Several large technology companies are now focusing on digital payments in India as online transactions increased during the pandemic.
The digital lending market in India is becoming a battleground for businesses of Facebook Inc. to Xiaomi Corp.
Facebook said this month that India will be the first country to launch its small business lending program, which offers loans via a partner to businesses advertising on its platform. The loans will range from 500,000 rupees ($ 6,720) to 5 million rupees with interest rates of 17% -20%, possibly without collateral.
The social media trip to India coincides with Xiaomi, the Chinese manufacturer of everything from rice cookers to gambling monitors, and plans to offer loans, credit cards and insurance products in collaboration with some of the largest banks and digital lenders, the Press Trust. of India reported, referring to the local chief, Manu Jain.
On Tuesday, Prosus NV said it had agreed to acquire Indian online payment service BillDesk for 345 billion rupees ($ 4.7 billion), which would be its largest global acquisition to date in the Asian country.
The European Investment Power Station’s PayU unit has reached an agreement to buy the 11-year-old company, which set up a giant for digital payments with a total volume of $ 147 billion, and Prosus’ investment in India to date amounts to more than $ 10 billion.
Amazon.com also made its first investment in the country’s wealth management sector this month, participating in a $ 40 million round through fintech firm Smallcase Technologies Pvt.
Alphabet Inc. Google also improves its game. After offering wealth management products like digital gold, investment funds on its popular Google Pay platform, it is now tied up with small Indian lenders for opening deposits for its clients.
The digital payments market in India is attracting the attention of some of the biggest technology companies after online transactions rose during the pandemic and traditional lenders became cautious after a rise in bad debt. Digital lending is expected to double to $ 350 billion by 2023 and reach a total of $ 1 billion in the five years since 2019, according to estimates by Boston Consulting Group.
“The payment business hardly makes money, but lending makes a lot of money,” says Saurabh Tripathi, managing director and senior partner at BCG’s financial institution practice. “Indian consumers are waiting for more relevant digital experiences, and many players are using this opportunity.”
Although the potential of the loan market in India is significant, so are the risks. The country’s bad loan ratio is expected to rise to 11.3% by March, making it the worst performer among major countries for the second consecutive year.
In addition to addressing loan collections by digital businesses, the Reserve Bank of India also plans to regulate online lenders, which includes more than 300 start-ups.