We know for a fact that the lending business is getting huge in the e-commerce space because of the fact that when money is lended to people which they can repay over a period of time in installments without interest, they feel that it will be fine to spend more as they know that they can repay the installments with ease from their monthly budget instead of buying the item with a huge price up front. In most parts of the world, e-commerce companies have realized that lending is a big business not only to earn interest but to increase their sales as well as make people spend more.
Because people don’t feel the burden of paying a huge amount upfront, they can buy a product with much higher value then they originally imagined which means that the overall cart value will also increase. This has been done by Apple by launching a credit card and now they have a savings account as well. Also, we see a lot of “buy now pay later” options poping up in the market to make it easy for customers to purchase products in installments.
Now, India’s Flipkart which is one of the biggest e-commerce brands in the country and over the world is getting into the lending business. We know that Flipkart has already launched a co-branded credit card thanks to its partnership with Axis Bank but now they are lending money up to 500,000 rupees for Indians. Flipkart says that this “loan, requiring no document submission and boasting a 30-second approval time, promises customers a seamless borrowing experience”. It is also to be noted that Flipkart and PhonePe were a single entity till last year but they have since separated to become two different entities.
Interestingly, after the split between Flipkart and PhonePe, they have become competitors as PhonePe has also launched an e-commerce platform while Flipkart is entering the financial service business. It is interesting to see how the lending business from Flipkart will be expanding going forward as it will definitely increase their sales but how they handle the experience will matter in the long run.
