The buy now, pay later (BNPL) offering was designed to help people shop without second thoughts and digital lending startups avoid high customer acquisition costs. But not everything has gone as planned, and for this nascent segment currently, it looks a bit like buy now, pain later.

Startups are grappling with the problem of late or missed repayments. Some large platforms are seeing bounce rates, i.e. loans not paid back on time, of 10 to 12%, said a senior executive in the space. 

They are forced to use recovery teams to make consumers pay back loans due for more than 30 days, a standard practice in the lending industry. Recovery rates of such loans hover above 80%, he added.

Loans not paid for over 90 days are classified as non-performing assets, or NPAs. In the BNPL segment, the recovery in such cases is 20 to 25%, according to the executive.