Introduction

Indian startups are coming up with unique solutions to empower local merchants. Small merchants don’t feel left out anymore in this whirlpool of technological advancement in the retail sector. According to a report, India is the world’s fastest-growing e-commerce market and this has opened up the platform for both big and small local merchants to woo the 1.3 billion smartphone-friendly Indian population. And the e-commerce industry has upped the ante for merchants of all volume and capacity with easy payment methods that are user and seller-friendly.

BNPL in India

Lending and borrowing have a deep connection with our Indian buyer sentiments. India’s vibrant fintech ecosystem has helped in empowering local merchants by offering them the options of a safe and sustainable credit system; one such option of the new fintech revolution is the ‘pay later’ credit service. This micro-credit system, commonly as BNPL or Buy Now Pay Later, is fast catching the attention of local smaller merchants because they are finding it similar to the traditional micro-credit system of ‘Khata.’ Khata works on the core virtue of trust between a merchant and a customer. In this traditional system practised in the Indian subcontinent from ages, a merchant allows a buyer to pay later at the end of a month; this happens after the buyer builds a bond of trust with the merchant by maintaining a good track record of purchases and repaying of debts on time. The BNPL system of credit, if simply put, is the digitisation of the Khataa system. Here too an e-commerce merchant offers a micro-credit option where a consumer can make a purchase and pay later without having to pay any interest if paid within the agreed time. The BNPL option is a one-click process at the point of check out.

During the nationwide lockdown imposed post the COVID-19 outbreak, Simpl onboarded smaller D2C (Direct to Consumer) merchants like Maate, Yoga Bar, Sleepy Owl Coffee in the list of 1500 new merchants taking the count to 2500 inducted vendors.

The increase in the ‘pay later’ offering indicates that the Indian merchants are open to induce the ‘pay later services. It also reflects that the merchants are opting for BNPL because it’s low-cost, affordable and helps in streamlining cash flow and credit collection. Also, the service is convenient and secured with minimal defaulters.

For the buyer, pay later service is a frictionless payment experience which enhances customer experience and retains a buyer’s loyalty towards a brand.

The industry trend indicates that BNPL could be the key to bring the smaller merchants in the bandwagon of new payment technology which is safe, cashless and frictionless. However, changing a merchant’s behaviour will require trust and evidence of clear benefit to the owner. Any service must either increase revenue or reduce cost.

How BNPL is empowering local merchants in the e-commerce world:

1. Consumer-friendly

During the lockdown and economic uncertainty, BNPL is empowering local merchants to broaden their customer base and drive sales without increasing costs or risks. Despite the pay cuts and job losses people still bought their basic necessity online using the power of ‘pay later’ services primarily for two reasons – buyers wanted to avoid paying high credit card interest; they wanted to make purchases and pay for it after a certain period, mostly interest-free. The option of paying later eases the worries of an online buyer which in return helps the merchants maintain their sales.

2. Customer loyalty

Many local merchants are embracing BNPL payment options because buyers are carefully evaluating the importance of each purchase, many consumers are seeking merchants that are offering flexibility in payments. BNPL is becoming increasingly popular for consumers seeking the balance between managing budgets and the need to immediately acquire products vital to their daily lives. BNPL is an alternative payment method that embodies both flexibility and control by enabling consumers to get the products they want first and submit payment later. This process is helping consumers to get attached to a brand.

3. Frictionless checkout

Pay later service at the point of sale with a single click helps a consumer to easily navigate out of the shopping app without having to share valuable banking details or wait for OTPs. This is helping online retailers focus only on engaging their customers, driving repeat business, increasing average money spent per transaction and limiting cart abandonment.

4. Alternative to credit card

The traditional credit card has laid the red carpet to ‘Pay-later’ because BNPL allows consumers across the globe the experience of shopping with convenience, peace of mind, transparency and affordability. Where credit cards don’t align with the value system of today’s millennial consumers given the high-interest rates, fees and low transparency, it’s not a good fit especially for those who are relatively new to credit and are at risk of getting stuck in a debt trap. Online retailers are seeking to drive sales amongst the millennials who are finding the BNPL concept attractive with benefits such as interest fees as low as 0% and minuscule sums in late fees. Unlike a credit card which offers a pre-approved credit line, BNPL apps offer point of sale (POS) loans.

All of this is appealing not just to the merchants but is garnering increasing takers in the consumers too. With the empowerment of local merchants , BNPL is playing a crucial role in facilitating more and more merchants to embrace this alt-credit offering and extend their benefits to their customers.

 

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