India’s top consumer internet companies are making a beeline for India’s under-penetrated credit market. After Ola and Paytm, which is May had launched their credit cards, Walmart-owned e-commerce major Flipkart has launched its credit card in partnership with Axis Bank and Mastercard to boost cashless payments by giving its customers access to credit.Flipkart would initially offer the credit card to 'select users' in July before giving access to other customers in the next few weeks, the company said in a statement. The company has kept Rs 500 as the registration fee with an annual waiver on spends of Rs 2 lakh while customers will get cashback auto-credited every month.India had nearly 49 million credit cards in May this year whereas debit cards stood at 824 million, as per RBI. Moreover, even as there around 220 million credit-worthy Indians as per estimates from CIBIL, one-third of them have not been tapped by formal financial institutions. In fact, only 72 million of this lot are considered as ‘credit active’, that is, an active account with a bank or lending body.
Flipkart aims at "driving access to formal credit in India," said Kalyan Krishnamurthy, CEO, Flipkart Group adding that "meaningful growth in India will be driven through expanding the credit fold."
"While these companies may have started as a wallet company, cab-hailing or food delivery or e-commerce but their high customer engagement and customer data encourage these companies to look at various channels of growth that fulfils gaps in various markets like credit, distribution of financial products. This no one can understand better than either banks or consumer internet companies witnessing multiple transactions," Sachin Seth, Partner -- Financial Advisory and Leader -- Fintech, EY India told Financial Express Online.Flipkart has partnered with multiple third-party platforms such as UrbanClap, PVR, MakeMyTrip, Uber etc., wherein customers having the credit card will get a 4 per cent unlimited cashback for transactions done on these platforms. For transactions with co-branded merchants including Flipkart, Myntra, and 2GUD, cardholders will get 5 per cent while with all other merchants, 1.5 per cent unlimited cashback will be given.However, since these companies are "not very strong in running the financial services regulatory mechanism, fraud etc., there could be certain challenges in the future. Also, customer service for financial products is a slightly different ballgame and expectations are different," added Seth.Also read: Now Paytm credit card: contactless payments, no hidden charges, and other cool featuresThe move comes amid fast-growing digital payments ecosystem in India on the back of booming e-commerce even as “90 per cent of transactions in India are still processed in cash, we are seeing a sizable shift towards digital payments,” said Ari Sarker, co-president, Asia-Pacific, Mastercard adding that online shopping and e-commerce accounts for more than 40 per cent of all digital payments in India.Co-branding is not a new phenomenon. What’s important to understand is that who will take the risk of default - company or the bank, said Seth.The country’s cashless transactions have grown from 244.8 crores in August 2018 to 2900.33 crore up to 10 July 2019, as per DigiDhan Dashboard.For initial transactions on the third-party and co-branded platforms, customers will get ‘welcome benefits' worth Rs 3,000. Among other benefits, Flipkart is giving four complimentary lounge visits across airports in India every year and one per cent fuel surcharge waiver for up to Rs 500 per month.Moreover, there will be a 20 per cent discount and 1.5 per cent cashback available for cardholders to apply at Axis Bank's partnered restaurants.