As the Indian digital loan market continues to swell, fresh battlegrounds are set up for global tech players to grab the $1 trillion worth of technology market in India. While giants including Facebook and Xiaomi Corp seek a foothold in the sector with new business models, India is set to become a testing ground for the digital loan market.
Facebook has already announced that India would be the first country where it will roll out its small business loan program offering loans via a partner to firms that advertise on its platform. The loans will range from Rs 500,000 rupees ($6,720) to Rs 50 lakh with interest rates of 17%-20%, potentially without collateral.
The foray coincides with Xiaomi's, the Chinese tech giant, plans to offer loans, credit cards, and insurance products in partnership with some of the nation's biggest banks and startup digital lenders.
On Tuesday, Prosus NV said it agreed to acquire Indian online payments service BillDesk for Rs 34,500 crore ($4.7 billion), making its largest global acquisition to date in the Asian nation. The European investment powerhouse's PayU unit struck a deal to buy the 11-year-old startup, creating digital payments giant with a total volume of $147 billion, and taking Prosus's investment in India to more than $10 billion to date.
Amazon.com has also made its maiden investment in India's wealth management sector this month, participating in a $40 million round by fintech startup Smallcase Technologies Pvt.
Alphabet Inc.'s Google is also looking to up its game. After offering wealth management products such as digital gold, mutual funds on its popular Google Pay platform, the company has now tied up with small Indian lenders for opening time deposits for its customers.
India's digital payments market is drawing the attention of some of tech's biggest names after online transactions surged during the pandemic and traditional lenders turned cautious following a rise in bad debt. Digital lending is expected to swell to $350 billion by 2023 and reach a total of $1 trillion in the five years since 2019, according to estimates from the Boston Consulting Group.
While the potential of India's loan market is significant, so too are its risks. The nation's bad loan ratio is expected to rise to 11.3% by March making it the worst performer among major countries for a second consecutive year.
As well as addressing loan collections by digital firms, the Reserve Bank of India is also planning to regulate online lenders, which include more than 300 startups.