rs 1,000 ($11).