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Pavitra Walvekar

Founder of Kudos Finance

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Buy Now, Pay Later: Why India Is Spending Using This New Form Of Credit

The first option is to pay a basic payment on the product that the customer has purchased and then chooses to break the remaining value into EMIs and also chooses to pay interest on the amount.

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Buy Now, Pay Later: Why India Is Spending Using This New Form Of Credit

We’ve all at one point used “Buy Now Pay Later” as an option. This definitely isn’t a new phenomenon for the Indian economy. However, BNPL has been around in a very different form for a long time. The options of 0 cost EMIs offered by numerous electronic retailer stores since early 2010. BNPL is more or less the same thing in a new form where there is an option of paying back without any kind of interest on the cost of your purchase.

From an industry perspective, there are two kinds of Buy Now, Pay Later. The first option is to pay a basic payment on the product that the customer has purchased and then chooses to break the remaining value into EMIs and also chooses to pay interest on the amount. The other kind of buy now pay later option is when the brand has a tie-up with the retailer and the retailer subvents the interest on the purchase. This is simply because the brand has enabled the sale for the retailer or the platform through their tie-ups and thus the end consumer does not have to pay interest.

One of the major reasons for BNPL to flourish right now is that there are two kinds of players who are benefiting from this. The first one is people who are new to credit and wish to increase their credit score which gets better with the completion of every BNPL. The ones are those who enjoy the seamless experience of the process. The advancements by India Stack has lead to the creation of this seamless experience. The experience we’re talking about over here is from the customer’s point of view. When one opts of the option of BNPL, they’re making a purchase without going through the process of getting your card out, entering the pin, etc. That is how seamless the consumer experience has become.

In a way, you could say that the option for BNPL has been around for quite some time however, the advancement by India Stack has enabled FinTechs to have the strong technical infrastructure to fulfill this demand.

This advancement in the infrastructure is not just facilitating for the consumer who is experiencing seamless transactions but also for the lenders who have access to applicants’ records with just their phone number. All of this information is available at the snap of a finger. This access brings in confidence for the lender who now is also compliant according to the regulations set by the RBI.

Not just in India but the phenomenon of BNPL has taken the industry by a storm globally. BNPL is now considered to be competing with credit cards. With the emergence of UPI and cardless transactions, BNPL is paving the way for a cashless transaction too.

One thing that we must address is the striking question of will the surge of BNPL replaces credit cards? The answer cannot be a binary yes or no. In some cases, it might, and in some cases, it may not. Cards are still considered a status symbol. Numerous banks and other financial institutes provide exclusive access to airport lounges, special discounts, and much more. Whereas on the other hand, BNPL is a convenience credit feature. Another factor is that buy now pay later is not a payment function. It in fact is a credit instrument. While the form of the credit has changed with the BNPL option, it is still a credit. And the consumer has to pay this at one point or another.

Therefore the risk with this product is that the players of BNPL could get overzealous with their credit by extending them to people who were not meant to get credit. This extension could lead to bad credit practices which are more likely to have an effect on the younger population below 25. There has been a tremendous increase in the BNPL players. At Kudos itself, we are continuously seeing demand by our existing players as well as new players to introduce BNPL on their platform and we are enabling them through us.

However, there are various new fintechs that are taking BNPL to almost all markets. Whether you want to change your car’s tyers to shopping on any e-commerce platform. There are Fintechs that are enabling credit everywhere. This kind of environment is facilitating the growth of a BNPL habit amongst the Indian markets.

Another factor is that the Indian consumer wants to have more, own more, and do more with their money, festive period or not. With the constant emergence of pure-play FinTechs who are making it easier for all kinds of transactions into a BNPL module, the buying power of the Indian markets has increased tremendously. When this is supported by an infrastructure facilitating digital lending, we are seeing more and more Indians opting for BNPL.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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