WHILE THERE IS a huge gap in credit demand and supply and access to credit has been particularly difficult, especially for young and new credit customers, due to restrictions on the issuance of credit cards by some major banks and payment networks — “buy now pay later” (BNPL) is becoming a preferred payment method for e-commerce transactions.
“Currently, only three out of 100 Indians own a credit card… Moreover, the cumbersome process of applying for credit cards adds to the woes of young Indians who demand a quick and hassle-free experience,” said Anup Agrawal, Chief company of PayU- belonging to the company BNPL LazyPay.
According to data released by RBI in March last year, only 62 million credit cards are in circulation in the country. Just to make a rough comparison, LazyPay – which launched in 2017 – has a pre-approval base of 62 million customers today, of which 4 million users are currently active. “We disbursed over $900 million in credit to customers in FY21 and expect to reach $2,500 million in FY22. Additionally, LazyPay saw an increase of 70 % user acquisition in 2021 as more and more consumers, especially outside the top 10 cities in India, have turned to the convenient payment option for their purchases,” Agrawal added.
So what exactly is the BNPL? “Simply put, with BNPL, the consumer can make a purchase and choose to pay for that purchase at a later date (at no additional cost). It aims to improve the consumer experience to enable frictionless commerce,” said Nitya Sharma, co-founder and CEO of the BNPL Simpl platform, which has grown exponentially since its inception in 2015 with currently over 15,000 merchant partners and 25 million users across India.
No wonder BNPL will see a massive increase in the coming years. According to a report published by management consultancy firm RedSeer in February this year, the fintech sub-segment is growing at 65% year-over-year growth and is expected to hit a staggering around $40. billion by 2025. This is especially true for India. , as more Indians (28%) are likely to buy using BNPL services over the next 12 months than consumers in other markets around the world, according to a new report from global research firm YouGov market and data analysis.
But why is the BNPL becoming so popular among Indians, especially among young people? BNPL offers convenience and affordability in its current form. In terms of convenience, deferred payment is an inexpensive solution used by consumers so that they can enjoy experiences and avoid the hassle of paying upfront with each transaction. This is an interest-free payment option if paid within the 30-day money-back cycle tracked by LazyPay. “On the other hand, BNPL for Affordability is a big size solution that is used by consumers who are looking to buy desired products or services without delay and pay later in small EMIs,” Agrawal added. The EMIs range from 3 to 12 months, with zero to minimal interest.