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Flipkart gets into lending game, will offer personal loans to shoppers

Customers can apply for a loan of up to Rs 5 lakhs, while the tenure for repayment ranges from 6 to 36 months. But the potential use of shoppers’ data by the platform raises a few questions.

Flipkart on July 7 announced that it is partnering with Axis Bank to offer personal loans of up to Rs 5 lakhs to shoppers.

The new loan facility joins the other credit options that the e-commerce platform already offers such as credit cards, Buy Now Pay Later (BNPL), and Equated Monthly Installments (EMI), but what sets the new facility apart is the larger amount that customers can apply for (up to Rs 5 lakhs) and the longer tenure for repayment (ranging from 6 to 36 months).

“The personal loan facility will empower customers with increased purchasing power and improve accessibility and affordability,” the company said in its press release.

Why does this matter: The new loan facility could help Flipkart set itself apart from its arch-rival Amazon, which currently doesn’t offer any loans. Moreover, Flipkart could become a prominent player in the lucrative online personal loans market given its large customer base and its access to their shopping data, which can be used to determine the creditworthiness of a borrower better than traditional fintech lenders.

“A person may buy an iPhone on Flipkart and a high-end bag on Myntra. Such purchasing behaviour can reveal a lot. When combined with the CIBIL score, the information can serve as a powerful indicator of the person’s creditworthiness,” an unnamed source explained to The Arc

How it will work: “Customers can expect the approval process for their loans to be completed in a mere 30 seconds. To initiate their loan application, they must provide basic details such as PAN (Permanent Account Number), date of birth, and work details. Once these details are provided, Axis Bank will approve their loan limit. Customers can then select their preferred loan amount and repayment method, considering their comfortable monthly repayment capability. Flipkart will present a comprehensive loan summary, repayment details, and terms and conditions for review before finalising the loan application,” the company explained.

Flipkart and PhonePe stepping on each other’s toes: Interestingly, Flipkart has gotten into the loans game before fintech startup PhonePe, its sister company. Whereas PhonePe has jumped on board ONDC, the new government-backed e-commerce venture, before Flipkart. Both Flipkart and Phonepe are owned by US giant Walmart.

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Is there a default loss guarantee arrangement in place? The partnership comes a few weeks after RBI allowed default loss guarantee arrangements in digital lending. These are arrangements by lending service providers to compensate banks or non-banking financial companies (NBFCs) up to a certain percentage of default of the loan extended by the bank or NBFC. We don’t know if there’s any default loss arrangement between Flipkart and Axis Bank because the terms of their partnership are not public.

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