Flipkart is trying to attract more customers, suppliers by giving them flexible payment options

• The e-commerce platform wants to branch out into three areas: consumer and supplier credit as well as micro-insurance.
  
• Flipkart is already in the process of applying for a non-banking financial company (NBFC) licence, and expects to start providing the services within three months.
  
• The foray into financial products and credit options could power as much as 20% of the company’s sales growth by 2020.

As it fends off Amazon for the top spot in India’s e-commerce market, Flipkart is looking to attract more consumers and suppliers to its platform by offering them credit and insurance products. In fact, the company is currently in the process of applying for a non-banking financial company (NBFC) licence from India’s central bank. It expects to start providing financial products within the next three months.

These financial services will mostly be complementary in nature, which means that they will mainly be in the form of flexible payment options for the 100 million customers who buy products and 100,000-odd sellers who supply goods to the platform. For example, customers are allowed a “pay later” option if they so choose, which in effect, is a micro-loan.

However, it doesn’t end there. The line of credit to customers and suppliers will be a precursor to more customised financial products like insurance policies, The company will initially offer insurance on specific purchases like smartphones before branching out into general and life products.

Flipkart has already been given the go-ahead from India’s insurance regulator to partner with insurers. It will use data on customer profile and transactions to gauge their credit-worthiness and price their policies accordingly.

Keeping up with stakeholder preferences

The move into financial services is a move in pursuit of higher sales. Well over half of Flipkart’s current customers, as well as a significant number of potential customers, don’t have access to formal credit options, which prevents them from making extensive purchases. To overcome this hurdle, Flipkart has provided them with EMI options, and now wants to take things a step further.

The company also wants to support its suppliers, which comprises a number of small businesses that face a crunch when it comes to their working capital needs. It could even extend credit to suppliers off its own balance sheet.

In an interview with Economic Times, Flipkart’s head of financial services, Ravi Garikipati, said that financial products would power as much as 20% of the portal’s sales growth by 2020. Around 800,000 users already avail of the “pay later” option on the platform.

Amazon is expected to follow suit in the financial services space as well, since a lack of access to credit also depresses purchases and discourages suppliers from coming aboard its platform. Last month, the company launched a new online platform where sellers can apply for loans online - the Selling Lending Network (SLN).

In addition to the lack of credit options, consumers also become hesitant at the point of purchase, given the prospect of immediately spending money. A one-click credit option is specifically aimed at alleviating that pain point.