Click to play videoMumbai: Virendra Verma and Rajesh Lalge are taking a loan to buy their new TV. But instead of a bank, they are being financed by the shop itself.
Future Money from the Big Bazaar and Pantaloon stable is the first attempt by an Indian retailer to get into the money lending business.
With margins of about two per cent, they are double those in the retail business, and in three years it is expected to be a Rs10,000 crore business for the future group.
"We are looking at at least driving 20-25 per cent of the consumption that happens across the stores through Future Money,” says CEO, Future Money, Rakesh Makkar.
Apart from driving sales, financial services also contributes significantly to international retailers' bottomlines. For example the world's fifth largest retailer, TESCI had 202 mn pounds of its 2 billion pound profits last year come from its financial services arm.
And that's the reason, Future Money plans to issue credit cards, sell personal loans, travel loans, mortgages, insurance products, mutual funds and do money transfers basically become a non banking financial company within the next three years.
The company estimates that its cost of acquiring a customer is about 40 paise versus about Rs 2.60 for other financial services companies.
"We are acquiring customers in our retail business so we have already acquired that customer. Now the idea is to sell him more,” says Group CEO, Future Group, Kishore Biyani.
Sources tell us that many Indian retailers want to get into the business of lending money like their contemporaries abroad. But with most of them still in the process of establishing a national footprint, its expected to take at least a couple of years before they get into the lucrative financial services space.
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