The Buy-Now-Pay-Later (BNPL) industry is booming world over and the situation in India is no different and various studies show this trend.
According to a report titled “The India Buy Now, Pay Later Report 2021” by Zest Money, BNPL use among Gen-Z (those born between 1997 to 2012) has gone up 232 per cent in 2021. “By 2025, e-commerce is expected to account for 12 per cent of global consumer spend, with 59 per cent of that being transacted via mobile devices. Moreover, e-commerce payment preferences continue to shift away from cash and credit cards towards digital wallets and BNPL,” a global payments report by FIS states.
“Whether you are shopping on an e-comm website or booking tickets on an online portal, you have the option of instant short-term loans with easy instalments via BNPL. This could tempt you to overextend yourself. Gen-Z consumers generally don’t have access to credit from traditional banks and hence use BNPL as a preferred mode of transacting,” says Neeta Bulchandani, director, NIBU-X Brands, a retail focussed e-commerce company.
The growing need for instant action is gaining pace in India. Several companies have either changed their business model to cater to this new trend or have come up with alternative arrangements. For example, Grofers changed its entire business model to cater to faster delivery. Capital Float changed its company’s loan portfolio and is now focused on the BNPL segment. HDFC Bank, too, plans to start a BNPL product. Many other companies in India are doing the same.
Payment service provider MobiKwik processed a gross merchant value (GMV) of Rs 10,577.96 crore for the April to December 2021 period. This figure was Rs 1,125.43 crore in the April to December 2020 period. So, the increase in BNPL GMV in just one year is of a huge 840 per cent. The average monthly spend was Rs 3,245 per user and 81 per cent users were repeat customers. This suggests that most consumers who use BNPL once, use it again.
“We have about 25 million pre-approved users on our BNPL platform, and within that, about 20 per cent are Gen-Z. The ticket size on BNPL that we give to these users is generally small since most are first-time credit users. But one interesting trend that we have seen is that the average spend by a user has gone up from Rs 2,200 last year to Rs 3,500 now. Also, customers’ loyalty has increased, which is evident from the increased number of repeat users on our platform,” says Upasana Taku, Co-founder and COO, MobiKwik.
Existing integration, convenience, lack of other credit, easy EMIs and quick refunds are the major draws of BNPL for Gen-Z and millennial consumers. But this can also mean the risk of taking on more debt that you can handle.
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In the US and Europe, faster delivery of goods and services has been popular among Gen-Z and millennial consumers for quite some time. In a survey conducted by emarketer.com, four out of 10 respondents who were 18 years or older said they preferred faster delivery of products and hence they buy the product online but then choose curbside pickup delivery option (i.e., in-store pickup).
In India, too, this trend has picked up. According to a RedSeer research report titled “Quick Commerce: A $5 Billion Market by 2025”, the majority of Indian Gen-Z users said they prefer shopping online and then choose a faster delivery because it was convenient. Social media and experiment-driven purposes influence what Gen-Z buys.
“BNPL has significantly impacted banks, large merchants and card schemes, and real-time payments will play a similar role in continued payments innovation. However, we’ve seen that BNPL is not just about payments. It was a way to get into the relationship and create a fantastic customer experience,” says Bernd Richter, FIS senior vice-president for the Global Real-time Payments Network in Europe, in the report mentioned earlier. Is BNPL better or credit cards? Find out here.
