In India, Buy Now Pay Later (BNPL) models started as a flexible payment method offered by e-commerce platforms. Being considerably successful, it gradually moved to other industries like food delivery, travel booking and online groceries. The BNPL sector is expected to grow steadily for a long time with a CAGR (Compound Annual Growth Rate) of 28.9% from 2021 to 2028. As a result, its Gross Merchandise Value is expected to reach US$37,440 million by 2028 from US$3,663.3 million in 2020. The following sections will cover how businesses can grow using this service.
A Brief Overview Of BNPL Services In India
Buy Now Pay Later options allow consumers to make purchases without any upfront payments. Instead, they can repay the credit in easy instalments or lump sums based on the agreed-upon terms. If they make a full repayment within the specified time frame, no interest charges are applicable. E-commerce platforms like Amazon, Flipkart, Paytm provide this interest-free credit option at checkout. These online shopping platforms make this offer available for numerous products during the festival season. Fintech firms such as MobiKwik, BharatPe, CASHe, LazyPay, ZestMoney, and Simpl have also been actively participating in India’s BNPL sector.Financial institutions, including KredX, are now offering Buy Now Pay Later services for retailers to increase their customer base. Traditional banks like HDFC Bank and ICICI Bank have also entered this sector attracted by its growing popularity.
BNPL And Its Popularity
One of the biggest selling points of Buy Now Pay Later services is that it allows young and new-to-credit consumers to make purchases without worrying about payments. Such consumers, mostly the Millennials and Gen Z population, usually do not have a credit history or credit cards but are looking for short-term credit. The COVID-19 pandemic dramatically accelerated the growth of BNPL services in India. Lockdowns, salary cuts, uncertain income and loss of employment made many look for credit options. Moreover, as most of the population started to rely on digital payments for online shopping, demand for easy credit also went up. Another advantage of BNPL that has drawn so many consumers is its ease of access. It comes with simple eligibility criteria that allow people with lower income and credit scores to avail small loans. Moreover, around 93% of India's population do not have access to formal credit, which means that it can become the fastest revenue driver for businesses.
Buy Now Pay Later For B2B Transactions
Just like the BNPL model has become a preferred model for consumers, businesses too can use it for various situations. For example, a retail business may use this facility to stock up inventories even in the absence of cash. Using BNPL, enterprises and businesses can take full advantage of seasonal opportunities. A busy period of sales would generate more than enough profits to repay the credit. Its interest-free credit makes it attractive for small businesses struggling with cash flow problems. Bottlenecks and inefficiencies often plague supply chains for B2B (Business to Business) transactions as they involve too many intermediaries. BNPL can better replace flow-based or transaction-based underwriting used to offer credit for start-ups and small businesses.
How Can Businesses Grow Using BNPL?
The following are some of the ways businesses can grow by offering Buy Now Pay Later:
Increase the pool of customers: The BNPL facility broadens the pool of customers. With hundreds of millions of potential customers in India lacking access to credit, businesses can drive sales exponentially by offering this facility.
Enhance client experience:Buy Now Pay Later services are a simple, quick and seamless payment method for customers. Once activated, it is a one-step process that customers can easily use on a business platform.
Higher conversion rate: Interest-free credit lures many people, making them comfortable meeting big-ticket expenses. This results in more conversion as fewer customers abandon their shopping carts due to financial assistance.
Allows businesses to remain competitive: With many businesses offering discounts and promotional offers, those who offer BNPL services can remain competitive and convince more customers to stay on one’s store/website.
Ensures payment in full: Financial institutions like KredX ensure that their clients (retailers) get paid in full. They also take full responsibility for lending decisions and are liable for defaults.
Works well for some retailers: Businesses selling high-value items like electronics, furniture, appliances etc., can experience major growth using BNPL services. As most customers cannot pay upfront for such products, the BNPL facilitates affordable purchases.
Buy Now Pay Later is growing widely in popularity as consumers can buy desired and essential products without having to wait for the payday. Though only a handful of corporations used this facility, many smaller retailers are now following this suit to boost their sales. Customers, companies, and financial institutions alike prefer this credit facility.
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