Global tech giants now bet on loan market

Fintech space is evolving every passing day in India. Especially, fintech companies that are into lending activities are witnessing a flurry of activities. Last year, many of these companies had to reduce their lending portfolio as fund flows from banks and NBFCs dried up owing to the pandemic. However, things are slowly coming back to normalcy with an uptick in loan demand. With the festive season around the corner, momentum in lending activity is likely to be back with a bang.

Currently, the total valuation of the fintech industry is pegged at around $50-60 billion. According to a Boston Consulting Group report, Indian fintech companies are likely to reach a valuation of $150-160 billion by 2025.While there are various types of fintechs operating in the ecosystem, the lending segment is witnessing some interesting events in recent days.

India's digital loan market is becoming a battleground for global giants. After a successful entry into the payments space, companies like Facebook Inc, Google,and Xiaomi Corp are seeking a foothold in this emerging opportunity. According to projections, the digital loan market is estimated to be around $1 trillion.

In July this year, Facebook said India would be the first country where it will roll out its small business loan programme offering loans via a partner to firms that advertise on its platform. These loans will range from Rs 5 lakh to Rs 50 lakh with interest rates varying in the range of 17-20 per cent. This move is significant as many small and medium enterprises advertise through its platform and any support in terms of working capital loan will definitely create a win-win situation for both Facebook and small businesses.

Global search engine Google is also upping its game. From offering various financial products such as digital gold, mutual funds on its payments platform Google Pay, it has now tied up with small Indian lenders for opening time deposits for its customers. Now, the Chinese maker of various electronic products,Xiaomi, also plans to offer loans, credit cards and insurance products in partnership with India's biggest banks and startup digital lenders.

E-commerce giant Amazon.com has also made its intention of entering into the financial services space clear through its maiden investment in the country's wealth management sector in July. The American firm participated in a $40 million round of fund raising by fintech startup Smallcase Technologies.

Such aggressive entry into the Indian financial services space augurs well for the fintech ecosystem along with Indian SMEs. Traditionally, SMEs don't get adequate lending support from the Indian banking system which is heavily skewed towards corporate lending. Though things have changed a lot in recent years, a lot more needs to be done. Therefore, the entry of global giants into lending carries good news for the Indian economy.

Also, as the fintech ecosystem matures in the country, the brick-and-mortar banking institutions have to recalibrate their strategies. With many more avenues of funding opening up, the relevance of the traditional banking system may reduce in the coming years. To stay relevant, the Indian banking system should actively support and collaborate with fintech cos to increase the flow of funds that will not only win them new customers, but also create opportunities for cross-selling various other banking products.