Everything You Need to Know About BNPL

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In recent years, the online payments industry has witnessed some significant changes in India. Fintech firms around the country have been launching new modes of payment that are aimed at simplifying things for the consumers. Some of the most popular forms of digital payments include mobile wallets, unified payments interface (UPI), as well as Buy Now Pay Later (BNPL). Let’s look closer and learn more about BNPL.

The concept of BNPL is not a new one. Particularly in a country like India, paying for groceries at the end of the month has been a fairly common practice for years. This practice used to be categorised under the Khata system. This new concept of BNPL is simply a revised app-based version of the Khata. This form of payment has been gaining traction across the country in recent years. Some interesting notions about BNPL:


Key Benefits of BNPL

1. BNPL can be categorised as a form of micro-credit.

This is because it enables a customer to buy a product without having to pay for it immediately. Most fintech firms offer BNPL solutions that do not include any interest on the credit that they are providing to the customers. Some experts also consider BNPL to be a successor of the credit card system, simply because it is much easier to use.


2. Another major benefit of BNPL is that it is highly convenient.

Customers simply get to choose the pay later option on their merchant payment page to complete the purchase. The bills from various purchases on different platforms via Pay Later is then consolidated into a single bill. This makes it much simpler for consumers to keep track of all their expenses. The process can also be automated, making life easier for consumers.


3. Further, BNPL also provides a major benefit in terms of being universal.

This mode of payment is not only beneficial for consumers, but it is also equally rewarding for retailers or sellers. For example, if a retailer signs up for a BNPL solution, they can ensure a regular flow of cash at the end of each month or the respective billing cycle. Not to mention, merchants witness lesser drop-off rates at checkout pages with BNPL and higher purchase frequency and ticket sizes even. BNPL thus goes a long way in resolving the cash woes – both for retailers and consumers. 


4. BNPL is also much safer compared to the other forms of payment.

This is because you do not need to share any sensitive information about your credit/debit cards in order to complete your purchases each time. The entire payment experience is also seamless since there is no need for multiple levels of verification and authentication. 


Rising Rates of Adoption in India

Historically, Indian consumers are known to be cash-friendly. However, this trend has been changing in recent years. Over the past few years, an increasing number of Indians have made the transition towards online modes of payment, including mobile wallets, net banking, and BNPL. In particular, BNPL has shown that this mode of payment has tremendous growth potential.

In addition to the above, the COVID-19 crisis has also escalated the growth rate within this segment. According to estimates, the daily essentials transactions conducted via Simpl have recorded an increase of over 50% during the COVID-19 period. This figure indicates that Indians are willing to try new forms of online payment and are becoming highly receptive to the BNPL mode in particular. It is likely that this trend will also continue in the near future. India is definitely moving towards becoming less reliant on cash, and BNPL is leading the way. 


Conclusion and Future Outlook

One of the defining features in the digital payments industry in the coming months will be the increased consumer demand for a frictionless payment experience – streamlined, one-click, an invisible payment experience even. Further to this, the efficiency of real-time payments is what consumers would lean towards.

As our BNPL systems benefit from the integration of AI and ML, the increase in digital transactions would also call for efficiency in fraud detection and prevention. While we look at orchestrating this effortless and highly intelligent payment experience, the responsibility will also lie in making this available to the end-user at the least cost possible. The facilitation of digital transformation in India will entail not just a faster, smarter payment system but an efficient one at that.


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