A new kind of partnership is taking shape in India’s fintech industry. Some peer-to-peer (P2P) lending platforms and major direct-to-consumer (D2C) fintech companies are increasingly seeking each other out to make up for what they lack.
The latest to jump on the bandwagon is payments-service provider MobiKwik. Earlier in October, it launched a P2P-investment platform—Xtra—in collaboration with the P2P lender Lendbox. A few weeks before that, credit-card-repayment app CRED had invested US$10 million in LiquiLoans to acquire a minority stake in the Mumbai-based P2P lender.
Ergo, a mutual-benefit scenario is playing out in the industry. It’s crucial for fintechs to venture into lending—a high-margin business in financial services and one of the few sure-shot ways of making money in the sector. Through these partnerships, fintechs are simply navigating a way to penetrate the space smoothly.
And this sudden interest in fraternising among P2P lenders is the result of a sector seeing relatively slow growth.
As The Ken has written written The Ken Putting the P back in P2P lending Read more before, there is a lack of trust in the P2P-lending model. A high number of defaults and no means for lenders to recover their money have prevented P2P lending’s steady rise in the Indian market. Despite that, the fintechs are clearly in the mood for experimentation.
Earlier in August 2021, another fintech startup, BharatPe, started offering P2P investment and bank-deposit products to its merchant partners. The company entered the space—in collaboration with Bengaluru-based startup LenDenClub and LiquiLoans—with the launch of its ‘12% Club’ product. BharatPe claims that the initiative already has 1.5 million users and disburses 250,000 loans on average annually.
P2P lending enables individuals to obtain loans directly from other individuals, cutting out financial institutions as middlemen. It is also called ‘social lending’ or ‘crowd lending’. Some of the big names in the sector include lenders like Faircent and Monexo.
The companies mentioned did not respond to The Ken’s requests to participate in this story till the time of publishing.
The exact number of loans in the industry is still unclear due to the lack of disclosures from the companies. But an executive at one of the companies in the P2P-lending space pegs the cumulative loan exposure exposure Mint Fintech lending volume doubles to ₹18,000 crore in FY22: Report Read more of the sector to have reached only around Rs 8,000 crore (~US$1 billion) in the year ended March 2022.
Many other executives peg the number far lower—in the range of Rs 4,000-5,000 crore (~US$500-600 million). Even if this is a 10X increase from 2018. The executives and others quoted in the story declined to be named as they aren’t authorised to speak to the media.