In a first for e-commerce in India, Flipkart has introduced Equated Monthly Installments (EMIs) with no interest for its buyers on products of ticket sizes of Rs 5,000 and above. Flipkart claims that the ‘No-Cost-EMI’ entails zero processing fee, zero down payment, and zero interest for customers.
They have partnered with Bajaj Finserv to create this offer, which is available on select products like electronics, home appliances, and mobile phones for now. The offering comes with loan tenures starting at three months up to 12 months.
In a statement, Mayank Jain, Senior Director and Head of Digital & Consumer Financial services, Flipkart, says, “Less than one percent of Indians have access to credit cards, and the traditional banking industry has been slow in addressing the need for small personal loans. This is the first step towards making shopping truly affordable for masses online and brands have shown great enthusiasm to collaborate with us. This has the potential to disrupt online shopping just like we did with Cash on Delivery a few years ago.”
The move throws light on the many financing options that are developing for online buyers in India. From discounts and cashbacks to instant loans and no EMIs, e-commerce players are leaving no stone unturned to build customer loyalty and retention.
As much as the credit card companies’ sales executives try, statistics say that in a country of 1.2 billion people, there are only 22.74 million credit card users. In 2014, Reserve Bank of India banned banks from providing zero-interest EMIs stating lack of transparency with hidden service charges and processing fees. The online retailers are not collaborating with banks, but with non-banking finance companies (NBFCs) such as Bajaj Finserv.
A survey conducted by Hitachi Capital Consumer Finance found that for 83 percent e-buyers, financing offers strongly influence their decision to buy. Enabling the customer with attractive and on-demand options is key. For instance, credit rating agency CIBIL (Credit Information Bureau India Limited) maintains credit scores for online buyers just as they do for clients of banks and non-banking financial institutions. This helps e-commerce platforms know their buyers’ credit histories, which will expedite their strategy for payment on an installment basis. Other strategies include:
With the e-commerce market in the country expected to reach $38 billion by 2020, it is essential that customers be offered the easiest and most transparent ways to transact online. Wishing for a cashless economy and cutting down CoD costs, e-commerce majors are encouraging online payments. Flipkart’s competitor Snapdeal had also started a similar initiative recently, by collaborating with HDFC Bank Ltd. to launch a co-branded credit card in partnership with Visa, and encourage more customers from tier 2 and 3 markets to adapt to digital payments. Enabling customers to buy more services, online coupons, instant loans, and payment banks is a move in the right direction.
Is anybody else wondering when the RBI is coming up with another hurdle against these efforts?