Why payment apps and P2P lending platforms are scratching their backs










A new type of partnership is taking shape in the Indian fintech industry. Some peer-to-peer (P2P) lending platforms and leading direct-to-consumer (D2C) fintech companies are increasingly looking to make up for what they lack.

The latest to jump on the bandwagon is payment service provider MobiKwik. Earlier in October, it launched a P2P investment platform – Xtra – in conjunction with P2P lender Lendbox. A few weeks earlier, credit card repayment app CRED invested $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 is crucial for fintechs to venture into lending, a high-margin business in financial services and one of the few surefire ways to make money in the industry. Through these partnerships, fintechs are simply navigating a way to smoothly enter the space.

And this sudden interest in fraternizing among P2P lenders is the result of a relatively slow growing industry.

As The Ken has

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The Ken
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before, there is a lack of confidence in the P2P lending model. A high number of defaults and no way for lenders to recover their money has prevented the steady rise of P2P lending in the Indian market. Despite this, fintechs are clearly in the mood to experiment.

Earlier in August 2021, another fintech startup, BharatPe, started offering P2P investment and bank deposit products to its merchant partners. The company has entered the space, together with Bengaluru-based startup LenDenClub and LiquiLoans, with the launch of its “12% Club” product. BharatPe says the initiative already has 1.5 million users and disburses an average of 250,000 loans per year.

P2P lending allows individuals to obtain loans directly from other individuals, eliminating financial institutions as intermediaries. It is also called “social loan” or “participatory loan”. Some of the big names in the industry include lenders like Faircent and Monexo.

The companies mentioned did not respond The Ken‘s requests to participate in this story until the time of publication.

The exact number of loans in the industry is still unclear due to lack of company disclosures. But an executive from one of the companies in the P2P lending space fixes the cumulative lending

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mint
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of the sector reached only around 8,000 crore rupees (~US$1 billion) in the year ending March 2022.

Many other leaders set the number much lower, in the range of 4,000-5,000 crore rupees (~$500-$600 million). Even though this is a 10x increase from 2018. The executives and others quoted in the story declined to be named because they are not authorized to speak to the media.

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