Flipkart set for financial services foray
E-commerce firm in process of getting NBFC licence, to lend to consumers and sellers initially
In a move that could disrupt the consumer lending segment, e-commerce giant Flipkart is set to enter the financial services space, offering credit and insurance products to consumers and sellers on its platform.
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 100 million-odd customers and over 100,000 sellers. In time, the company will offer these services beyond its platform, taking on firms like Paytm and Bajaj Finserv.
Itisalsopartneringinsurance companies to co-create micro-insuranceproductsthat will align with a customer’s e-commerce journey, according to the company. “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,” said Ravi Garikipati, senior vicepresident and head of financial services at Flipkart. “A strong understanding of customers helps us arrive at credit-risk profiles very differently and will play a big role in underwriting.”
Currently, over 60 per cent of the consumers shopping on Flipkart do not have any access to formal credit. This deters them from making large purchases on the platform, which, the company says, hinders its growth. While Flipkart has for some time partnered banks and NBFCs to offer customers EMIs on making big purchases, it says a gap still exists.
On the seller front, Flipkart scrapped its lending programme after it witnessed
gaps in the speed at which credit could be delivered to them. Garikipati says the new products will reduce the time taken for sellers to access credit from a few days to a few minutes or even seconds. The company is also looking at lending to sellers from its own balance sheet.
“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 in his previous stint served as the CTO and head of engineering at Flipkart.
On the insurance front, Flipkart will at first partner select insurers to offer bytesized micro insurances pertaining to specific purchases on its platform.
The SAARC Development Fund (SDF) is in advanced-level talks with the Asian Infrastructure Investment Bank (AIIB) for cofinancing four cross-border infrastructure projects across the region, a move set to lay the ground for the body becoming a regional development bank in the near future.
In its recent push to engage major international lenders, the SDF has tapped infra financing major AIIB for projects on renewable energy, urban development, climate change, and intra-regional trade, SDF Chief Executive Officer Sunil Motiwal told Business Standard on the sidelines of the SDF Partnership Conclave 2018.
The two-day meet, which started on Monday, is an attempt by the Thimphu based secretariat to revive the fund, which has suffered from chronic lack of funding and has been burdened by oversight issues by member nations, who often do not see eye to eye on policy issues.
The multilateral development financing body was set up by SAARC member nations back in 2010 and has implemented 12 developmental projects so far, mostly in the social space. But now the body plans to ramp up the financing of infra projects.
With India getting ample attention from the China-led AIIB, which has sanctioned projects worth more than $1.2 billion till now, the SDF is hopeful of tapping the bank for co-financing opportunities in the infra space, with projects related to energy, power, transportation, telecommunications, and tourism, among others, a person in the know said. AIIB signalled the final approval of a further $1.9 billion during its board of governors meet in Mumbai last week.
“We are already working with multilateral agencies such as the International Finance Corporation (IFC) and the Asian Development Bank (ADB). In-principle approval has already been accorded to a waste-to-energy project in Sri Lanka in partnership with the IFC. We are also doing a hydropower project in Nepal with the participation of Bangladesh and India and funding provided by the ADB and the IFC. The total loan commitment would be $30 million,” Motiwal added.
“SDF is focused on this particular model of project financing and is working on building a consortium of financing agencies that may bankroll specific projects. We already have agreements with the ADB, the World Bank and other multilateral bodies,” said Sayeed Zeeshan Ali, assistant director at the SDF, and in-charge of the economic and infrastructure window.
Despite plans to focus on infra projects, budgetary constraints and lack of attention from sovereign and private sector financiers have historically slowed progress, a senior visiting delegate said.
Big plans ahead
“We will hold a regional level meet focusing on fund mobilisation by December and are aiming to become a regional development bank for South Asia within the next two years,” Motiwal said.
The government had earlier shot down a plan to transform SDF into a regional bank. “There was a move in this direction three years back as well but finally the proposal was not found to be feasible since India was concentrating its efforts on the New Development Bank founded by the BRICS grouping,” a senior finance ministry official said. Given that the SDF is set to gain a number of projects as co-lender, the proposal is now being given a look, he added.
The SDF has a total corpus of $1.5 billion with the total capital base currently at $497 million. Of this, more than 100 million has been committed. The fund is aiming to tie up with 40 banks from various SAARC member states.