Though Flipkart launched in 2007, it was only in 2013 that e-commerce really took off in India. That was the year Amazon entered India through a marketplace model, and Flipkart too launched its own marketplace model.

Their 2013 launch of the marketplace model turned the two of them into “platforms”, enabling hundreds and thousands of brands and sellers to sell their products to their millions of customers.

From selling smartphones, books, and apparel to customers, the two of them now started offering warehouses, packaging, and logistics to sellers. The great Indian e-commerce gold rush had begun and the two biggest online retailers were now in the business of selling pickaxes too.

Powered in large parts by the marketplace model and discounts to enable it, India’s e-commerce sector grew 130% and 180% in 2014 and 2015 respectively, according to multiple reports. Till it fell off a cliff in 2016 and fell to a paltry 12% growth. Online spending per buyer fell to Rs 24,092 in 2016 from Rs 29,006 in 2015, said a survey by research firm Forrester.

Was the gold rush over even before it had begun?

What would happen to the market for pickaxes if sellers didn’t have the money or the desire to buy them?

It’s 2017 and the answer may be here: lend them the money to buy pickaxes.

Multiple sources have confirmed to The Ken that both Flipkart and Amazon have applied for a “Non-Banking Financial Company” (NBFC) license from regulators, in order to become lenders. The Reserve Bank of India mandates that any entity that is not a bank, will need to get a license to give loans.

Flipkart is in the final stages of getting a license, said two sources, while Amazon is expected to launch its lending initiative next year in India, said a source close to the development. Globally, Amazon has given close to $3 billion in loans, of which $1 billion was loaned to its sellers on an invitation basis just last year. Flipkart did not respond to questions sent by email. Amazon denied that it has applied for a license. 

New line of business

Amazon lends about $6000 to $750,000 (appx Rs 3.5 lakh to Rs 4.5 crore) to its sellers in the US, UK, and Japan

Loans could solve some of the growth woes for Flipkart and Amazon. They could fund a whole host of growth drivers like discounts or EMI (equated monthly installments) loans for customers; more aggressive advertising and marketing; investments in holding more inventory etc.

Because Flipkart and Amazon generate mountains of data every day on customer search, usage, and purchase behaviour, they can direct loans to sellers who can convert them into orders most efficiently.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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