A note of caution amid the BNPL boom

As the ‘buy now, pay later’ business—a limited-period, zero-interest consumer credit scheme—heats up across the world, the impact is being felt in India as well. While several early-stage entrepreneurs have hopped on the country’s nascent BNPL market, established lending startups too are pivoting to this to attract investor attention and better valuations.

Capital Float recently raised $50 million from Lightrock India, Sequoia Capital and others, pitching its BNPL business with Amazon, MakeMyTrip and Unacademy. A few days prior to this, BNPL startup ZestMoney raised $50 million in a strategic investment from Australian BNPL company Zip.

Also, payments Unicorn BharatPe launched a BNPL offering called PostPe last month for consumers transacting on BharatPe QR codes. And Paytm offers users of its digital wallet a postpaid product for BNPL purchases. Several consumer-facing platforms have their own pay-later options, like Ola Money Postpaid.

While the BNPL opportunity is huge, multiple factors influence the market in India. Well-capitalized consumer-focussed banks can give startups a run for their money, and given the relatively small size of India’s ecommerce market, retail players like Bajaj Finance rule the roost.

And as Covid-19 took the wind away from India’s consumption story, the gross non-performing rates, or non-repayment of loans, of several BNPL companies have increased to 10-15% in the last year-and-a-half, from around 5% earlier, say industry sources.