Amazon and Flipkart Challenge Traditional Banks: The Battle for India’s Digital Lending Market

India’s rapidly rising digital economy is seeing a seismic shift as global e-commerce giants Amazon and Flipkart aggressively expand into the consumer lending space. With the ever-increasing appetite for digital credit among India’s burgeoning online shoppers, both companies are launching pay-later options, personal loans, and business credit products that position them as genuine rivals to traditional Indian banks and non-banking financial companies (NBFCs). This bold maneuver not only underscores the evolution of fintech in India but also signals a new era where tech titans take on conventional financial institutions in the battle for retail credit supremacy.

India’s Booming Demand for Digital Lending

The Indian financial landscape is undergoing a dramatic transformation. As internet penetration deepens, digital payments and online shopping have exploded in popularity. According to recent Reserve Bank of India (RBI) estimates, digital lending disbursements are set to exceed $350 billion annually by the end of this decade, more than triple the current market size. Driving this explosive growth is the “Buy Now, Pay Later” (BNPL) model, which allows consumers to make purchases and defer payments with little to no interest for a set period.

Amazon and Flipkart’s entry into this lucrative market is both timely and strategic. Their massive user bases, vast troves of consumer data, and intuitive interfaces give them a competitive edge over legacy lenders. By embedding lending options directly into the digital shopping experience, these companies offer unparalleled convenience, meeting the needs of modern consumers who demand instant credit without cumbersome paperwork.

Big Tech Leverages Payments Ecosystem for Lending

The journey of Amazon and Flipkart into financial services began with their success in digital payments. Today, both platforms rank among the top 10 for transactions on the Unified Payments Interface (UPI), India’s leading real-time payments infrastructure. This dominance in UPI has helped these companies build deep trust and engagement with millions of users, acting as a launchpad for their entry into credit products.

As more users become comfortable with digital wallets and online transactions, the leap towards digital loans is a natural progression. The seamless integration of lending products within the e-commerce ecosystem is revolutionizing financial access – giving consumers, especially young or new-to-credit individuals, an alternative to traditional bank loans, credit cards, and sporadic dealer financing.

Amazon’s Expanding Suite of Financial Products

Amazon has made enormous strides in transforming its digital payments arm, Amazon Pay, into a full-fledged financial services powerhouse. The company’s financial push accelerated after its acquisition of Axio, a well-known Bengaluru-based NBFC specializing in BNPL and personal loan products. By integrating Axio’s technology and regulatory license, Amazon can issue loans directly, develop new credit tools, and tap into a growing segment of underserved customers.

Amazon’s lending products are diverse and evolving. With Axio’s backing, Amazon Pay users can now access:

Buy Now, Pay Later (BNPL): Allows consumers to spread payments over weeks or months with minimal or no interest, boosting purchasing power at checkout.
Personal Loans: Instant, unsecured loans delivered with a few taps—ideal for small-ticket emergencies or recurring needs.
Fixed Deposit Offerings: Through partnerships with regulated banks, Amazon provides digital FDs as savings tools directly within its app.
Small-Business Credit Products: Amazon is preparing to roll out working capital loans and cash management services for sellers on its platform, addressing a chronic pain point for small enterprises that rely heavily on the e-commerce ecosystem for daily revenue.

This suite positions Amazon to be far more than a marketplace—it aims to be an end-to-end financial partner for both shoppers and merchants. By reducing credit friction and supporting customers throughout their financial journey, Amazon deepens loyalty while opening new streams of revenue through interest and service fees.

Regulatory Hurdles: Ensuring Responsible Lending

With great opportunity comes increased regulatory scrutiny. India’s RBI, aware of both the promise and risks of digital lending, has tightened oversight to protect consumers. New regulations enforce strict disclosures, prevent opaque or predatory pricing, and demand higher capital buffers from digital lenders. For Amazon, more stringent requirements mean greater transparency and compliance costs, but also the ability to build trust within a regulated market.

SME lending, in particular, falls under the RBI’s purview. To expand credit options for merchants, Amazon must continually engage with regulators and adapt offerings as the legal landscape evolves. The focus is increasingly on sustainable, responsible lending, with user protection and system stability at the core.

Flipkart’s Ambitious Lending Roadmap

Not to be outdone, Walmart-owned Flipkart is navigating its own path toward becoming a licensed digital lender. Flipkart Finance, the company’s new credit arm, is on the verge of securing final approval from the RBI—a move that will allow it to issue its own loans rather than relying on third-party NBFCs or fintech partners.

Once operational, Flipkart Finance will debut with:

No-Cost EMI Options: Shoppers can convert big-ticket purchases into flexible monthly installments with no extra charges, making high-value goods accessible to a larger customer base.
Consumer Durable Loans: Targeted at appliances, electronics, and other durable goods, these loans will carry interest rates between 18% and 26% per year, providing attractive margins for Flipkart while serving the aspirations of middle-class households.

Flipkart’s direct-to-customer credit integration will create a seamless shopping experience: users can approve loans at checkout without leaving the Flipkart app. This consolidation of shopping and borrowing enhances customer convenience and allows Flipkart to exercise greater control over credit assessments, approvals, and repayment terms.

In March 2025, Flipkart achieved a significant milestone by becoming the first major e-commerce player to obtain an NBFC license. However, the license comes with a key limitation: Flipkart can issue loans but cannot accept retail deposits. As such, it must rely on wholesale borrowing or equity infusions from parent company Walmart to grow its loan book—highlighting the capital-intensive nature of direct lending compared to platform-based facilitation.

The High Stakes of Digital Lending in India

The fierce rivalry between Amazon and Flipkart is ushering in a new era for Indian finance. For consumers, the proliferation of pay-later and instant loan options means greater access to credit, faster approvals, and more flexibility in managing personal finances. For merchants—especially small businesses—integrated financing solutions reduce reliance on informal credit, unlock working capital, and power growth in a competitive marketplace.

But as lenders, both Amazon and Flipkart must balance growth ambitions with prudent risk management. The Indian market is not immune to the pitfalls seen in other countries: high rates of default among new-to-credit users, opaque interest charges, and concerns over consumer data privacy are all on the minds of policymakers and watchdogs.

Furthermore, by stepping directly into the lending arena, these companies disrupt the longstanding dominance of India’s banking sector. Traditional banks, facing stiff competition from non-traditional entrants, will need to innovate both their products and digital channels to retain customers—potentially leading to more favorable loan terms, better user experiences, and even new collaborative models in the future.

The Road Ahead: Opportunities and Challenges

The coming years will be crucial as regulatory clarity, consumer behavior, and macroeconomic trends shape the evolution of digital lending in India. Despite the hurdles, the opportunity for global platforms to redefine financial inclusion and democratize credit for a billion-plus consumers is immense.

To sustain their growth, Amazon and Flipkart must continue to invest in advanced risk assessment tools, robust compliance systems, and user-friendly financial products. Partnerships with regulated banks, co-lending models, and innovative credit scoring based on transaction data will help extend credit deeper into semi-urban and rural India—bridging the gap where traditional banking still struggles.

Ultimately, the transformation underway offers a blueprint for how global tech giants can partner with, compete against, and reshape incumbent financial sectors in emerging markets. As Amazon and Flipkart vie for leadership in India’s digital lending revolution, all eyes will be on how they navigate the complex triangle of innovation, competition, and regulation for the benefit of Indian consumers and the broader economy.