At 87%, India has the highest fintech adoption rate. The reasons are many, including a vibrant youth demographic that favors online commerce. Over 50% of India’s population is 25 years, and older. With a propensity to explore and buy products on their smartphones, young consumers have fueled huge growth in the country’s digital payments ecosystem. In 2021, India had the highest real-time payment volume worldwide
From bank transfers to digital wallets, you have so many options to support your purchases on your favourite websites. Nowadays, you might have noticed the word “pay-later” frequently on many of these channels. BNPL or Buy-Now-Pay-Later is a special fintech vertical that has emerged from the challenges posed by the pandemic. It has redefined India’s digital payment landscape, which had little to offer when it came to interest-free credit to young borrowers. One of the fastest-growing e-commerce online payment methods, it will fuel 14% of all e-commerce transactions by 2026, almost 5 times more than what it does in 2021.
Why is BNPL Gaining So Much Traction?
Lack of Access to Credit
This short-term flexible micro-credit model is appealing to young consumers as it increases their affordability. This segment has deep desires to improve their lifestyles, with exposure to so many options and conveniences online.
However, they are mostly first-time borrowers who don’t have credit cards to fund these purchases. With a lack of credit history, banks remain wary of issuing cards for them. Some of them don’t prefer credit cards, fearing high-interest rates. As of July 2021, only 67 million credit cards were in circulation, showing a lack of penetration. With BNPL, you can make purchases in advance, and choose to pay later. If repayment is done within a stipulated time, you can avail of interest-free credit.
BNPL platforms use technology to assess the creditworthiness of applicants. This means instant loan approvals, highly appealing to the young generations accustomed to instant online gratification. Moreover, you don’t need to wait for the next paycheck to afford a product that you need today.
No wonder, BNPL is the most in-demand financing option around. A 2022 survey reveals that over 28% of Indian consumers are willing to pay by this method in the next 12 months. The intent to use this service is highest in India, surpassing the global average. The consumers mostly lie in the age bracket 30-39.
Immersive Digital Experiences
This is the era of powerful apps, which are redefining the way consumers shop, pay, and connect with brands. These apps offer immersive digital experiences. By using data and emerging technologies they offer these experiences spanning beyond payments.
The BNPL mode of payment can be easily engineered across different brands at their checkouts, ranging from fashion, healthcare, travel, electronics, education, electronics, wellness, etc. With a click of a button, consumers can start the loan process on these apps receiving quick approvals for a credit line that they can use to buy products and services from multiple brands.
The convenience offered is unparalleled, especially when the app allows them to do much more than just avail credit within 90 seconds. From social interactions to budgeting, checking credit history to tracking cashback and discounts, the apps combine an ever-expanding range of services.
BNPL Fueling Offline Purchases Too
While BNPL is reinventing e-commerce in India, it is supporting offline stores too. It allows a wider array of purchases by allowing you to use it to pay at the nearest grocery store or petrol pump via digital cards like LazyCard by LazyPay. This will allow its penetration further into Tier-II and Tier-III cities, where internet connectivity is accelerating at a rapid pace. A report says that by 2025, the number of active internet users in rural areas will surpass that of India’s urban areas.
An Ecosystem That Favors Buyers and Merchants
BNPL is revolutionising the concept of customer credit, by combining the latest UI/UX, your favourite brand, and changing the economics of traditional lending. While it is making payments convenient for you, it is also encouraging repeat purchase behaviour. The next time you face a cash crunch, you can simply use your approved credit limit to make a purchase.
This is an attractive opportunity for merchants to grow sales, increase their average order value, and drive greater customer loyalty. Around 91% of merchants who have adopted BNPL see improvement in at least 1 important business metric. Over 16% reported an increase in cart totals, and 13% saw growth in repeat buys.
The Indian BNPL market is forecasted to grow to a size of $93.5 billion by 2028, growing at a CAGR OF 54.3% from 2022 onwards. What started as a way to alleviate financial constraints in the pandemic has emerged as a highly popular alternative credit model in the country. With a favorable policy environment in India and an increasing number of merchants adopting the model, there is an increased investment into this vertical. The BNPL payment method is here to stay.