The Indian BNPL market could become the largest in the world and is expected to grow 10-fold over the next five years to reach $35-40 billion by 2026, according to a market research report by Benori Knowledge, a provider of custom research and analytics solutions. The market was at a nascent stage of $3.5-4 billion in 2021.
“One of the most interesting trends to play against the backdrop of the accelerated adoption of e-commerce platforms in India is the rise of the BNPL payment option,” according to the report.
In terms of e-commerce, BNPL is expected to constitute 14% of transaction value by 2026, a growth of almost 5 times, compared to 3% in 2021.
“India’s high youth demographics, rising consumer spending, increasing preference for online channels and electronic payment methods, exponential growth in e-commerce, transparency of costs and benefits, and experience frictionless payment systems are expected to contribute to market growth over the forecast period,” the report says.
Also, the low credit card penetration at 5% is not enough to meet consumer credit demand, he added.
India currently has around 22-25 million BNPL users, which is expected to reach 90-100 million by 2026.
Impact on consumer decisions
Benori conducted the survey with over 1,000 users. 90% of users said they were more likely to shop at stores, both offline and online, that offer BNPL at checkout. Similarly, 75% confirm using BNPL when shopping on e-commerce websites and apps. The BNPL option is most commonly used to purchase electronics (71%), followed by fashion and lifestyle accessories (67%) and common and daily shopping items (57%). The preference for BNPL is driven by its low or non-existent interest rates, followed by flexibility and convenience and ineligibility for credit cards, according to the report.
The number of BNPL users bridges the gap to the number of users using credit cards. Almost half of respondents said they use both BNPL and credit cards for payments; 45% said they would prefer to make payments through BNPL, even if they have a credit card.
“This indicates that BNPL will become a ubiquitous payment method in the future as it sees increased acceptance from the young and savvy segment of the population,” he said.
“Furthermore, BNPL, as an alternative mode of payment, increases consumers’ ability to spend and also encourages overspending,” he added.
90% of respondents said they spent more money than they expected because of BNPL, and 40% said that using BNPL increased their monthly spending by 30%. This increase climbed to 50% for 33% of respondents. The trend was also prevalent in Tier 2 and Tier 3 cities. The survey also indicated that, on average, women spent more money than men when using BNPL.
Surveyed users also expressed a preference for a credit limit of over ₹50,000 and a 30-day refund period, far exceeding what is currently offered by most BNPL providers.
Ashish Gupta, co-founder and CEO of Benori, said: “While there has been a huge increase in online shopping amid the pandemic, inflation and reduced disposable income have led to the emergence and the boom in short-term financing solutions. These two elements have propelled the growth of BNPL services in the country.
“Although BNPL currently represents only a small share of e-commerce spending, there are signs that there is still plenty of room for BNPL businesses to grow in this segment. Additionally, with easy access to a digital credit facility, BNPL also fills gaps in consumer credit demand that credit cards cannot fill. Our research findings validate this and highlight the enabling factors that enhance the potential of BNPL services in India. With ever-increasing e-commerce volumes, and the fintech ecosystem and other growth drivers coming together, the Indian BNPL market is poised for extraordinary growth by 2026, emerging as a win-win situation. for all stakeholders in the BNPL space,” Gupta said. .
March 26, 2022