New-age BNPL platforms have registered a staggering Rs 1,700 crore of business revenue in October 2020
The post-pandemic economy is subjected to extreme volatility. Consumers are battling everyday to win the war of switching from the ‘old normal’ to the ‘new normal’. When it comes to personal loans, it is reported that they have seen a lag in approval or have raised issues with the approval process not being as smooth as before.
Many traditional lenders are reluctant towards fulfilling the financial needs of consumers. This attitude stems from a lack of confidence in the market and the consumers. Lenders feel this holding back would help avert potential risks in an ailing market economy. In their playing field, digital lenders are stepping up to empower customers with ML and algorithm-powered ‘Buy Now Pay Later’ options. The focus of BNPL service providers is to serve and assist the consumers with more than just a line of credit.
BNPL, being an emerging trend in the financial market, showcases explosive growth prospects by being a viable solution in not just meeting the financial needs and aspirations of customers but also by putting the consumer first. Numerous trends reveal that more and more consumers utilise BNPL options in their day-to-day lives to buy products across various online B2C platforms.
According to Pine Labs, new-age BNPL platforms have registered a staggering Rs 1,700 crore of business revenue in October 2020 alongside a 49 per cent increase in purchase via BNPL options for the July-Sept quarter 2020.
Why prefer BNPL over credit cards?
BNPL is different from other traditional options like credit cards. For starters, unlike credit cards, BNPL services are chargeless for the consumers. BNPL options are also much more transparent than credit cards as the various costs and benefits are projected upfront in contrast to the latter.
There are many transactional complications associated with credit cards like transaction failure, high time-period for reversal of amount, and many more. New customers face a constant issue in qualifying for credit cards due to lack of adequate credit ratings.
Charges: It is chargeless for customers seeking to make their payments online. Additionally, Pay later is an ambitious payment category for the well informed, mobile-savvy customers who seek a hassle-free user experience when they go online to buy products.
Interest free period: Customers can enjoy services without paying in advance or paying any interest on EMI. Every month a bill is generated wherein users have an allotted time frame to clear their dues.
It is the convenience and the transparency for which the younger generation prefers BNPL payment options over credit cards. Firstly, credit ratings are not a deciding factor in accessing BNPL. Secondly, it enables consumers to know exactly how much has to be paid and the apparent due date. There are no payment-related discrepancies involved which may surprise the user later.
It also provides numerous opportunities to merchants for expanding their businesses. The payment option helps improve essential metrics in the form of increased cart conversion, larger cart size, and increased buying frequency. This enables companies to gain high revenue for value delivered to merchants and at the same time generate greater efficiency by being less costly than credit card options.
Conclusion
Though cash might still be a relevant player in payments in India, the pandemic has proved an accelerator for embracing digital payments systems. For instance, in the FMCG product services area, we have witnessed online food ordering services evolving to serve customers through contactless deliveries. Many companies have stopped providing the customer with cash on delivery options to minimize physical contact. Due to public interest, the government has been encouraging the proliferation of digital payment platforms to ensure safety via contactless transactions.
These trends indicate that BNPL options indeed can penetrate deeper and expand their user base as they fill a necessary gap in consumer needs.
The author is Co-founder and CEO, Simpl
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