Buy
Now Pay Later (BNPL) is a short-term credit service and payment solution which
has quickly risen to prominence in India. With significant funding from private
equity and venture capital firms, and shifting consumer preferences towards
alternative credit solutions, this segment has experienced exponential growth
over the past few years. With even e-commerce firms starting to offer BNPL
services to improve user experience during checkout, we look at what makes BNPL
an attractive credit proposition to customers.
Discounts
& cashback along with a smooth & frictionless checkout experience are
major triggers driving usage of BNPL applications amongst customers. When it
comes to choosing a specific provider while making a purchase, customers gauge
the processing fee if any along with the quantum of discount/ cashback.
Standalone
BNPL fintech like Simpl, LazyPay, etc. compete with credit cards and BNPL
offerings from e-commerce platforms like Flipkart PayLater, Amazon PayLater,
etc. Our survey reveals that BNPL fintechs are mostly preferred for low-ticket
spend categories like entertainment and F&B. For high-value spending on
categories like retail shopping, annual payments (insurance, tuition fees, etc.),
and medical bills customers tend to use credit cards due to wide-scale
acceptance and better reward structure owing to a higher cap on points/cashback.
Customers
perceive credit cards to have better rewards & cashback as compared to BNPL
fintech and e-commerce platforms. Additionally, customers feel that the
interest rates charged by credit cards in case of delayed payments are lower.
BNPL providers usually do not charge any processing fee for availing their
services or converting a purchase into EMI transactions, a facility that is
widely appreciated by customers.
BNPL
has helped drive financial inclusion in India by providing easy access for
first-time users to get access to credit. Although the recently issued RBI
circulars/ clarifications on co-branded prepaid cards and the draft guidelines
on digital lending could create some short-term pain for the ecosystem, it is
anticipated that in the long run, these would provide more clarity to fintech
businesses and enable the creation of a robust BNPL ecosystem.