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Here is Why Flipkart is Keen to Enter the Financial Services Sector Consumer lending space is a USD 1.2 trillion opportunity in India

By Vanita D'souza

Opinions expressed by Entrepreneur contributors are their own.

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Looks the Indian startup's ecosystem is smitten by the opportunities fintech industry is benefiting of. No wonder, we have unicorn startup companies such as the Flipkart looking into tap the market.

Market buzz says that Flipkart is in the middle applying for an NBFC license to extend the line of credit to its sellers and customers. With time, it would expand its financial services offerings beyond its e-commerce platform.

However, before going gong go over the move – one needs to understand is this an actual trend wherein big fishes are looking to tap into the financial inclusion roadmap or just another step to deal with foreign competition.

Copy Cat

The credit problem in India is beyond surreal. For example, the small and medium enterprises sector (SMEs), which contributes between 30-40 per cent in the country's GDP, suffers majorly because of its unattended financing need and the gap is as big as around USD 650 billion.

Bhavin Patel from LenDenClub believes that the idea of e-commerce companies like Flipkart venturing into the credit is adopted from the Chinese model of operating.

"In China, the majority of e-commerce and consumer companies offer financial products. By offering a financial product, you are expanding your consumer reach. This could be one of the major driving factors behind opting NBFC license," he added.

Take an example of Alibaba here, which has seen significant growth in their volumes and yet, have built a strong fintech company Alipay that drives the group's valuation with the help of its lending arm.

Manish Lunia, Co-Founder, says, "Every month millions of customers buy goods at domestic e-commerce companies like Flipkart and need smart EMI options. Its only natural for companies like Flipkart to cater that demand on its own or partner with lending companies that can co-create products with them."

Disruption or Growth Factor?

However, existing players in the NBFCs side don't see Flipkart's move as disruption or competition as their industry is too nascent and there is enough opportunity for startups to grow together.

Giving an example of the consumer lending space, Gaurav Chopra, Founder & CEO, IndiaLends says this segment is expected to be a USD 1.2 trillion opportunity for the organised lenders, implying a 22 per cent compound annual growth rate over the next three years.

"The retail loans accounted for 20 per cent of loans disbursed in FY17, and the share is steadily increasing. We are uniquely positioned to tap this opportunity by using technology, specifically by reducing loan origination cost, better risk assessment capabilities by using alternate data captured during the customer's digital journey, low customer acquisition cost, and faster loan processing because of a completely digital process," he pointed out.

Road Map

As the artificial intelligence, big data and other new technologies have started unwrapping their capabilities while India continues to adopt digitalization, the fintech sector in India is headed to a great climax.

Having said that, Lunia feels all fintech players combined in India have barely scraped the surface of the opportunities that lie ahead.

"For the first time- there is ample data and analytics available to take decisions aided by robust technology and regulatory setup. The new to credit millennials are finding long banking processes very cumbersome and irritating and fintech journeys are the way to go," he says while adding that, "The new borrower base is adding over 30 per cent y-o-y to the retail credit outstanding as per latest CIBIL insights and new fintech startups can be lauded to have contributed to the overall change in perception and risk attribution to this segment."

While on the other side, Patel's thoughts tune in with Lunia as he believes in the next 3-4 years will be decider what will be the destination.

He notes, "During these 4 years, the way of delivery of lending product will change. Majority of the lending product will become a full product as against in the past.

Will companies like Flipkart be a game changer here is what we need to wait and watch!

Vanita D'souza

Former Senior Correspondent, Entrepreneur India

I am a Mumbai-based journalist and have worked with media companies like The Dollar Business Magazine, Business Standard, etc.While on the other side, I am an avid reader who is a travel freak and has accepted foodism as my religion.


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