Mumbai: If you have been following the fintech journey, since the end of 2015 the next big boom was supposed to come from the lending business. However, it’s 2018 and the narrative still remains the same. The money continues to flow into credit business despite slow growth. In 2018, alternative lending, consumer finance and investment technology companies saw the maximum interest from investors. Investors are still optimistic about the credit business in India. Let’s take a look at what happened in 2018 and what can you expect in the New Year.

Payments and lending

With the entry of at least six most valuable global companies based on market capitalization, including Amazon.com Inc, Alphabet Inc, Microsoft, Facebook, Berkshire Hathaway Inc and Alibaba Group, the competition in the country’s digital payments market has now intensified. In fact, of the top seven technology giants, only Apple so far has stayed away from the payments industry in India, mainly due to the small market share it currently holds. The competition picked up pace with Alphabet’s Google revamping its Google Tez to Google Pay and partnering with banks including the country’s largest private bank ICICI Bank Ltd, HDFC Bank Ltd, Kotak Mahindra Bank Ltd and Federal Bank Ltd.

This year, Warren Buffett’s Berkshire Hathaway invested in Vijay Shekhar Sharma’s One97 Communication that owns Paytm. Jack Ma’s Alibaba Group, through its investment arm Ant Financial, on the other hand, has had a head start with Paytm in the payment business when it invested in 2015 for the first time.

Meanwhile, Jeff Bezos’s Amazon this year acquired Bengaluru-based app aggregator Tapzo through its payments arm Amazon Pay India to push its digital payments business.

In February, Facebook’s Whatsapp, which was in the midst of government scrutiny for its digital payments platform and data privacy, has been running a UPI digital platform in its beta version. And amid all the pomp and show, in April this year Microsoft quietly launched digital payments service on Microsoft Kaizala, an app for group communication and work management.

The total digital payments market in India is expected to touch $1 trillion over the next five years, according to a Credit Suisse report. Even before the global tech giants ventured into the digital payments market, large telecom companies and fintech start-ups had already tried to build their stronghold. This, in fact, is the second wave of investment in the payments segment.

However, if payments experts are to be believed, none of the consumer facing payment companies is making money. Hence, the chase is not for payment, but to lend, build data for ads for core business and retail.

In payments, if you are making a 10-15 bps margin, in credit it goes up to 600-700 bps margin. “Fintech graduated from payments to lending side such as retail lending and SME lending. Lending is not just about technology but about understanding risk," said Dipak Gupta, chairman, CII FinTech Summit Steering Committee and joint managing director, Kotak-Mahindra Bank. However, the lending business has not picked up. “It is not easy to adapt from payment to lending. Hence, it is taking so long," said Gupta.

What should you know?

In 2019, you will see more companies using your data to sell targeted financial products including loans, mutual funds and insurance. Despite the short-term liquidity crunch faced by lending companies due to which some fintech companies had to reduce lending, investors are optimistic that there will be more consumer lending platforms available for consumers. Hence, be careful about the data you provide online.

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