The BNPL market in India is booming, attracting global buyers

By Puja Sharma

The global Buy Now Pay Later market has experienced rapid growth over the past few years. This rapid expansion is projected to continue, with BNPL sales expected to more than double between 2021 and 2026, according to this report’s findings. Several market players are seeing even stronger growth than the industry’s average. These include the world’s three largest Buy Now, Pay later specialists, Affirm, Afterpay, and Klarna.

The BNPL boom

The secret behind BNPL’s rapid expansion is the smooth integration of these services into E-Commerce checkouts, attractive financing options like interest-free pay-in-four loans, and a relatively easy application process. Among the top motivations for consumers to use BNPL services is the ability to afford items that would otherwise be beyond their budgets and the desire to avoid paying credit card interest. Overall, Buy Now, Pay Later is projected to grow faster than some other leading payment methods, to account for nearly one-fourth of the world’s online retail sales in five years, according to a forecast included in the report.

According to the Survey, BNPL payment in India is expected to grow by 89.5% on annual basis to reach $6927.4m in 2022. The medium to the long-term growth story of the industry in India remains strong. The Buy Now, Pay Later payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 54.3% from 2022-to 2028. The BNPL Gross Merchandise Value in the country will increase from $3656.3m in 2021 to reach $93509.1m by 2028.

While the buy now, pays later (BNPL) services have been around for quite some time, it is the global pandemic that has propelled the adoption and growth of the BNPL industry in India. With over a billion consumers and a large credit-averse population, BNPL is expected to disrupt the payments sector in India.

Amid the growing demand for BNPL products from both merchants and consumers, the publisher expects such firms to aggressively raise fresh capital for expanding their services across the country. Moreover, as the BNPL market in India continues to record strong growth over the next few quarters, it is expected that more global firms to expand their footprint in the country. This will subsequently lead to more strategic partnerships and mergers and acquisitions deals from the short to medium-term perspective.

Boost around festival season

Over the last four to eight quarters, BNPL platforms have experienced accelerated growth based on widespread adoption. However, the market got a further boost during the festival season in the country, wherein several BNPL platforms reported over 100% growth in disbursals during the Diwali festival in 2021, compared to the year before.

LazyPay, the product owned by PayU, experienced a credit demand increase of 300% over the last festive season in India. The firm mainly experienced demand in segments such as food and beverages, travel, and entertainment. With the firm facilitating five million transactions every month through its platform in 2021, LazyPay targets to acquire two million new consumers by the end of 2022.

Global firms are entering the Indian BNPL market: Given the high-growth potential of the Indian BNPL segment from the short to medium-term perspective, global firms are entering the market through strategic investment in local firms. In September 2021, Australian firm Zip announced that it is investing $50m to acquire a minority stake in the local BNPL brand ZestMoney. The strategic investment from Zip in ZestMoney is part of the company’s expansion plan in new markets.

Diffusion of funds in the BNPL startups

The majority of BNPL startups operating in the Indian market have experienced significant growth over the last year. With the market expected to record strong growth over the next few quarters, such platforms are raising funds to expand and capitalize on the high-growth potential industry. In December 2021, Simpl, one of the leading BNPL platforms in India, announced that the firm had raised $40m in its Series B funding round. The firm is planning to use the newly infused capital to expand its BNPL offering across the country to further accelerate its growth.