BNPL - A Bankbazaar Primer
The Covid-19 pandemic has fundamentally transformed consumer behavior and spending patterns in two major ways.
One: Job losses and paycuts due to the ensuing lockdowns have made it difficult for many people to spend money freely.
Two: An increasing number of people have turned online even for their essential expenses like groceries and bills in addition to their discretionary purchases.
Consumers, especially the millennials and Gen Z, are today looking for simplified micro credit solutions to better manage their recurring and occasional purchases which can be applied for easily and availed for seamlessly. All these factors have led to the massive popularization of Buy Now Pay Later or BNPL services in India in the last few years. With over 30 focused start-ups, a few e-commerce giants and even leading banks and NBFCs now joining the bandwagon, BNPL services in India are making rapid progress in customer onboarding, merchant partnerships and attracting investments.
What is BNPL?
For the unfamiliar, a BNPL service allows customers to make eligible purchases which can be split into easy instalments or repaid at a later date (within the repayment cycle) at zero-to-low interest charges. BNPL service providers offer customers short-term micro-loans for specific purchases usually starting at Rs.2,000 and going up to Rs.1 lakh in credit limits, with repayment cycles in the range of 14 days to 30 days (up to 90 days, in some cases) depending on the terms and conditions of the service provider.
However, late-payment penalties (and interest charges, in a few cases) could be levied for repayments beyond the due dates while BNPL providers can report about late payments to credit bureaus potentially hurting the credit scores of such users.
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