Buy now pay later India is something that has grown exponentially in recent times. The BNPL concept has attained immense popularity amongst Indians, with reports highlighting how FY21 was ample proof of its success. According to several reports, BNPL apps successfully disbursed funds to more than 15 million customers in this period. The unsecured retail financing segment has already expanded by 25% over a three-year period, including personal loans, consumer durable loans, and credit cards, despite the impact of the pandemic.
Reports by Bain & Company highlight how BNPL apps and other digital lending platforms are ensuring quicker credit access to consumers, especially those who are new to credit, and are drawing more Gen Z and millennial users as a result. They are not only more affordable but also easy to use. Digital lending platforms like these loan apps have become clear customer favorites, going by the Fy21 disbursal figures as mentioned above. Ticket sizes for several loans, particularly in the consumer durables and personal loan categories, are steadily coming down on account of higher emphasis on lending in the smaller ticket-size category. This is also majorly driven by NBFCs and fintech players. The ticket sizes in the personal loan segment have also dropped by 70% over the last couple of years as per reports.
Some other prominent trends worth noting
- BNPL apps are already adhering to new RBI guidelines, tightening up their terms and conditions, and tying up with NBFC and fintech partners for their offerings.
- Total retail credit increased handsomely throughout the country for FY21, with personal loans growing by 29%, credit cards growing by 19%, and consumer durable loans posting growth of 13% (compounded annual growth rate or CAGR).
- Unsecured retail lending is currently finding great traction in semi-urban regions and Tier-4 regions have shown growth of 32% for a three-year period. Tier-1 areas have seen a growth of 18% in this same duration.
- 70% of total disbursements in the smaller loan segment have been for those below 40 years of age.
- 36% of disbursements have been seen across the segment which is 30 to 40 years of age.
- 37% of credit has been disbursed amongst those below 30 years as well.
- Most digital lenders are swiftly scaling up their presence throughout several under-served markets, including Tier-2, Tier-3, and Tier-4 regions.
- $35 billion has also been invested in fintech segments in India, doubling the overall share of the country in the global fintech funding category from 2016 onwards.
- 2021 and 2022 witnessed funding of $19 billion+ in the fintech segment along with 18 new unicorns being added as well.
- Both the lending and payments segments still draw most of the funding in the fintech industry, with 60% earmarked for them as per reports.
- 30%+ is also going into insurance, wealth-tech, and neo-banking among other new-age sectors.
The success of BNPL in FY21 and its steady growth throughout the present fiscal indicate a moment of triumph for digital lending, which has had to tweak its playbook after the RBI’s new measures were announced. FY21 saw $10 billion in 580 deals for fintech players in India, testifying to their stellar growth prospects in the coming years. This was thrice the amount of $3.5 billion that was generated in funding for the space in 2020. 2022 has already drawn $4.2 billion in funding, as per reports. Lending and payments should also continue to drive most investors as per industry experts.
The present enterprise value (EV) contributed by fintech players in India is estimated at approximately $100 billion by Bain & Company. This is still low in comparison with $1.4 trillion from the total EV of the financial services sector for 2021. However, fintech players here will naturally get deeper into rural and semi-urban markets, building up their base amongst un-served or under-served consumers, while offering a higher spectrum of financial services and products alike. Fintech players in the country are expected to touch $350 billion in their total EV for FY26, generating more than 15% of the financial services enterprise value in the country.