Indians will leapfrog to BNPL services skipping credit cards: Lizzie Chapman

The ease of signing up for an EMI/Pay Later solution, along with a quick and simple KYC to check eligibility in a matter of minutes, has made the BNPL solution popular.

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Apart from managing operations during the weekend, the 'early credit' product can also be used during bank holidays when businesses don’t get paid, causing further delay in their operations.

The Buy Now Pay Later (BNPL) solution has gained popularity amidst the festive season. The ease of signing up for an EMI/Pay Later solution, along with a quick and simple KYC to check eligibility in a matter of minutes, has made the BNPL solution popular. However, experts say, this trend is not a recent phenomenon.

Lizzie Chapman, CEO, and Co-Founder, ZestMoney, says, “Even though the festive season did see a renewed consumer demand for the BNPL solutions, it is not a festive trend. It will continue for years to come.” In an exclusive interview with Priyadarshini Maji, she explains how the consumer habit is here to stay and COVID is only helping accelerate that.

Why is the Buy Now Pay Later solution gaining popularity amidst the festive season?

This trend is not a recent phenomenon – India is a classic Buy Now Pay Later (BNPL) market – one where credit card penetration is so low that we will leapfrog to Pay Later solutions faster than in the West…just look at companies like Bajaj Finserv who have more customers than any credit card provider today.

The main innovation in the last couple of years has been the digitalization of these products by Buy Now Pay Later providers. The signing up for an EMI/Pay Later solution has been made even faster and smoother, by the BNPL providers.

Yes, the festive season did see a renewed consumer demand for these solutions. Multiple things here at play. With the pandemic impacting finances, people do want to plan their budgets better and avoid large lump sum expenses.

Pay Later offers them the flexibility to spread the cost – which is a very sensible financial plan at times of great economic uncertainty.

Consumers are loving an all-digital experience for credit. Since the pandemic, all forms of digital financial services and payments are seeing an uplift as consumers are keen to avoid branches, cash, and agent-driven models. KYC is quick and simple; you could be sitting in any part of India and check your eligibility in a matter of minutes.

Most of the BNPL providers are available on the checkout of online shopping platforms like Amazon and Flipkart as well as all the largest brands- online and offline. At ZestMoney we saw applications for PayLater solutions increase 2-3X year on year. This is not a festive trend. We believe it will continue for years to come. The consumer habit is here to stay and COVID only helped accelerate that.

What are some of the factors influencing this trend?

The shift towards Pay Later solutions is a global phenomenon and represents the fact that young digital consumers are looking for complete transparency and no hidden charges. The consumer knows exactly what one is opting for, unlike credit cards where there is so much ambiguity.

For instance, ZestMoney is a complete digital solution – the costs are lesser, hence, EMI is available at even smaller ticket sizes for a wider group of people. Until recently only the top 30 MN households had access to formalized consumer credit – players like ZestMoney are expanding that base to 200 MN households with Pay Later solutions.

Which category is The Buy Now Pay Later solution used for most commonly?

All large ticket categories like electronics, home appliances, and smartphones continue to lead BNPL demand.

Work from home and online learning is driving the demand for laptops and mobile phones. We continue to see a massive surge in ed-tech as people take to up-skilling courses to stay relevant in the job market.

One would be surprised to know that we are seeing a lot of traction for Electric Vehicles (EVs) too. People, especially in tier II and III markets want to own a scooter and avoid public transport in times of the pandemic.

A significant number of these people are availing formal credit for the first time in their lives so in a way we are helping them build their credit score for larger ticket loans they may need later.

Given the current situation, with job losses and pay cuts should people opt for this option?

The economic uncertainty has created a larger awareness about financial planning. So, people will opt for these solutions to manage their cash flows. It’s an excellent financial discipline to opt for EMI over lump-sum payments in times of uncertainty.

The pandemic has made customers even more focused on their financial affairs and categories like insurance (with the EMI option) have seen a huge and much-needed boost.

What are the categories that are witnessing demand in online and offline retail?

As I mentioned earlier, electronics and smartphones are by far the biggest category. Fashion, healthcare, insurance, travel (temporarily impacted now) are important drivers of demand.

We are also seeing customers asking for PayLater and EMI solutions in categories where they were not usually relevant – from fashion to furniture to lifestyle such as salons.

What is your outlook on the overall digital lending ecosystem in India?

We strongly believe that India will be a Pay Later first credit market. Unlike the west, Indians will leapfrog to Pay Later skipping credit cards. Young people all over the world are turning away from credit cards as a form of payment and looking for new-age contextual credit solutions.

In India, the young millennial is digitally savvy and does not want to use credit cards. They would prefer a transparent digital Pay later solution that has no hidden charges and offers the best user experience. There is also a huge population that needs a better, cheaper form of consumer credit.

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