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.