With the current progress and widespread adoption of BNPL among the Indian populace, it is easy to estimate that the future is bright for this innovative micro-lending model.
BNPL is one of the fastest growing payment systems among Indian consumers. In September this year alone, BNPL witnessed a 35% spike in transaction volume, and this goes on to display the immense popularity of BNPL in a country of 137 crore Indians.
But what is fueling the rapid growth of BNPL among Indian consumers? Research conducted by Sumeet Srivastava of Spocto and team points out a few.
The Rise of India’s Ecommerce
Over the past couple of years, ecommerce has witnessed a sharp growth in India. From being a phenomenon restricted to high rises of India’s metropolitan cities to drawing a 67% user base from Tier 2 cities and beyond, Indian ecommerce has come a long way, and everyone right from businesses and payment processors to consumers want to take advantage of this.
However, in order to better serve customers from Tier 2 & 3 cities, it is important that BNPL is incorporated as one of the offerings.
Combined with the growth of cashless payments, eCommerce players have realized the need of equipping consumers with the right tools to shop freely, and there is no better answer to this than BNPL.
Right from Amazon’s PayLater to Flipkart’s native offering of the same, even marquee financial institutions want to acquire a slice of the pie via their offerings. For instance, ICICI PayLater and HDFC’s FlexiPay are both platforms designed to leverage this opportunity.
No matter which BNPL innovation you focus on, one common hamstring which all of them largely owe credit to is the frictionless service they offer to consumers.
“You see, in India, microlending has been prevalent for many years; however, the former has largely been delivered via informal channels, and BNPL is banking on this exact opportunity to design an online micro-lending credit source.”
BNPL as an offering is redefining the traditional microlending architecture thereby making it more accessible and efficient for the end consumer.
As the popularity of BNPL continues to rise, it is predicted to have a 9% market share by 2024 and with upcoming innovations, this seems like a plausible goal.
However, our research indicated that there are still some challenges in the BNPL ecosystem that need to be addressed if the offering is set to reach its full potential, with one of them being collections. As we articulated in a previous publication, digital collections are by far the most efficient method of ensuring that consumers can repay their financial obligations with the same ease that they borrowed it the first time.
If aggregators and providers rely on legacy collection channels, not only will the overall efficiency of the system decline, but it will hamper the relationship with the end consumer as well.
The reason behind this is simple; traditional collection channels demand the consumer to take up additional effort on their part to repay their obligations, for example, bank transfers.
On the other hand, modern collection systems leverage cutting edge technology such as artificial intelligence and machine learning to not only learn but also adapt to consumer behaviour and ultimately provide them with a repayment option most convenient to them. Along with this, since modern collection channels support a wide array of payment systems, right from auto debit UPI to credit cards, the dream of empowering consumers to repay at the touch of a button is closer to home than ever before.
The Way Ahead
With the current progress and widespread adoption of BNPL among the Indian populace, it is easy to estimate that the future is bright for this innovative micro-lending model. The next challenge, however, remains, to translate the same efficiency in offline transactions as well, and that will be a development worth noting.
Source: Business World