More than a year ago, when we unpacked Flipkart’s fintech ambitions, we never expected this new vertical to become the focal point for Flipkart. But now, , the ecommerce giant is about to enter a new era.

This is not just about enabling loans for its marketplace users (consumers and sellers) as an RBI-regulated lender – Flipkart can lend to other digital lending apps too. It’s the first ecommerce marketplace in India to go this way, and its entry could open up an NBFC rush where more and more platforms look to take charge of their lending stack.

Let’s see why, but after a look at the key stories from our newsroom this week:

• Porter was among the first movers in the hyperlocal logistics tech wave, and now, the startup is banking on the last-mile logistics boom fuelled by quick commerce after entering the unicorn club.
• Amazon Prime Video’s non-skippable ads are coming to India from June 17, but is it actually good value for brands eyeing this new digital real estate?
• In the EV battery swapping market, led largely by gig workers serving quick commerce and commerce platforms on two and three-wheelers, Battery Smart has a 70% market share. How did the company conquer this market?

Flipkart’s NBFC plans have been in the works for several years now. The company approached the central bank for a licence in 2022, and it took nearly three years for approval. Incidentally, Flipkart separated from PhonePe in 2022 and this was likely necessitated by its NBFC application.

Insiders say that while there is a lot of excitement around the lending operations, the business can only commence after Flipkart goes through the compliance rigmarole. Firstly, it has to separate itself from the main corporate office and its key personnel, as this is an RBI-regulated entity.

When it does become operational, the NBFC will start with loans on the Flipkart app and the super.money app. Flipkart’s NBFC arm will join lenders such as Axis Bank, IDFC Bank, and Credit Saison, which currently work with both these apps.

However, while Flipkart earns a small commission from these banks when distributing loans, Flipkart’s NBFC will now reap the full revenue benefit. It also allows Flipkart to create new credit products and offer insurance and other financial services through the NBFC.

“This removes a lot of the risk in the digital loan distribution business where Flipkart was thus far operating. Margins in distribution are shrinking and the rules are getting more stringent for RBI-regulated lenders working with digital distribution platforms,” a Delhi-based digital lending startup’s founder said, referring to the recent changes in the first loss default guarantee arrangements.

As per the Reserve Bank of India’s (RBI’s) new mandate, banks and NBFC lenders are not permitted to offset default loss guarantees (DLGs) provided by lending apps like against their internal provisions to tackle stressed loans.

This is likely to increase the interest rates offered by NBFCs and banks in loans distributed through these apps. Lending apps have to diversify their source of funds to find the best margins.

In April, Flipkart also confirmed its plans to redomicile to India from Singapore after months of speculation. This is of course a major step for Flipkart in its IPO journey, and given the company’s $36 Bn valuation, it would involve a huge tax outlay as well.

Recently, the company sold a 6% stake in Aditya Birla Fashion for INR 583 Cr and a 9% stake in BlackBuck for INR 672 Cr. Besides this, the company is rationalising employee costs, as we have reported in the past, in a bid to get closer to profitability.

The NBFC arm is a major booster shot for revenue.

In its corner, Walmart-owned Flipkart has the power of data and years of running a retail marketplace with analytics around consumer and seller behaviour and performance. Indeed, it has created various models around them for other use cases. It’s not like Flipkart wasn’t utilising them for financial services earlier — the company had a BNPL offering for a while and has offered products on EMI for years as well as co-branded credit cards.

So, it has some sense of user behaviour in the context of loans and credit products as well. This is a valuable edge for the company for its own user base, but this can also be cross-sold to other digital commerce touchpoints outside the Flipkart walled garden through embedded finance and more.

The NBFC licence truly unlocks a whole host of possibilities that were thus far out of reach. Flipkart can offer auto loans for instance, which consequently makes it easier for the company to sell vehicles through its platforms, too, especially if it ties up with OEMs.

It may also offer financing to sellers listed on the platform across categories. On , for instance, retailers who want to set up dark stores can more conveniently borrow from the NBFC arm.

Such targeted products can prove to be a win-win for the ecommerce and the fintech business. The revenue upside is significant and it’s also why other companies might eye the same route.

Flipkart’s eternal rival Amazon India is likely to get an NBFC licence as well as its acquisition bid for (formerly known as Capital Float) is currently in the regulatory approval process.

Amazon’s fintech arm Amazon Pay currently offers instant credit through Amazon Pay Later and has a co-branded credit card, just like Flipkart. Additionally, it holds wallet and UPI payment app licences as well. The NBFC licence will bring Amazon on par with Flipkart, creating a new era in the rivalry between the two companies.

Amazon Pay’s UPI game has certainly become weaker in the past few months, as super.money has caught up. The Flipkart-owned platform had close to in April among UPI apps.

Among the other players, Tata and Reliance do have NBFCs and other regulatory licences that allow them to stretch their advantage in the digital and physical retail channels owned by the conglomerates. Flipkart is now in the same league as these behemoths.

But the question is will other scaled up companies with VC dollars in their reserves join Flipkart? We can even see the quick commerce and food delivery trio — Eternal, Swiggy and Zepto — joining this rush. At the moment, some of these platforms offer working capital loans and short-term credit products for gig workers through NBFCs such as Indifi, InCred, PayU, IIFL, among others.

Flipkart can indeed become an option for these giants as well due to the category affinity, but one cannot rule out the chance of these rivals taking control by arming themselves with a licence too. Could we see a new breed of NBFCs in the Indian market dominated by tech platforms and large marketplaces?

• Between June 2 and 7, Indian startups cumulatively raised $134.4 Mn across 16 deals, marking a 45% jump from the previous week, with ecommerce and fintech startups bagging the most deals
• The fintech giant has acquired conversational AI platform Gupshup’s proprietary technology GSPay to roll out UPI payments for feature phone users
• IndiaAI Mission CEO Abhishek Singh believes Indian AI startups part of IndiaAI’s LLM project also need to think beyond India to compete and succeed against global giants
• Indian crypto exchange has incorporated an entity in Panama by the name of Zensui Corporation to continue with its crypto operations without a mandatory Singapore licence
• BYJU’S cofounder Byju Raveendran’s brother and former director of the edtech, Riju Ravindran, has moved the NCLT, seeking GLAS Trust’s removal from the committee of creditors

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