Transforming Online shopping: Buy-now-pay-later to become big in e-commerce

BNPL turning into a preferred payment mode for users without credit card access, credit history

Credit cards typically offer interest-free credit periods up to 45 days

WHILE THERE IS a huge gap in credit demand and supply and access to credit has been particularly challenging, especially for youth and new- to-credit customers, due to restrictions on issuance of credit cards by some large banks and payment networks —‘buy now pay later’ (BNPL) is becoming a preferred mode of payment for e-commerce transactions.

“Currently, only three in every 100 Indians own a credit card… Additionally, the tedious application process for credit cards adds to the woes of young Indians who demand a hassle-free and quick experience,” said Anup Agrawal, business head of PayU-owned BNPL firm LazyPay.

As per 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 was launched in 2017— has a pre-approval base of 62 million customers today, of which 4 million users are currently active. “We have disbursed over $900 million in credit to customers in FY21 and projected to hit $2,500 million in FY22. Additionally, LazyPay saw an uptick of 70% in user acquisition in 2021 as more and more consumers, specifically from outside of the top 10 cities in India, turned towards the convenient payment option for their purchases,” added Agrawal.

So, what exactly is BNPL? “Simply put, with BNPL, the consumer can make a purchase and opt to pay for this purchase at a later date (at no extra charge). It aims to better the consumer experience to enable frictionless commerce,” said Nitya Sharma, co-founder and CEO of BNPL platform Simpl, 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 is bound to experience a massive surge in the coming years. According to a report released by management consulting firm RedSeer in February this year, the fintech subsegment is moving at a 65% year-on-year growth and is all set to touch a staggering ~$40 billion by 2025. This is especially true for India, as more Indians (28%) are likely to purchase using BNPL services in the next 12 months than consumers in other markets across the world, as per a new report by global market research and data analytics firm YouGov.

But why is BNPL becoming so popular among Indians, especially among the youngsters? BNPL offers convenience and affordability in its current form. In terms of convenience, deferred payment is a low ticket-sized solution used by consumers so they can enjoy experiences and avoid the hassles of upfront payment with every transaction. This is an interest-free payment option if paid within the repayment cycle of 30 days, as followed by LazyPay.“On the other hand, BNPL for affordability is a large ticket-sized solution that is used by consumers looking to buy desired products or services without any delay and pay later in small EMIs,” added Agrawal. The EMIs range from 3-12 months, with zero to minimal interest.

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