Online shoppers load up on no-cost EMIs this festive season: Report

Credit and debit card companies and non-banking financial companies (NBFCs) that offer no-cost equated monthly instalments (EMIs) have changed the ways of the Indian e-commerce industry, especially in the festive season. Close to 20 percent of the gross merchandising value (GMV) of sales were made through no-cost EMIs, Business Standard reports.

This is a massive jump from a mere 4-5 percent share in sales two years ago.

US-based e-commerce giant Amazon.com said 75 percent of EMIs availed by customers during its annual sale, the Great Indian Festival, were no-cost. It added that for products of over Rs 20,000, a third of transactions were financed through this scheme.

Amazon Pay Director Vikas Bansal told the paper, “No-cost EMIs will help expand the reach of financing to more customers, especially in smaller towns and cities. Of the more than 100 million active customers at present, only 30 million have access to financing options. We want to reach all of them and one way to do it is through this route.”

While paying through the no-cost EMI option, customers receive discounts equivalent to the interest they have to pay. The manufacturer or seller (or both) will have to bear this discount. Independent card companies and NBFCs offer these EMIs.

The report said Bajaj Finserv, a major player in e-commerce finance, has a 30 percent share of this market, with the average size of a no-cost EMI being Rs 16,500. The company on an average offers 1.6 lakh loans a month. Electronics, mobile phones and items of high maintenance see customers opting for EMIs. Some companies only offer EMIs on products costing more than Rs 30,000.

This trend is here to stay and will grow in coming years, especially in categories like consumer electronics and durables, Arvind Singhal, Chairman of consultancy firm Technopak, told the publication.

Many e-commerce players prefer to cut down on advertising and promotion and pass that on to customers through no-cost finance. This helps them grow their market as people who were earlier reluctant to purchase the product come into the market when they have access to a financing option.