The intention to foray into the lending business is interesting, given its parent Facebook announced on April 21, the acquisition of a 9.9% stake in Jio Platforms owned by Reliance Industries.
WhatsApp is eyeing the loan market in India, according to the objectives of operations stated in the memorandum of association (MoA) of its local entity. The Facebook-owned company has altered its memorandum of association (MoA) to include an enabling clause to this effect, filings with the ministry of corporate affairs (MCA) reveal. The intention to foray into the lending business is interesting, given its parent Facebook announced on April 21, the acquisition of a 9.9% stake in Jio Platforms owned by Reliance Industries.
The alliance is expected to speed up WhatsApp’s entry into the payments market delayed by regulatory hurdles.
It’s 400 million strong user base in India, gives WhatsApp a ready-made customer franchise. The company has made it clear it it “shall not to do any banking business within the meaning of Banking Regulation Act, 1949,” suggesting it would team up with existing lenders. “To advance money or give credit on such terms as may seem expedient, and with or without security, to customers and others,…” the filing said.
So far, payment players like PayU India have opted for the non-banking finance company (NBFC) route to enter the lending business. The emergence of alternative methods of credit-scoring has also enabled non-financial businesses such as Ola, Xiaomi and Flipkart to consider an entry into the credit market. These consumer firms have an existing ecosystem of drivers, sellers and dealerships who they can lend to at a minimal operating cost.
The $5.7 billion Facebook-Jio deal places the neighbourhood kirana store at the centre of its strategy providing a catchment. Analysts at Citi Research noted that a key element of RIL’s new commerce plans is to drive digitisation of mom-and-pop retailers. “Whilst still early days, the broad reach that WhatsApp enjoys in India could help towards scaling up of this business,” they observed.