Indian consumers are ratcheting up buy-now, pay-later (BNPL) installment plans to purchase everything from washing machines to vacations online as the nation’s longest festive season gets under way.
Popularity is swelling for these small-sized loans that typically amount to less than 5,000 rupees (US$67) as the labor market recovers from the COVID-19 pandemic shock. Those payments have been growing at least 20 to 30 percent over the past three months, fintech-firm executives said.
They are expected to increase by about 66 percent on an annual basis in India to US$11.6 billion this year, a survey by Research and Markets showed.
Photo: Reuters
“Things are very positive, people have got their jobs back,” said Bhavin Patel, cofounder and CEO of LenDenClub, a peer-to-peer lending platform. “The buy-now, pay-later model is the most popular source of borrowing for customers who need small size loans quickly to tide over immediate cash needs.”
Rising vaccination rates, coupled with decreasing COVID-19 cases, are fueling optimism that people are more willing to spend on goods and jewelry this year. Those consumers are increasingly turning to installment plans from retailers such as e-commerce giants Amazon.com Inc, Flipkart Internet Pvt Ltd and Ant Group Co (螞蟻集團) backed Paytm Ecommerce Pvt, as well as smaller fintech firms like LenDenClub, Simpl, ZestMoney and CASHe.
LenDen has seen loan applications treble to 170,000 last month from February and expects a further increase to 250,000 in December, Patel said.
More broadly, spending per credit card was up 54 percent in August from a year earlier, a Bank of America Corp report showed.
“BNPL is aided by two things, one is the festive season and second is COVID as people are becoming more comfortable with purchasing online,” CASHe chief executive Yogi Sadana said. “We are growing about 30 to 35 percent on a monthly basis, in terms of the number of loans we provide every month. The pick-up is phenomenal.”
For fintechs, such loans are filling a sweet spot. They cater to customers who typically would not either qualify to borrow from a traditional bank or would have to wait longer than getting a loan within a few hours.
“It’s a win-win for all three players — the borrowers who get loans quickly, the lenders who earn 10 to 12 percent average returns and us who earn a 5 to 6 percent fee by getting the borrowers and lenders on a common platform,” Patel said.
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