With a surge in COVID-19 cases across the country, there has been a decline in discretionary spends according to data shared by BNPL (Buy Now, Pay Later) players. Experts, however, point out that the dip in spending has been much lower than what was seen during the peak of the second wave of the COVID-19 and the demand is expected to resume by the end of February.
“There are two-three cycles in India as far as BNPL is concerned. The larger cycle starts in August and ends in November around Diwali. That’s when festival related purchases happen. Second, cycle starts from March and ends in April again due to festival and marriage season. This wave has somewhere caught between the two periods. So anyway, we were expecting 10-15 per cent kind of impact in overall consumption related spending. That’s what we are seeing this month. This impact is expected to continue till the February end,” says Bhavin Patel, Co-founder, CEO, LenDenClub.
Patel adds, “It was experienced in the second wave as well, during the month of April and May in 2021. The demand had gone down by sizable number so compared to that it is very less. As compared to the second wave, where we had demand going down by 60-70 per cent, this time we are not expecting to go below 15-20 per cent.”
Nitin Gupta, Founder and CEO, Uni, agrees, “We saw a 20 per cent dip in the first half of the January, as spend had come down with lockdowns being imposed. Earlier also when the second wave hit the country, spends were lower in the months of April and May. Something similar is happening this time.”
Has there been any impact on the bounce or default rate? Bhavin adds that no such impact has been seen of late. “No significant impact has been seen on the payment side. January so far has been at par with the previous month, as there has been no impact on jobs. Even from the customer side we are hardly receiving requests to delay EMIs because of job losses.”
The Buy Now, Pay Later sector allows one to defer the payment for their purchases without additional costs being charged. Currently the size of India's annualized BNPL market in gross transaction value terms has grown to around $3-3.5 billion (Rs 22,500-26,250 crore) and is expected to reach $45-50 billion (Rs 3.37-3.75 lakh crore) by 2026, according to consultancy firm RedSeer.
Experts point out that currently BNPL represents a small portion of the loan market but it is all set to overshadow the traditional credit markets that, after decades of effort, stack up at Rs 8.65 lakh crore for personal loans at banks and Rs 1.23 lakh crore for outstanding credit card debt.
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