Buy Now, Pay Later = Celebrate Now, Worry Later
Have a long shopping list ahead of the festive season? A larger fridge? That Sierra Blue iPhone 13? A new wardrobe? Or just more golgappas? India's rapidly growing 'Buy Now, Pay Later' industry has a message for you: 'Swipe Now, Think Later'.
While the onset of the festive season typically brings with it a host of discounts from retailers and special offers from traditional lenders, this year BNPL firms are adding to the season's sparkle by making sure you overcome any resistance to spend.
Companies such as ZestMoney, CASHe, LenDenClub, LazyPay, Capital Float and Sezzle have all amped up their efforts amid the festive season.
ZestMoney, for instance, linked their offering to the Flipkart Big Billion Days sale running from Oct. 3-10, promising that you can pay later in parts at 0% interest.
BharatPe, a relatively new entrant into this space, through its PostPe is giving you a credit line of up to Rs 10 lakh to spend on everything from iPhones to the street food "golgappas".
Others are making sure their products are available at a larger number of touch points across the country.
The efforts are paying off, claim many of these firms.
"We have seen a 30% increase in new customer acquisition in September. It is higher than our average customer acquisition rate over the last three months," said Sashank Rishyasringa, co-founder of Capital Float.
This Diwali, we expect to increase our disbursals by 2.5x of the gross merchandise value financed during Diwali last year.Sashank Rishyasringa, Co-Founder & CEO, Capital Float
ZestMoney also claims improved traction in the lead-up to the festive season.
"We are seeing many customers reach out for a higher credit limit, indicating their willingness to spend more in coming months," said Lizzie Chapman, co-founder and chief executive officer of ZestMoney. "We've also temporarily doubled limits for select customers."
Televisions and phones are the categories where BNPL is being most commonly used, followed by home appliances, fashion and home decor. Unconventional categories seeing traction include electric vehicles, Chapman said.
CASHe, an instant loan financing company, claims it has approved over 40,000 loans in September, out of which BNPL constitutes around 40%. Mumbai-based LenDenClub, a peer-to-peer lending service, said its BNPL offering is expected to grow by 25-30% in the coming months.
The rise of BNPL aids the entire industry as it helps boost consumption, said Kumar Gopalan, chief executive officer of Retailers Association of India.
It's good news as manufacturers as well as merchants are benefitting. From flight tickets to spas, the model will have a positive impact on the economy.Kumar Gopalan, CEO, Retailers Association of India
Traditional Lenders Not Being Left Behind
Fintech firms aren't the only ones chasing the festival shopper.
Flush with liquidity, banks and non-banks have also stepped up festive season offers. These offers include no-cost EMI options to rival those put on the table by BNPL firms.
HDFC Bank Ltd., for instance, is offering cashbacks and no-cost EMIs across all premium smartphones and consumer durables. In a press conference last week, Parag Rao, group head of payments, consumer finance at the lender, said HDFC Bank will be pushing its own BNPL offering this festive season. "The bank is bullish about this segment," he said, adding that it will leverage its large network to push the offering. "It's a critical product to bring onboard new users who are just getting started with organised lending."
Similarly, ICICI Bank Ltd., through its pay-later product is also offering no-cost EMIs on home appliances and other electronic products with minimum documentation. The same is true for Bajaj Finance Ltd., the largest consumer finance non-bank lender, which has tie-ups with the likes of Amazon to push their no-cost EMI products.
Lend Now, Repent Later?
As with all unsecured consumer credit, the fear of delinquencies remains.
According to CRIF High Mark's latest CreditScape report, the delinquency rate among short term personal loans rose to 12.7% in March 2021 from 8.2% a year before. The portfolios at risk for loans between Rs 5,000 to Rs 10,000 stood at 23.9% as of March 2021. Portfolio at risk includes the ratio of loans which are overdue by 31-180 days.
To be sure, the CRIF report covers banks, formal NBFCs and a few BNPL-focused firms. Many BNPL providers don't report to credit bureaus and rely on their internal scoring mechanism.
It's important for the consumer, too, to keep the risk in mind. A default on any of these products can impact your credit history, said personal finance consultant Amol Joshi.
"BNPL is about convenience and shouldn't be used as a survival cushion," he said. "Even a single default is recorded and stored for eternity. You can't turn back the clock, and a bad credit score can haunt you for an extended period."