BENGALURU: Ever since the outbreak of the pandemic, there has been a massive shift in consumers’ preferences towards online buying and digital payments.
These preferences have propelled the adoption of buy-now-pay-later (BNPL) services.
As consumers can buy now and pay them off over time, e-commerce and fintech firms are providing attractive offers like zero interest and instant discount.
These companies are also seeing immense response from consumers.
Fintech firm Paytm, which went public recently, says that during the last 18 months the company has been seeing high adoption of credit products on its platform, mainly Paytm Postpaid, which is the company’s BNPL product.
“The number of loans disbursed grew 714% y-o-y to over 2.8 million in Q2 FY22. The lending business continued to show strong growth as a result of the rapid scale-up of all of our lending products, including postpaid (BNPL), consumer loans, and merchant loans,” a Paytm spokesperson says.
Paytm says the growth rate suggests the scale-up can be fairly large from where it stands today and that it is seeing a fairly large opportunity in India.
“Our financial institution partners have disbursed around 1.3 million loans in October 2021, which shows a cumulative 472% increase in number of loans disbursed y-o-y and aggregating to a total disbursal of Rs 627 crore, implying a 418% increase in value of loans disbursed y-o-y,” the spokesperson adds.So, if a college student without a credit card wants to buy a laptop, the student can do so instantly and also break down into 6 or even 8 payments.
Flexible EMI options
E-commerce major Flipkart has seen a 2x y-o-y growth in customers using Flipkart Pay Later with some of the top categories such as lifestyle, grocery, home and electronic accessories. Ahead of this year’s festive season, Flipkart launched ‘Flipkart Pay Later
EMI’ facility, offering a credit line of up to Rs 70,000 for customers, that can be paid back over flexible tenures.
“The early response during this festive season and beyond has been overwhelmingly positive, with Flipkart Pay Later EMI contributing a healthy and rapidly growing share of all EMIs on the platform,” says Dheeraj Aneja, Senior Vice President and Head - Fintech and Payments Group, Flipkart.
Increasing adoption of BNPL
Redseer research says that India’s BNPL market will touch $45-50 billion by 2026, from the existing $3-3.5 billion.
According to Research and Markets, the higher purchasing power offered by BNPL in times of coronavirus pandemic is driving the growth of the sector.
Strong growth of the e-commerce sector helped start-ups and fintech giants to establish their footprints in the BNPL space in India.
For instance, the pay later service offered by Amazon has more than two million users in India and has already been used more than 10 million times since its launch in April 2020, says the report.
The report adds that the BNPL payment adoption is expected to grow steadily, recording a CAGR of 28.9% during 2021-2028. The BNPL gross merchandise value in the country will increase from $3.7 bn in 2020 to $37.5 bn by 2028.
E-commerce players partner with fintech players/non-banking financial services companies or banks and offer various options to customers. Banks have also forayed into the BNPL segment, as HDFC Bank’s FlexiPay, where one can select tenure starting from 15 days up to 90 days; ICICI Bank’s PayLater, where one can get up to 45 days zero interest digital credit.
Paytm has built strategic partnerships with large banks and NBFCs and garnered positive results. The Paytm spokesperson says, “We are further planning to accelerate our strategic penetration in the BNPL market segment across demographics and geographies pan India and significantly increasing new customer acquisition and acquired side ecosystem and use cases at both offline and online, leveraging strong Paytm Payments distribution.”
Fintech players such as Simpl, ZestMoney and Uni, among other prominent players provide many discounts and choices to customers.Simpl, a pure-play BNPL fintech player, has been seeing an upward curve in the BNPL space. Over the past two months, Simpl onboarded 4,000 merchants taking the total count to over 7,000 as of date.
Credit and debit cards are widely used payment forms, but people’s interest in alternative payment systems has accelerated in a post-Covid world, and India is no exception. Buy Now Pay Later provides the most hassle-free and convenient checkout options. We have witnessed robust revenue growth with a sizable jump in monthly active merchants taking the total tally of partner merchants to over 7,000 and 10x growth in the active user base in the last 18 months, says Nitya Sharma, Co-founder and CEO, Simpl.
Uni, which is present in the top 50 cities in the country, says millennials and GenZ prefer the new payments option. “BNPL format helps them plan better and solve short-term liquidity crunches,” says Nitin Gupta, founder and CEO, Uni.
From Rs 80 lakh monthly disbursal in June this year, Uni is currently clocking Rs 120 crore in monthly disbursals as of November 2021, and is growing at the rate of 40% M-o-M. Uni is also planning to launch affordable EMI plans if customers need longer repayment tenures from 6,9,12 and 18 months.
The way forward
While it is evident that the BNPL space will see significant players and exponential growth in future, there are also concerns like falling behind on payments and consumer debt. Also, since in India the segment is nascent, there is no standardisation. According to Research and Markets, the size of the US BNPL market was said to be worth around a few billion dollars in 2019, but this is estimated to have grown by 1,200% by 2024. Now, the regulators in the US are worried about unregulated credit.
Fintechs are capitalising on the growth of Point-of-Sale (POS) products including BNPL, which could present a longer-term competitive threat to banks and card companies. Failure to adapt and compete effectively with these new payment/commerce constructs could erode market share and reduce profitability, which could lead to negative rating momentum for monoline card issuers, Fitch Ratings says.