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Buy Now Pay Later (BNPL)

Updated: Jun 8, 2023

Buy Now, Pay Later (BNPL) is a type of credit that enables a customer to break up a retail transaction into a series of smaller, interest-free payments and pay them back over time. The standard BNPL payment plan divides a $50 to $1,000 purchase into four equal instalments, with the first instalment being paid as a down payment payable at checkout and the following three instalments being due in two-week intervals over the course of six weeks.

According to Goldman Sachs, consumer demand will drive the Indian e-commerce market to grow to a $99 billion market by 2024. The fastest-growing online payment method will be BNPL, which will rise from 3% in 2020 to 9% in 2024.

The BNPL market in India comprises of:

  • App-based BNPL: Lazypay, Simpl, Zest money, Cashe

  • E-Commerce/Travel Sites: Amazon Pay Later (Capital Float), Flipkart Pay Later, and Ola Money Postpaid

  • Card Based: Postpe, Slice and Dhani Onefreedom Card

  • M-wallet: Freecharge Pay Later, Paytm Postpaid, and Zip pay Later by Mobikwik

Lazypay leads the BNPL market with ~39% of the total Gross Merchandise Value ("GMV") followed by Capital Float (Amazon Pay Later) and Zest Money.

How much is BNPL accepted as a mode of payment ?

Buy now, pay later (BNPL) is a developing loan tech sector in India as a result of the rise of e-commerce and digital payments, as well as the rapid growth of Fintechs. In addition, GenZ consumers, young millennials, and first-time credit borrowers, who are typically overlooked or underserved by traditional banks, choose BNPL since it is so easy to acquire credit.

Customers turned to internet shopping as a result of the pandemic's economic effects. To order groceries, clothing, and other necessities, people turned to the internet. Buy Now Pay Later (BNPL) arose as more than just a simple payment method; by providing free EMIs, it essentially reduced borrowers' financial stress.

Is BNPL better than credit cards ?

Digital natives and tech-savvy clients, millennials and Gen Z, are progressively migrating to the concept of micro-credit and purchase now pay later services for a more seamless user and merchant experience. Credit cards have been used for many years and have gradually but certainly entered the ecosystem of online shopping. The challenges of documentation, credit score requirements, many rounds of identification, and so on, on the other hand, cost time and effort.

As millennials and Gen-Z's grow impatient with conventional paperwork and demand for flexibility and transparency increases, BNPL has stepped up to eliminate these areas of friction.

Is BNPL the future of lending in India ?

India's lending market is simply too big for one person or industry to handle. BNPL won't replace traditional credit, but because of the strength of cooperation, it might improve it in two ways.

To start, BNPL has the capacity to offer loans to an economy like India that is credit-starved. In contrast to traditional credit, BNPL loans are mostly used for online shopping and utility bill payment. They are quickly evolving into a common sort of online transaction as a result of this mix.

BNPL will bring the next billion dollars into the banking system. Since the vast majority of BNPL borrowers are first-time credit users, BNPL is making it easier for them to establish credit histories and join the formal financial sector, thereby enhancing financial inclusion in the nation. These credit history details may also be used by conventional financial institutions to create a more accurate and effective credit risk assessment model. Access will be simpler for those who have been denied credit as a result.

To conclude we can say that more than just a financial tool, BNPL has evolved into a way of life. It will soon replace other sources of credit expansion in India. The BNPL revolution in India is still in its early stages, but it will eventually alter how credit is perceived there.

Additionally, it is expected that as smartphones and internet access become more common in India, BNPL payment companies' reach would expand. The India Buy Now Pay Later Market is expected to demonstrate an upward trend in terms of Gross Merchandise Value ("GMV") and average ticket size over the forecast period FY'22-FY'26, significantly quicker than in previous years, with the market continually rising. The forthcoming RBI restrictions are also likely to make the market more secure for clients.


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