Amazon and Flipkart, India’s two largest e-commerce platforms, are accelerating efforts to build full-fledged financial ecosystems around their marketplaces, signalling an aggressive move into consumer credit that positions both companies as emerging competitors to India’s traditional banks and non-bank lenders. Their strategy marks a major shift in the country’s retail finance landscape, shaped by rising digital consumption, a booming consumer loan market, and new regulatory permissions that allow foreign-backed tech firms to lend directly.

This push comes at a turning point for India’s financial sector. The consumer lending market has expanded from roughly $80 billion in 2020 to more than $200 billion by 2025, driven largely by unsecured personal loans, credit cards, and financing for consumer durables. Even as regulators warn of excessive household leverage in certain segments, tech platforms see a massive opportunity: millions of digitally active customers who shop frequently, transact online, and are underserved or thin-file borrowers within the formal banking system.

Amazon and Flipkart are now looking to convert this data-rich consumer base into a lending market, offering everything from buy-now-pay-later (BNPL) products to small business loans, EMI-based shopping credit, and even fixed-deposit products. Their ambition is clear: to own the entire customer journey, from purchase decision to payment, financing, and long-term retention — a model that challenges banks by leveraging behavioural insights rather than branch networks.

A Structural Shift: Why Tech Platforms Are Targeting Consumer Credit

The pursuit of lending by e-commerce giants is not accidental. Several structural forces are reshaping India’s retail and financial ecosystems, creating a unique opening for technology companies to move into credit.

India’s financial inclusion efforts have brought hundreds of millions into the banking system, but formal credit penetration remains relatively low. Many first-time borrowers struggle to access loans due to limited credit histories, especially outside major cities. At the same time, digital commerce has exploded, producing granular data on spending habits, repayment patterns, and lifestyle categories — the kind of information banks typically do not possess.

For companies like Amazon and Flipkart, this data becomes the backbone of their credit-scoring models. Their apps track billions of transactions every year, including purchase categories, frequency of returns, payment reliability, and even micro-behavioural signals such as cart abandonment or peak shopping windows. With this information, they can underwrite risk in ways traditional players cannot.

The growth of India’s Unified Payments Interface (UPI) reinforces this advantage. Both Amazon Pay and Flipkart’s payments app rank among the country’s most frequently used UPI platforms, giving the companies access to high-velocity transaction flows. As lending globally becomes more intertwined with payments data, the overlap between commerce and credit creates a powerful strategic advantage for these platforms.

Amazon’s Re-Entry Into Small Business and Consumer Lending

Amazon’s acquisition of Axio, a Bengaluru-based non-bank lender, earlier this year represents one of its most significant bets on the Indian financial market. Axio already provides BNPL and personal loan products, but under Amazon’s ownership, its mandate is expanding sharply.

The company plans to re-enter the small business lending space, targeting merchants who sell on the Amazon platform as well as digitally active small businesses outside India’s largest metros. These borrowers often face difficulties obtaining affordable credit due to limited collateral or lack of long-term banking relationships.

Amazon’s focus areas include:

• Merchant cash flow financing:
  Short-term loans designed to smooth inventory cycles, offering immediate working capital to sellers who deal with fluctuating demand.
• Tailored lending propositions:
  Custom credit lines based on merchant behaviour — such as order volume, seasonal patterns, fulfilment speed, and refund rates — allowing more accurate risk assessment.
• Cash management solutions:
  Tools that help small enterprises manage payouts, expenses, and receivables directly within Amazon’s ecosystem, positioning the company as a central financial partner rather than just a sales platform.

Amazon’s expansion also aligns with India’s regulatory shift earlier this year, when the Reserve Bank of India permitted tech companies to operate direct lending operations through wholly owned non-bank finance units. This decision marked a major milestone, giving companies like Amazon the legal framework to originate loans, manage risk, and scale credit without relying on partner banks.

Additionally, Amazon has begun offering fixed deposit products through partnerships with local lenders, enabling users to invest small sums directly via Amazon Pay. By adding savings tools alongside credit products, Amazon is gradually shaping itself into a consumer-facing financial marketplace.

Flipkart Prepares Its Own Lending Arm to Target Shoppers and Durable Purchasers

Flipkart, majority-owned by Walmart, is simultaneously racing to build its own lending business through its newly registered non-bank entity, Flipkart Finance. The company is awaiting final regulatory approval for its lending plan, but internal documents reveal ambitious product categories designed to target India’s booming middle class.

Flipkart plans to introduce two primary “pay-later” offerings:

• No-cost EMI loans for online shoppers:
  These loans, spread over three to 24 months, allow customers to purchase electronics, fashion items, appliances, and other products without upfront charges. No-cost EMIs have become a powerful driver of online sales in India, bridging affordability gaps for millions of buyers.
• Financing for consumer durables with interest rates ranging from 18%–26% per annum:
  Unlike the no-cost products, these loans involve interest, positioning Flipkart as a direct competitor to banks and traditional NBFCs that typically charge 12%–22% for similar purchases. Higher rates indicate that Flipkart may initially target borrowers with thinner credit profiles — a market segment where digital players believe they can price risk more effectively.

Flipkart aims to launch these products next year, and internal sources suggest the company is preparing large-scale onboarding campaigns tied to major sale events, such as Big Billion Days and festive season promotions.

As with Amazon, the backbone of Flipkart’s lending strategy is behavioural data. With millions of users shopping on the platform monthly, Flipkart can perform micro-segmentation — identifying first-time credit users, high-frequency buyers, premium shoppers, and seasonal spenders — and craft specific financial products for each.

A Changing Credit Market: Tech vs. Banks

India’s consumer credit market has more than doubled in five years, driven by lifestyle upgrades, smartphone adoption, and easy access to digital payment systems. Yet, banks remain cautious about lending to riskier categories, particularly young borrowers, gig workers, and those outside major cities. This mismatch creates fertile ground for tech companies.

Amazon and Flipkart are positioned to capitalise for several reasons:

• Control of customer journey:
  Banks enter the picture only at the payment stage, while tech companies influence browsing, decision-making, cart value, and promotional cycles.
• Data depth:
  Banks rely heavily on credit bureau data; tech firms leverage real-time behavioural markers.
• Lower costs of customer acquisition:
  For Amazon and Flipkart, the cost of converting an existing shopper into a credit user is significantly lower than onboarding customers from scratch.
• Built-in repayment incentives:
  Platforms can restrict access, offer loyalty rewards, or provide targeted discounts to encourage timely repayment.

These advantages translate into the ability to lend profitably even in segments where banks hesitate. However, the e-commerce companies face risks of their own: rising delinquencies in unsecured lending, regulatory oversight, and the challenge of competing in a highly regulated financial sector.

Regulatory Turning Point Opens New Avenues for Foreign Tech Firms

The Reserve Bank of India’s decision earlier this year to allow e-commerce platforms to lend via wholly owned NBFCs altered the competitive landscape. Previously, Amazon and Flipkart relied on partner banks to issue credit-based products, limiting profitability and control. Now, with direct lending permissions, they can design products, manage underwriting, and build their own balance sheet-based financial businesses.

This regulatory opening signals a shift in India’s approach toward foreign-backed digital finance. Until recently, policymakers were cautious about allowing global tech players into core financial services due to concerns about data sovereignty and systemic risk. However, the rapid growth of digital payments and consumer credit has forced regulators to expand participation, albeit under strict compliance controls.

For Amazon and Flipkart, this shift is transformative. It turns them from facilitators of credit to primary originators, enabling them to scale lending and deepen customer engagement across India’s vast digital marketplace.

A New Phase of Competition in India’s Financial Services

India’s banks and NBFCs are now facing competition from technology companies that control both the demand side and supply side of retail consumption. As Amazon and Flipkart integrate lending into their platforms, the battle for consumer credit will increasingly depend on ecosystem strength, data analytics, and customer loyalty—not just interest rates.

With India’s consumer loan market still expanding, the entry of these tech giants marks the beginning of a new phase where commerce and finance merge at unprecedented scale. Their success will depend on the balance they strike between rapid expansion and responsible risk management, but their intent is clear: to become central players in the country’s financial future.

(Adapted from Reuters.com)

Categories: Economy & Finance, Strategy