Buy now, pay later = party now, worry later


Do you have a long shopping list before Christmas? Bigger Fridge? The Sierra Blue iPhone 13? A new wardrobe? Or just more golgappas? India’s fast growing buy now pay later industry has a message for you: Swipe Now, Think Later.

While the start of the holiday season is usually accompanied by a variety of discounts from retailers and special offers from traditional lenders, this year BNPL companies are adding to the shine of the season by making sure you overcome any resistance to spending.

Companies like ZestMoney, CASHe, LenDenClub, LazyPay, Capital Float and Sezzle have all stepped up their efforts over the holiday season.

ZestMoney, for example, linked its offer to the Flipkart Big Billion Days sale from October 3rd to 10th and promised that you can later pay in parts with 0% interest.

BharatPe, a relatively new entrant in this space, is giving you up to Rs 10 lakh of credit through their PostPe that you can spend on everything from iPhones to golgappas street food..

Others ensure that their products are available at a greater number of touchpoints across the country.

The efforts are paying off, claim many of these companies.

“We saw new customer acquisition up 30% in September. This is higher than our average customer acquisition rate over the past three months,” said Sashank Rishyasringa, co-founder of Capital Float.

ZestMoney also claims improved traction ahead of the holiday season.

“We see many customers looking for a higher credit limit, which signals their willingness to spend more in the months ahead,” said Lizzie Chapman, Co-Founder and CEO of ZestMoney. “We have also temporarily doubled the limits for selected customers.”

CASHe, an instant loan finance company, claims to have approved over 40,000 loans in September, of which BNPL accounts for about 40%. Mumbai-based LenDenClub, a peer-to-peer lending service, said its BNPL offering will grow 25-30% in the coming months.

BNPL’s surge is helping the entire industry as it helps boost consumption, said Kumar Gopalan, chief executive officer of the Retailers Association of India.

Fintech firms aren’t the only ones chasing festival shoppers.

Banks and non-banks have also supplied the holiday offers with liquidity. These offers include free EMI options that can compete with those put on the table by BNPL firms.

HDFC Bank Ltd. offers, for example, cashbacks and free EMIs for all premium smartphones and durable consumer goods. 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 Christmas season. “The bank is optimistic about this segment,” he said, adding that it will use its large network to drive the offering forward. “It is an important product in bringing new users on board who are just starting out in organized lending.”

Similarly, ICICI Bank Ltd. also offer free EMIs on household appliances and other electronic products with minimal documentation through their Pay Later product. The same goes for Bajaj Finance Ltd., the largest non-bank consumer finance lender that works with companies like Amazon to promote their free EMI products.

As with all unsecured consumer loans, the fear of default remains.

According to CRIF High Mark’s latest CreditScape report, the short-term personal loan default rate rose to 12.7% in March 2021 from 8.2% a year earlier. The risk portfolios for loans between Rs 5,000 and Rs 10,000 were 23.9% in March 2021. The risk portfolio includes the ratio of loans that are 31-180 days past due.

Of course, the CRIF report covers banks, formal NBFCs, and some BNPL-focused companies. Many BNPL providers do not contact credit bureaus and rely on their internal scoring mechanism.

The risk is also important to the consumer. A failure with any of these products can affect your credit history, said personal financial advisor Amol Joshi.

“BNPL is about convenience and shouldn’t be used as a survival cushion,” he said. “Even a single failure is recorded and stored forever. You can’t turn back the clock and bad credit can keep you going for a long time.”

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