Synopsis: A brief explanation of the growing demand for buy now pay later apps in India, along with an analysis of the leading pay later apps to avail easy digital credit.
India is witnessing a digital credit boom, and pay later apps are on the forefront, enabling consumers to avail easy credit to finance their lifestyle. A Credit Suisse Group AG report estimates the growth of the digital payments market in India to reach $1 trillion by 2023. The buy now pay later apps are a core contributor to digital credit growth.
The article explains the concept of buy now pay later apps and shares the leading digital credit apps consumers can use.
Buy Now Pay Later (BNPL) Apps
The buy now pay later apps are a digitised version of the udhaar khata (credit book) facility consumers utilise from local neighbourhood kirana (ration) shops. Consumers buy daily needs goods from the ration shops and pay every week or every month. It is a revolving credit line provided by the shopkeeper based on reputation (in the society) and trust (timely repayments).
Imagine the same in the online space. The BNPL apps offer micro-credit to consumers based on their social profile (Aadhaar card or sometimes social account logins are integrated) and credit score (though first-time credit users can avail the services and start building a credit score profile).
As the consumer builds trust with the BNPL apps service provider, the micro-credit amount keeps increasing. Most buy now pay later apps offer a basic Rs. 2000 to Rs. 3000 credit line after completing the signup and basic KYC process.
The Indian ecommerce and credit lending market was introduced to the online “pay later” concept in 2015, and since then it has steadily grown. Most millennials depend on such buy now pay later apps to fulfill their lifestyle needs. Consumers use the pay later apps to pay for the phone, food, and shopping bills.
Leading Buy Now Pay Later Apps India
We hand-curated the following list after using the pay later apps (BNPL apps) for a few weeks.
#1 Simpl Pay
Co-founded by Nityanand Sharma and Chaitra Chidanand in 2015, Simpl Pay is the first technology company to introduce the concept of “buy now, pay later” to India. Their diverse group of individual and institutional investors include Transferwise, Visa Inc, and Square Inc.
Simpl Pay collaborates with financial institutions and merchants to extended digital credit to its consumers. A verifiable mobile number, PAN card, and Aadhaar card is enough to signup and receive a credit line based on their machine algorithm.
It enables one-click checkout on their partnered merchant platforms. Bills are generated on the 1st and 16th of every month, and the consumer roughly has 5-days to clear the dues in total.
In other words, digital spendings between the 16th and 31st of every month are added into a single bill, and the maximum due date is the 5th of next month. Payment delays attract a penalty of Rs. 50 per week + 18% GST.
The maximum credit limit is Rs. 20,000. The starting credit limit is Rs. 2,000 that increases with timely payments. However, the limit is reducible with regular payment delays.
Co-founded by Aurko Bhattacharya, Akshat Saxena, and Uday Somayajula in 2015, ePayLater give 14-days interest-free credit term to its verified consumers. It is a recognised startup of the Government of India’s Ministry of Commerce Department of Industrial Policy and Promotion (DIPP).
A verifiable mobile number, PAN card, and Aadhaar card is enough to signup and receive a credit line based on a quick CIBIL check. It collaborates with the IRCTC railway booking platform exclusively, giving Indian consumers unhindered access to railway travel and other integrated booking options.
While their website does not have a curated list of accepted merchants yet, ePayLater is acceptable on most major ecommerce, food delivery, and travel booking platforms through UPI. Where UPI option is not available, like the IRCTC website, the consumer receives an OTP to validate the transaction.
Every ePayLater bill is individually payable and has a distinct 14-day billing cycle. The bills are not clubbed together. For example, a transaction made on 5th has a due date of 19th, and a transaction on 10th has a due date of 24th of the month. The unique billing cycle process gives the consumer the benefit of paying the bills individually, removing the burden of paying a single combined bill.
The maximum short-term credit limit is Rs. 20,000. The starting credit limit is dependent on the CIBIL credit score check results, and it increases with timely payments. Delayed payments attract per day interest. Extensively delayed payment leads to account blockage with a slim chance of unblocking.
PayU is the owner of the LazyPay buy now pay later app. It is a Netherland-based financial conglomerate in operational since 2002. Nitin Gupta and Shailaz Nag introduced PayU to India in 2011. LazyPay launched in April 2017 to offer easy digital credit options to capture the growing mobile-savvy millennial market.
LazyPay collaborates with an extensive list of merchants. Signup with a mobile number and receive a basic Rs. 2000 credit line without any KYC. Increase the credit line up to Rs. 20,000 after completing the KYC process.
The LazyPay payment option automatically reflects on the checkout page of their partnered merchants. Choose the option, enter the OTP, and pay.
This BNPL apps follow a 15-day payment cycle where the bills are due on the 3rd and 18th of every month. Payment delays attract an Rs. 10 per day penalty. The account gets blocked when invoices are not paid on time; the account is automatically unblocked once dues are cleared.
Co-founded by Charlie Youakim, Paul Paradis, and Kilian Brackey in 2016, Sezzle Inc is a Minneapolis, USA based publicly traded financial technology company. It offers interest-free instalment plans through their turnkey alternative payment platform that utilises machine algorithm to extend digital credit to consumers.
Sezzle launched their pilot project in India in March 2020, and as of publishing this article, they have around 300,000 verified consumers from India. Indeed, being a populous country which is moving towards becoming a cashless society, Sezzle understands the tremendous opportunity India provides to BNPL apps.
The buy now pay later app offers a unique payment option. Every bill is split into 4 EMI’s, payable over 6 weeks with 0% interest. For example, if a consumer shop for around Rs. 2,000 from any of their partnered stores, the buyer pays 25% upfront, that is, Rs. 500 and continues to pay 25% every 2 weeks at 0% interest. Any penalty amount in case of payment delays is not yet clear from their website. The Sezzle payment option is visible prominently during checkout.
The signup process is easy – create an account with mobile number, verify email id, add PAN and other KYC details, and connect the UPI id or a bank card for easy repayments. The digital credit limit is decided based on credit analysis and repayment record.
#1 Is the “buy now, pay later” concept the same as availing a “personal loan”?
The BNPL apps simply extend a micro-credit line to the consumers at 0% interest for 14-days maximum. The micro-credit is capped at Rs. 20,000 mainly. There is a basic KYC process involved, and everything is app-based. There is no need to visit any physical branch or office.
In contrast, there are processing fees, hard CIBIL check, physical document verification, reference verification, and EMI’s involved in the personal loan process. Personal loans are not availed for 14-days; the minimum time period is 91 days.
Using the buy now pay later apps is like availing a credit option at a local friendly neighbourhood grocery store.
#2 Are non-payments reported to credit bureaus?
Yes, they are.
The buy now pay later apps are often a bit lenient in extending repayment time. However, repeated repayment delays or non-repayment are reported to credit bureaus. Therefore, never default on repaying the pay later apps. A few thousand rupees is not worth ruining a credit score.
#3 How do the BNPL apps make a profit?
The BNPL apps business model has two revenue methods: they receive a commission from merchants for providing them sales volume, and they earn interest / late fees from the consumers when they delay making payments.
The “buy now pay later apps” are strongly contributing to the digital credit boom in India. Their unique business model is giving millions of Indians an easy access to micro-credit facilities.
The pay later apps are technologically robust, secure, and utilises multiple credit assessment factors other than relying on just the CIBIL score to extend a micro-credit line to new and existing consumers.