The pandemic has accelerated the adoption of digital payments in India. Online payment transactions more than doubled in 2021 compared to 2020, crossing a billion in number. Buy Now Pay later (BNPL), which allows consumers to purchase items upfront and pay for them later within a stipulated period, has become increasingly popular. Let’s delve into the details:
What is BNPL (Buy Now Pay later)?
BNPLs (Buy now Pay Later) are small-ticket loans that empower consumers to buy products online and offline without immediate payment. They can either pay in a lump sum or opt for the no-cost EMI route. The underlying principle is to enhance consumer spending power through readily available credit.
How Does BNPL Work?
- Purchase and Selection: After making a purchase, customers choose BNPL as the payment option during checkout.
- Repayment Options:
- Auto Repayment: Consumers link their debit card or bank account for auto repayment setup. The due amount is deducted directly from the linked account.
- Manual Repayment: Consumers pay the installments or the entire outstanding balance using their debit card, UPI, or net banking.
Advantages of BNPL:
- Convenience: BNPL offers flexibility and convenience, especially for online shopping.
- Interest-Free Period: Consumers can enjoy a no-cost EMI option.
- Financial Inclusion: BNPL extends credit to a wider audience, including those who may not have credit cards.
- Instant Approval: The application process is quick and straightforward.
Scope of BNPL in India:
- The Indian BNPL industry is expected to grow 89.5% to reach USD 6.9 billion by the end of 2022.
- BNPL providers are high-tech firms investing in platforms and infrastructure. They must provide compelling reasons for consumers and merchants to choose their services over competitors.
- The market dynamics and evolution of the BNPL space are promising, with various models available.
Different BNPL Business Models:
- Integrated Shopping Apps: These apps treat BNPL as more than just a credit product, recording significant growth.
- Off-Card Financing Solutions: Third-party service providers offer immediate financing options at the point of sale.
- Virtual Rent-to-Own Models: Consumers can rent products and eventually own them.
- Card-Linked Installments: BNPL tied to credit or debit cards.
- Vertical-Focused Larger-Ticket Plays: Targeting specific industries or product categories.
- SME Sales Financing: Supporting small and medium-sized enterprises.
Target Customers:
- Online Shoppers: BNPL is popular among consumers who shop online.
- Younger Demographics: Millennials and Gen Z are more likely to use BNPL services.
- Tier-2 and 3 Cities: Increasing smartphone and internet penetration in these cities drives BNPL adoption.
Also Read: Buy Now Pay Later (BNPL): A Historical Perspective
In summary, BNPL is poised to disrupt the credit payments space in India, offering convenience, flexibility, and financial inclusion. As the market continues to evolve, BNPL providers must innovate to stay ahead in this competitive landscape.
For more information, you can refer to the following sources:
- Razorpay: The Rise of BNPL in India
- Paytm Business Blog: Future of BNPL in India
- Matrix Partners India: Decoding the BNPL Model
Feel free to explore these resources for deeper insights! 😊
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