The buzz is that Flipkart is looking to enter the financial services space, and start offering its customers as well as sellers a plethora of credit and insurance products. According to The Business Standard, the Bengaluru-headquartered firm has begun the process of applying for a non-banking financial company (NBFC) licence, which will allow it to open lines of credit to its customers numbering around 10 crore and over 1 lakh sellers.
"Our vision for fintech at Flipkart is to create highly differentiated financial solutions for our customers, both consumers and sellers, leveraging data and technology to make it very inclusive, simple and transparent," Ravi Garikipati, senior vice-president and head of financial services at Flipkart, told the daily, adding, "A strong understanding of customers helps us arrive at credit-risk profiles very differently and will play a big role in underwriting."
Although the e-commerce giant has already tied-up with banks and NBFCs to allow its customers to pay for big purchases in monthly instalments (EMIs), the company claims that a credit gap persists. The report added that over 60 per cent of the consumers shopping on Flipkart do not have any access to formal credit, which deters them from making large purchases on the platform, thereby hindering the company's growth.
"Be it consumer lending or seller lending, we have a hybrid strategy. We are planning to apply for an NBFC licence on our own and when we have that in place, we would like to drive most of the loans using our own balance sheet. It is not exactly a marketplace, but a curated set of partners who will work with us," added Garikipati, who has previously served as Flipkart's CTO and head of engineering.
In fact, the company has reportedly already scrapped its lending programme for sellers on its platform due to the time it took to push credit to them. According to Garikipati, the new products will reduce the time taken for sellers to access credit from a few days to a few minutes, or even seconds.
That's not all. Flipkart told the daily that it is also partnering with select insurance companies to co-create micro-insurance products that will align with a customer's purchases on the platform. For instance, customers will be able to buy a comprehensive protection plan for their smartphones right on Flipkart and sellers will be able to insure their products against damage in the reverse shipping process.
The Insurance Regulatory and Development Authority of India (IRDAI) has already given its nod for such partnerships. Flipkart eventually plans to move into the general and life insurance space, but will limit itself to curating a select few policies instead of becoming an aggregator like PolicyBazaar, BankBazaar or CoverFox.
The company added that the first few financial services products would be launched in the next three months, targeting consumer lending, vendor lending as well as insurance. Flipkart, in fact, has already identified three insurance partners but did not disclose their names. In time, it plans to offer these services beyond its platform, taking on firms like Paytm and Bajaj Finserv.
This development comes less than two months after Flipkart's arch rival Amazon made its first investment in the Indian insurance sector - putting in $12 million in online-only insurance policy provider Acko. The buzz is that Amazon will not only distribute Acko's financial products but also be involved in the creation stage.
Wondering why Amazon and Flipkart are suddenly so interested in this space? Experts say that India's lending market boasts a total debt demand of $520 billion. Of this, $150 billion is unmet and addressable, and that is the credit gap that a lot of fintech companies are currently eyeing. The entry of the ecommerce giants only heats up competition in the sector.
So perhaps, in the near future, Flipkart and Amazon customers who regularly buy baby products will be peddled health insurance or child plans while pet insurance could be cross-sold to those buying pet products.