The BNPL wave has taken the country by storm, and how! The whole concept of buy now pay later has become indispensable for a large section of consumers as they grapple with sudden expenses and another discretionary spending that they do not want to delay. BNPL payments are anticipated to witness a growth of 22.9% on an annual basis. Reports estimate that they will touch a whopping USD$14,289.4 million in 2023, testifying to their popularity amongst the masses in India.
There are multiple buy now pay later apps that have also emerged as viable solutions for consumers in this space. The industry has posted stellar growth over the last four quarters as well, backed by growing penetration of e-commerce and smartphones throughout the country. The BNPL industry has positive forecasts for both the medium and long term in the country, with payments anticipated to touch 12.2% in CAGR (compounded annual growth rate) between 2023 and 2028. At the same time, the GMV (Gross Merchandise Value) of the industry in India will go up to USD$25,387.2 million by 2028 from 2022’s figure of USD$11,628.8 million. This is a direct testament to the advancement of technologies in the payments sector. In fact, technology has been a major disruptor and enabler for the mainstream BFSI (banking, financial services, and insurance) industry. It has ushered in more convenience for consumers, particularly in unserved or under-served areas, while enabling a more user-friendly experience as well.
The buy now pay later mechanism aims at the direct fulfillment of consumer needs and aspirations while enabling the convenience that people desire. This has naturally propelled it towards greater heights in the country over the last few years.
What are some other trends worth noting in this segment?
The buy now pay later segment has witnessed sizable growth amidst increasing demand for flexible methods of payment amongst consumers, not just in Tier-1 cities, but also in Tier-2 and Tier-3 cities. The trend should gain momentum over the next few years according to reports, with this payment method finding favor across segments and age groups. In fact, buy now pay later apps are fast becoming default methods of payment for several individuals in the country as well. They no longer turn to other conventional modes of payment, choosing this system in a bid to take care of necessary expenditures, before repaying the amount comfortably as per their preferences.
Consumer spending in the BNPL category is anticipated to grow hugely in Q4 FY22 owing to several additional factors as well. Rising costs of living and inflation are also behind consumers turning to these convenient options for diverse requirements. Both offline and online purchases are seeing higher demand for buy now pay later services. Q4 CY2022 saw huge demand for BNPL players such as LazyPay and others, while consumers also took to this method to cover purchases in the holiday and festive season. Loan disbursements have more than doubled for several apps and other fintech players, while a majority of demand came from Tier-2 and Tier-3 Indian cities, as mentioned earlier. These are expected to continue being major growth engines for the category in the next four to five years, going to reports.
Which are the sectors positively impacted by BNPL?
Several transactions in this segment are also taking place for travel bookings and other related purchases. There is a huge demand for such facilities across travel platforms, leading to major players exploring tie-ups with travel brands in the country. People now want this method for booking train tickets, flights, holiday packages, and more. They are also using these facilities to pay for their groceries, other household essentials, appliances, and even fashion and accessory shopping. Several buy now pay later apps are also beefing up their roster of partner merchants in order to enable more customers to avail of the facility in diverse market segments.
With demand anticipated to go up even further throughout the third and fourth quarters of FY23 in terms of overall numbers, experts feel that there will be strong growth in several related industry segments owing to the BNPL facility. There could also be several newer service offerings brought into the mainstream by these buy now pay later apps for the benefit of users in the future as well. This system is thus well on its way towards becoming one of the biggest and most favored ones in the entire payments space in India. Consistent growth in consumer spending, coupled with increasing technological literacy will naturally drive a whole new fintech revolution in the country. BNPL is expected to play a prominent role too.
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Consumer aspirations are steadily rising with evolving lifestyles and requirements. From travel to gadgets and household appliances, there are diverse expenses that salaried professionals have to take care of periodically. At the same time, there are utility bills to pay or even shopping/grocery/food bills to cover. This is otherwise parred for the course, but sometimes there are sticky situations when people do not have sufficient funds for the same. This leads to a plethora of issues, particularly during the end of the month or festive periods when many professionals are short on cash to meet all these needs together. This is where several apps and fintech players have come out with the BNPL or buy now pay later concept.
Under the same, consumers can use their buy now pay later apps to make purchases at partner merchants, both online and offline. They can then repay the amount comfortably within a specified duration or choose convenient EMI plans for a few months without any hidden charges. This helps them avail of credit for a wide variety of expenses in multiple segments. Hence, consumers do not have to compromise on their aspirations, dreams, and necessities even in scenarios when they cannot pay for the same instantly. That has driven the BNPL concept to greater heights, particularly in Tier-2 and Tier-3 cities across India. Many consumers are now using BNPL as their default mode of payment.
The concept has cut across age groups and segments to become one of the defining trends in the fintech payments space. Several reports and industry experts estimate skyrocketing growth for BNPL in 2023 and beyond. The last year was a hugely positive one for the segment and this year should be no different. Driven by the growing penetration of e-commerce and smartphones, buy now pay later is expected to keep witnessing steady growth over the next few years according to experts.