Buy now, pay later (BNPL) model goes mainstream during the pandemic

FinTech has been at the forefront of financial innovation for the past few years and now the newest payment option Buy Now Pay Later (BNPL), is the main game changer for the ecommerce and the payments ecosystem in India. The BNPL payment option is offered to customers during checkout on e-commerce websites. The facility helps break down a large expense into small EMIs, instead of making an upfront payment. Millennials and Gen Zers, who possess strong intent and purchasing power are not wary of using credit cards and paying interest and fees. The BNPL service is not perceived as a credit card loan, as it offers shoppers a revolving line of credit that gets replenished with periodical repayments. The reasons BNPL is preferred over other payment mechanisms is it improves cash-flow of the customer’s personal finances with no added cost.

Even before the pandemic, online shopping was growing at a phenomenal pace in India. The Indian Government’s policies and regulatory frameworks further propelled this growth. The pandemic shifted consumer behaviour and this has been among the most defining events for consumer behaviour, the implications of which are expected to last well into the next decade.

The BNPL trend, which started with the sale of smartphones, has made inroads in newer categories such as electronics, household items, furniture’s, beauty & wellness products in a stay at home, work from home scenario. These insights have emerged during an assessment of BNPL transactions across different merchant categories of Mswipe India’s leading end-to-end digital enabler of SMEs and the largest POS acquirer in the country.

The online grocery market in India surged and is estimated to exceed sales of Rs. 22,500 crore (US$ 3.09 billion) in 2020, representing a whopping 76% increase over 2019. The pandemic put household budgets under severe pressure. BNPL came at a time when the Indian customer needed it the most. It allowed millions of customers to get online and make purchases even without having a bank account. It eased the spending pressure and credit crunch on customers by distributing payment over three, six or nine months. This allowed Indians to make aspirational purchases even during challenging times. The electronics segment has had the highest market share in India’s ecommerce retail market. During the pandemic, the category with the largest non-essential digital spending was home supplies. Some of the top BNPL offering gateways are listed below:

Lazy Pay: This gateway is integrated with major e-commerce and utility apps like Swiggy, Flipkart, BookyMyShow, MakeMyTrip, and Urban Company. LazyPay is a product of PayU, a payment technology provider. A user has to sign up with LazyPay, on which the company offers a credit limit. The user can use the credit to make payments at over 250+ online merchants. No interest is charged if the user pays back by the first week of the following month.

Simpl: Allows users to pay on multitude of online merchants with a single tap. Each purchase is then added up so the user can pay every two weeks. Popular merchants like Zomato, BigBasket, Fresh2Home, Sleepy Owl Coffee etc. accept the one-tap Simpl pay option. There appears to be no charges if timely payments are made.

Paytm Postpaid: Was initially available only to ICICI bank account holders, but is now open to all users. Iit claims to provide up to Rs. 1,00,000 (US$ 1,371.6) as the credit limit for a one-time sign up. Users can use the service to pay at local shops as well as online merchants. It also offers facility to pay utility bills at a later date via UPI. Paytm postpaid charges a convenience fee of up to 3% on monthly spends.

Slice: This is a free credit card designed for today’s millennial. The payment gateway is Visa, and it allows the card holder to buy now and pay later at over 5 million online and offline merchants. The app offers EMI and emergency cash options as well.

Flexpay: Is the latest entrant into the category and offers credit on Unified Payments Interface (UPI) and allows peer-to-peer transactions. The company (Vivifi) that created Flexpay aims to target local stores who may not always have the credit card option but use UPIs. Customers can use the pay later feature with the app.

Flexible, no-cost deferred payment option allows millions of Indians to purchase products conveniently on their favourite ecommerce website or app. It gives retailers the opportunity to generate incremental sales by closing deals when customers would have otherwise restricted their purchases due to insufficient funds.