India’s Snapdeal has been on an acquisition spree in the last several months, tapping into the $1.1 billion it has raised from the likes of Softbank
to expand from being a marketplace for goods into a platform for all
kinds of online transactions. The latest chapter in this story is
today’s news that it has acquired a majority stake in RupeePower, a provider of loans and credit cards.
The terms of the deal are not being disclosed, the company
tells me, but it is a controlling stake. Snapdeal says that it will
launch a financial services marketplace on the back of the acquisition,
and projects that it will provide $1 billion of loans over the next two
years through the platform. Snapdeal will work with financial
institutions to finance these loans, with Snapdeal providing the reach
into markets that have been otherwise hard for the banks to address.
“Financial Services companies will now be
able to leverage Snapdeal’s nationwide reach across 5000+ towns and
cities,” Snapdeal noted. “Often resolving to following up on cold leads,
these companies will be able to market and target their products and
services to a captive audience on Snapdeal implying higher conversion
vis-à-vis the traditional offline channels…The benefits thus realised by
the financial services companies will be re-funneled and offered to
customers as exclusive financial products/services offers on Snapdeal.”
You can think of RupeePower as something equivalent to the Kabbage of
India: using an online tool and algorithms that work in the background,
RupeePower gives users the ability to apply for loans that will take
many no more than 5 minutes to get approved. Unlike Kabbage, the loans
are focused mainly on consumers rather than businesses and cover
personal loans but also larger amounts for cars and homes.
This will play specifically into the fact that autos and real estate are two of the new categories that Snapdeal is now selling online: now you can buy the vehicle and
finance it in one place. Snapdeal also says it will use the current
product — which also includes credit card services it runs in tandem
with banks — to expand into other areas of financial services.
This is filling a hole in the Indian market: financial services in the country are fragmented and antiquated,
something that other companies like Razorpay.com are also trying to
tackle, but Snapdeal’s big competitor Flipkart has not (not yet, at
least). The acquisition somewhat mirrors what eBay did many years ago
when it acquired PayPal to supplement services around its own
marketplace business.
Future services, Snapdeal says, will include things like
extended warranties — which, again, Snapdeal can offer alongside the
products it sells on its main platform.
“Realizing the various difficulties that consumers face while
deciding and purchasing financial products/services and the challenges
that companies face whilst reaching out to the ‘right’ audience, we have
brought RupeePower into our family, to help solve the distribution
challenges of the financial services ecosystem and make it more
inclusive,” said Kunal Bahl, cofounder and CEO of Snapdeal, in a
statement. “The same way Snapdeal has democratised retail in India, now
we aspire to democratise access to credit.”
RupeePower was founded in 2011 and says it has financed
INR 1,500 crores ($24 million) in the current financial year. It’s
tapping into the bigger trend in India (and the rest of the world) of
services like this moving online, plus the growing middle class in the
country that wants to borrow more money, and in this way specifically.
Tejasvi Mohanram, founder and CEO of RupeePower, projects
that digitally originated loans account for only 7.5% of all loans
today, but that will rise to 40% in the next four years to reach $67
billion of loans. “Our emphasis will be on scaling RupeePower into the
top match-making platform between lenders and borrowers, providing
consumers with the best targeted offers and a super-simplified loan
process, while ensuring lower opex & smarter credit match for
lenders,” he said in a statement.
The acquisition comes on the heels of Snapdeal making other investments, including acquisitions to build out its logistics services.