Buy now, pay later (BNPL) seems to be the new buzz phrase for customers of the upcoming festivities. Companies that offer BNPL, which enables customers to pay later in installments at zero additional cost for their purchases, are gearing up for a spike in usage in the coming months.
In fact, even before the key days of Navratri, Dussehra and Diwali, the payment mode has witnessed a tenfold growth in usage as customers made the most of e-commerce sales.
As Indians shrug off the impact of a second Covid-19 wave coupled with higher vaccination rates, consumer sentiment seems to be peaking, giving companies the confidence that they will be seeing nothing less than a bumper season, aided in no small part by the flexibility to pay later.
BNPL usage to grow over last year
As customers gear up for the big spending season, BNPL players like ZestMoney have already seen a growth in signups and customer applications to avail credit limits.
Lizzie Chapman, CEO and co-founder at ZestMoney, said, “Customer applications for BNPL have gone up by 10X over the last three months on our platform, while existing customers are transacting more often than they ever did before. In September alone, we had 50 percent more new customers sign up.”
The fintech startup is also growing its network of physical stores it has tie-ups with to cross one lakh given the rising demand from retailers for BNPL as a payment mode.
“Seeing the demand for BNPL, we expect this festive season to witness a 3x growth compared to the same period last year. The consumer sentiment is very optimistic for the next three months,” Chapman added.
E-commerce platforms like Flipkart and Amazon that provide ‘pay later’ options too have seen a spike in usage amid their annual festival season sales. Amazon Pay India Director Vikas Bansal said, “During the Great Indian Festival 2021 so far, we have seen about 10 times surge in usage for Amazon Pay Later compared to usual business months. We are seeing customers use pay later for large purchases as well as small-value payments during the festival.”
In fact, Flipkart said that pay later accounts for the second-highest share of payments after paid orders and has also crossed UPI or unified payments interface as a preferred mode of payment. Flipkart’s pay later equated monthly installment (EMI) scheme, too, has seen a 10x jump in the number of daily transacting customers since The Big Billion Days sale started on October 3.
Nityanand Sharma, co-founder and CEO of Bengaluru-based BNPL startup Simpl, which has seven million users and tie-ups with over 4,500 merchants, said that 2021 has turned out to be starkly different on the consumer sentiment front compared with 2020.
“We expect a marked improvement in the overall consumer spirits, enhanced spending with a resultant spike in merchant sales during the upcoming festive season. Our internal forecasts indicate an expected 30-50 percent jump in product usage of Simpl across categories by consumers compared to last year,” Sharma said.
Customers using pay later for smaller purchases
With only three percent of Indians holding credit cards, the opportunity for fintech-led pay later products is huge across ticket sizes. Companies are also seeing Indians choose the option for even small-ticket purchases to make the most of festive season sales. For Simpl, Sharma expects customers to avail credit in the range of Rs 400 to Rs 6,000.
ZestMoney’s 11 million-plus customers avail credit of Rs 14,000 on an average, which has risen to Rs 16,000, according to Chapman.
Fintech CASHe, which gives a credit line of up to Rs 1 lakh and has over seven million customers, recently launched its BNPL product and is expecting month-on-month transactions growth to increase from 20 percent to 30 percent during October and November.
Yogi Sadana, CEO of CASHe, said, “Currently, the average ticket size ranges from Rs 15,000 to Rs 20,000 on our BNPL offering. However, we are seeing a steady increase in the ticket size as we move closer to Diwali.”
Larger players like Amazon are witnessing small and big-ticket purchases alike by customers, with purchase sizes going up to Rs 60,000.
Adoption led by Tier II & III markets
M.N. Pai, 56, a Mangaluru-based chartered accountant, has availed the option to pay through monthly EMIs or BNPL instruments a number of times, purely for the convenience. For the festive season too, Pai is open to making purchases that allow him to pay later.
“I choose it because there are no additional costs involved, so I have to shell out the same amount that I would pay upfront. However, pay later is easier on your pocket and gives the flexibility to maintain cash flow better with the payment spread out over the next few months,” he explained.
“Tier II and III markets have three times more demand compared to metro cities. Customers are lapping up pay later because it gives them the perfect flexibility to spread out the cost and plan their finances better, as well as more clarity and transparency over fees,” said ZestMoney’s Chapman.
“As for consumer demand, we expect TVs and smartphones to be one of the largest categories followed by large home appliances, online fashion, home décor, etc. Demand for electric vehicles is also high, we are expecting to double our electric two-wheeler business next month,” she added.
Amazon Pay’s Bansal agrees. According to him, the easy signup process is also a key reason for why many transactions originate from Tier II and III markets.
Growth with each passing year is also led by the low penetration of credit as well as BNPL products in India. According to a report by research and brokerage firm Bernstein, the share of pure-play fintech pay later players in India’s overall BNPL market was only three percent in 2020.
Bernstein expects that to grow to 26 percent by 2025, when it expects the Indian BNPL market to grow to $100 billion from $15 billion currently.