Diwali bonanza for BNPL platforms as disbursals grow by more than 100%

The buy now pay later (BNPL) juggernaut continued to grow bigger during the festive season as multiple players said that they saw disbursals grow by more than 100 per cent compared to Diwali last year.

LazyPay, the BNPL platform of Prosus-owned payments major PayU, saw credit demand rise 300 per cent over the festive season last year, especially in segments like travel, food & beverages and entertainment.

“We also saw an uptick of 70 per cent in user acquisition in the last two months. Around 60 per cent of the demand is from tier-2 and tier-3 cities, specifically outside of the top 10 cities in India, while the average age of consumers is 26-27 years,” said Anup Agrawal, business head at LazyPay.

Uni, a BNPL company started in June this year, saw more than 100 per cent increase in transactions, both in terms of volumes and value during the festive season. 

“We are currently doing more than Rs 100 crore of monthly disbursals and the peak spend per day in the season was 200 per cent higher than the average,” said Prateek Jindal, co-founder and chief product officer of Uni.

“We added 5X new customers in October compared to last year. In October alone, we crossed the gross merchandise value we did in the entire festive season last year. We are on track to hit $1 billion in GMV this financial year,” said Lizzie Chapman, CEO and co-founder of Bengaluru-based pay later start-up Zest Money which counts Goldman Sachs, Xiaomi among its investors.

However, it is not pure-play fintech start-ups who are riding high on the BNPL wave. In September, ahead of the festive season, Flipkart had raised the credit limit of its pay later service from Rs 10,000 to Rs 70,000 which a customer can pay back as equated monthly installments (EMIs) over a period of 12 months.

This led to nearly a 4X jump in the number of transacting customers using Flipkart Pay Later and over 1 million customers opted for the facility for their purchases during the Big Billion Days sale, a company spokesperson told Business Standard.

“India is traditionally a credit averse market and the Coronavirus (Covid-19) pandemic’s impact has increased reliance on credit solutions. Access to credit is a key unsolved need for Indian customers who want to manage their expenses, while also fulfilling their aspirations,” the spokesperson added.

E-commerce major Amazon also has its own pay later service. The company did not respond to queries on its pay later service’s performance during the festive season.

Fintech unicorn BharatPe, which launched its BNPL platform PostPe in early October, saw average daily disbursals grow 2X to Rs 6 crore after the first two weeks. Suhail Sameer, CEO of BharatPe, said, “The top spends were in categories like cabs, QR transactions at grocery or small retailers as well as electronic purchases- these are ones that witness a spike during the festive season. We expect the numbers to stay steady post festive season as the awareness for the product has grown manifold in the last one month.”

While most of these players saw transactions on their platforms rise on account of increased spends on categories like apparel, electronics and grocery, BNPL start-up Simpl said that it recorded more transactions on purchases like cosmetics and food delivery.

“Another interesting trend this Diwali has been that the larger share of the BNPL growth has been due to purchases on direct-to-commerce platforms rather than the e-commerce biggies like Flipkart and Amazon,” said Nitya Sharma, founder and CEO of Simpl.

Sharma said that the platform was seeing average disbursals of Rs 125 crore and three million transactions monthly before the festive season, but saw transactions growing 100 per cent month on month in October.

Mrigank Gutgutia, associate partner at Redseer Consulting, said,“The current size of the BNPL market is $2-3.5 billion (in terms of disbursals) in India depending on which types of BNPL models are considered. It is expected to grow 15X (or 68 per cent CAGR) to reach $40-50 billion in the next five years in the aggressive scenario and at least $30 billion in the moderate scenario.”

Ezetap, a payments company which integrates BNPL with point-of-sales machines and at the checkout of ecommerce platforms, said it recorded a 73 per cent increase in volume of pay later transactions, and a 136 per cent rise in value of transactions during the festive season this year compared to 2020.

However, when compared to average monthly pay later transactions this year, there was a 17 per cent increase in volume of transactions and a 20 per cent increase in value, said Ezetap. The average ticket size of BNPL transactions on the platform rose only by 3 per cent during the Diwali period.

“This surging trend of pay later schemes is likely to sustain and grow further in the months ahead. We are anticipating our Diwali growth to continue and sustain as consumer demand for BNPL increases, and are already working towards expanding the team to manage the demand and enhance our offerings,” said Bhaskar Chatterjee, head of product at Ezetap.

Line of credit

 

*PayU’s BNPL platform saw credit demand increase 300 per cent over the festive season last year

 

*Flipkart’s pay later service saw transacting users jump four fold after credit limit was increased to Rs 70,000 in September

 

*BharatPe saw average daily BNPL disbursals grow 2X to Rs 6 crores after the first two weeks of launch in October

 

*Zest Money, a BNPL platform backed by Goldman Sachs, Xiaomi, added 5X new customers in October compared to last year

 

*Ezetap recorded a 73 per cent increase in volume of pay later transactions and a 136 per cent rise in value of transactions during the festive season year-on-year

 

*India’s BNPL market to reach $40-50 billion in the next five years in the aggressive scenario and at least $30 billion in the moderate scenario