Facebook and Xiaomi enter India’s $ 1 trillion digital loan market

India’s digital loan market is emerging as a battleground for companies from Facebook Inc. to Xiaomi Corp., looking to gain a foothold in what is expected to be a trillion dollar industry.

Facebook said this month that India would be the first country to roll out its small business loan program offering loans through a partner to businesses that advertise on its platform. The loans will range from 500,000 rupees ($ 6,720) to 5 million rupees with interest rates of 17-20%, potentially unsecured.

The social media giant’s foray into India coincides with that of Xiaomi, 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 country’s biggest banks and digital startup lenders, India’s Press Trust reported, citing local leader Manu Jain.

On Tuesday, Prosus NV announced that it had agreed to acquire Indian online payment service BillDesk for 345 billion rupees ($ 4.7 billion), making it its largest global acquisition to date in the Asian country.

The European Investment Hub’s PayU unit has reached a deal to buy the 11-year-old startup, creating a digital payments giant with total volume of $ 147 billion and taking Prosus’ investment in India to more than $ 10 billion to date.

Amazon.com also made its first investment in the nation’s wealth management sector this month, participating in a $ 40 million funding round by fintech startup Smallcase Technologies Pvt.

Alphabet Inc.’s Google is also improving its game. After offering wealth management products such as digital gold and mutual funds on its popular Google Pay platform, it is now tied to small Indian lenders. to open term deposits for its clients.

India’s digital payments market is attracting the attention of some of the biggest names in tech after online transactions increased during the pandemic and traditional lenders became cautious following an increase in bad debts. Digital loans are expected to triple to $ 350 billion by 2023 and reach a total of $ 1,000 billion in the five years since 2019, according to estimates by the Boston Consulting Group.

“The payments industry hardly makes any money, but the loans make a lot of money,” said Saurabh Tripathi, managing director and senior practice partner of financial institutions at BCG. “Indian consumers expect better-designed digital experiences and many players are leaping at this opportunity. “

While the potential of the Indian loan market is great, so are its risks. The country’s bad debt ratio is expected to hit 11.3% by March, making it the worst-performing country for the second year in a row.

In addition to dealing with digital business loan collection, the Reserve Bank of India also plans to regulate online lenders, which include more than 300 startups.

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