E-commerce entities in India could benefit significantly from the banking platform, with the regulator exploring the opportunity to collaborate with leading internet companies.
While e-commerce companies are already keen on promoting online payments for purchases on their respective platforms, they are also gradually foraying into offering financial services.
Snapdeal recently acquired RupeePower, an online marketplace for loans. A more intense collaboration could mutually benefit banks and e-commerce companies.
“E-commerce is galloping at a fast pace. You have to take cognisance of that,” H R Khan, deputy governor, Reserve Bank of India, said on Monday in Mumbai.
Citing recent RBI norms on payments banks, Khan said there could be an arrangement in which the parties share each others’ platform.
A P Hota, managing director, National Payments Corporation of India (NPCI), said the benefit would be a simplified interaction between banks and the e-commerce platform. “It will lead to all kinds of transactions happening in a seamless manner. What is required is standardisation, as the way e-commerce merchants are connected to banks differs from bank to bank. That is where the unified payment interface of NPCI would come into play,” he said.
According to Rajiv Anand, head of retail banking at Axis Bank, “even with payment banks, there will be some areas where we will compete with them and there will be others where we will collaborate’.’ In the e-commerce space, there are multiple areas the bank is working with. “This partnership will find newer avenues for banks to be able to make shopping through some of these websites much more frictionless.’’
E-commerce companies are bullish on this as well, as the market for online financial services is pegged at Rs 4,500 crore. Also, online transactions, compared to cash on delivery, are cost-effective for e-commerce companies.
“Access to capital is an issue in India and via RupeePower, we can address that. Before the acquisition as well, about Rs 1,500 crore in loans have been disbursed and there is a huge opportunity in this market,” said Kunal Bahl, founder and chief executive at Snapdeal.
RupeePower does not lend on its own. The platform provides financial services such as personal loans, educational loans, credit cards, automobile loans, home loans and extended warranties. Bahl has said he is looking at Rs 6,000 crore of lending in 24 months.
Asked if e-commerce entities would be allowed to function as business correspondents of banks or allowed to form a joint venture, RBI’s Khan said, “We are not averse to the idea.”
On Tuesday, Khan said, “Some alliances are already happening between e-commerce and banks. How do they use each other’s platforms for expanding their footprint? Competition is desirable and the whole idea is that this should also lead to some amount of co-operation because nobody alone can achieve the optimal efficiency of technology and a business proposition.”
A report by PricewaterhouseCoopers and the Confederation of Indian Industry says the e-commerce boom has also fuelled customer comfort with online purchases, slowly filtering to financial products. Banks can use these channels to reach new customers, including those in smaller cities.
With the proliferation of mobile-based services and the reducing median price of smartphones, the payments segment is on an exponential growth trajectory, aided by policy, frameworks and guidelines being formalised by the regulator, according to the report.