Tough days ahead for lending startups, Flipkart and Amazon to enter business

While the growth of e-commerce companies was unprecedented during 2013-16, it turned sluggish in the past 12-18 months. According to the research firm Forrester, growths of e-commerce players were merely 12 percent as opposed to 130 and 180 percent in 2014 and 2015.

The slowdown has been forcing e-commerce majors like Flipkart and Amazon to evangelize other areas to tap in. After launching private labels, e-commerce majors Flipkart and Amazon are planning to enter the lending business. According to a report by The Ken, both Flipkart and Amazon have applied for a “Non-Banking Financial Company” (NBFC) license from regulators.

As per report, Flipkart is in the final stages of getting a license on the other hand Amazon is anticipated to launch its lending business by early next year in India.

Currently, Flipkart and Amazon account for nearly 25 percent of loans disbursed by a slew of fintech lending startups such as Capital Float, Lending Kart amongst others. Opportunity for getting into lending business is huge given the number of sellers, who require loans at both platforms.

Meanwhile, Flipkart and Amazon had partnered with banks, NBFCs, and fintech lending startups to provide loans to their sellers and finance its customers’ purchases. Despite of partnerships, at present, only handful of the sellers and buyers are able to procure loans. However, once they start lending by themselves, it could be a game changer for both.

Unlike fintech lenders, both companies relatively have better access to data-points related to merchants and buyers who have transaction history with them. Acquiring customers for lending startups is an expensive one, however, Flipkart and Amazon have several data points that can be factored in while lending money to sellers.

Importantly, Amazon and Flipkart have made it compulsory for sellers to comply with their Know Your Customer” (KYC) norms. The move will help them to incur almost no cost while acquiring consumer as they already own the data, which helps in marking sellers to lend.

Update: Amazon has denied to The Ken's report that it applied for an NBFC license.