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Fintech firms on a roll: Heralding the new era of BNPL

Digital Banking, Lending, and Insurance were amongst the top contenders in this category, with prominent names like Cred (215 million dollars) and RazorPay (160 million dollars) leading the pack.

August 13, 2021 / 04:16 PM IST

Indian fintech companies seem to be in vogue this financial year. The sector garnered investments worth Rs 1,402.8 billion in the first half of 2021, which is very close to the 2.25 billion dollars of cumulative investments the fintech industry received in all of 2020. With a projected expansion CAGR of 24.28 percent (2021-2028) to reach 52,827 dollars in the next seven years, it would be an understatement to say that the industry is exponentially booming. 

Digital Banking and lending, along with Insuretechs were amongst the top contenders in this category, with prominent names like Cred (215 million dollars) and RazorPay (160 million dollars) leading the pack in terms of raising investments. 

Adding to the definitive surge in this space, IIFL Finance recently partnered with Bangalore and Gurgaon-based FinBox, an AI-powered embedded lending platform to offer digital credit products to multiple B2B, e-commerce, and retailers aggregator platforms worth Rs 1,000 crore over the remainder of 2021. 

"BNPL credit is the lifeblood of B2B e-commerce and trade. Just like cash-on-delivery kickstarted the Indian B2C e-commerce story, seamless access to cash flow-based BNPL financing is fuelling B2B e-commerce, said Rajat Deshpande, co-founder, and chief executive officer, FinBox. 

The Buy-Now-Pay-Later (BNPL) Revolution

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The COVID-19 pandemic has drastically transformed our income and spending patterns, monetary liquidity situations, solidifying our digital payment habits, ensuring that the BNPL infrastructure in India can only grow from here. Firms like LazyPay, Simpl, and more are amongst the main names  captaining almost 33 BNPL focussed platforms in the country at present, according to industry tracker Tracxn.

Have you often wished, staring at your screen as the month-end approaches, that your bank balance could suffice to buy out your entire wishlist? Now, what if someone offers to purchase to your heart’s content, all by providing you an easy loan that you can pay back later? Over else, they defer and break down your total payment in small installments so that you can comfortably pay off the money in due time? 

Essentially, BNPL is a zero-interest, short-term micro-credit you can avail of for regular purchases. It also helps in building a credit history for individuals who have little to no prior record of the same. It allows you to leverage credit for a stipulated number of days, without having to worry about the usual loan expenses like processing fees, interest rates, or deductions.

Consulting giant KPMG, in its recent fintech report cited that leveraging AI and advanced technologies for underwriting purposes makes the Indian model distinct. “India’s unique model allows digital banks to primarily act as software-as-a-service (SaaS) providers with regulatory responsibility remaining with bank partners. Early fintech leaders in India have continued to expand their business models into adjacencies in order to bring their customers more value such as payments players acquiring  insuretechs", said the report. 

No wonder then, the BNPL model has caught on like wildfire amidst the young generation. From buying high-end smartphones, electricals, appliances, fashion, funding travel expenses, and more, the expanse of the Buy Now Pay Later model of payment continues to range far and wide. 

Notably, since the ticket size is small, ranging between Rs 1,000 to Rs 12,000 on average, possibilities of loan defaults and stresses are minimal if industry data is to be believed.  Even globally, fintech firms surged meteorically as their investments rose to fresh highs. Reports suggest that fintech investments boomed from $87 billion in the second half of 2020 to almost $98 billion in the first six months of 2021, with a record number of 2,456 deals finalised in the first half of 2021. 

Per Amit Kumar, Founder, GalaxyCard, a firm that aims to provide easy, seamless access to credit cards, BNPL is a great value add for people who have minor cash flows, frequent money variations, and have low savings. 

“BNPL offers a lot of conveniences as you no longer need to interact with multiple interfaces for each transaction and repayment can be done just once a month, like with the case of a typical credit card. Additionally, BNPL is a boon for when you need money for sudden needs, emergencies or even regular, daily use products easily”, he signs off. 
Ira Puranik
first published: Aug 13, 2021 04:16 pm
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