Tech Giants Eye India's $1 trillion Digital Loan Market

India’s digital payments market has grabbed the attention of some of tech’s giants after online transactions surged during the pandemic.

Also, the country’s digital loan market is transforming into a battleground for companies from Facebook to Xiaomi as eye the new $1 trillion industry.

Facebook this month states that India would be the first country that rolls out its small business loan program offering loans through a partner to firms that advertise on its platform. The loans would range from 500,000($6,720) to 5 million with interest rates of 17-20 percent, potentially without security.

The social media giant’s foray into India coincides with Xiaomi’s, the Chinese maker of everything from rice cookers to gaming monitors, plans to offer loans, credit cards and insurance products in partnership with some of the nation’s biggest banks and start-up digital lenders, the Press Trust of India reported, citing local head Manu Jain.

Amazon.com also made its maiden investment in the country’s wealth management sector this month, participating in a $40 million round by fintech start-up Smallcase Technologies Pvt.

Alphabet Inc.’s Google is also upping its game. After offering wealth management products such as digital gold, mutual funds on its popular Google Pay platform, it’s now collaborated with small Indian lenders for opening time deposits for its customers.

India’s digital payments market is drawing the attention of some of techs 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 treble 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.

Saurabh Tripathi, Managing Director and senior partner, BCG’s financial institutions practice says, “The payment business hardly makes any money, but lending makes a lot of money. Indian consumers are waiting for more appropriately designed digital experiences and many players are jumping at this opportunity.”

While the potential of India’s loan market is important, so are its risks. The nation’s bad loan ratio is expected to escalate to 11.3 percent 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 start-ups.

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