The New Genie in Town
The Indian consumer never had it better. Whether it is the latest appliance or low-value purchases, the craze around point-of-sale credit has seen consumers making a beeline for such credit options that enable them to make purchases without having to make immediate payments. Welcome to the world of Buy Now, Pay Later (BNPL) schemes, which are burgeoning by the day and have captured the imagination of the aspirational Indian middle class. These BNPL schemes—offered by several platforms such as Paytm, LazyPay, ZestMoney and even banks—have fuelled consumption by making it extremely easy for consumers to make purchases. The borrower gets the option of an instant, short-term loan with a deferred repayment tenure, including the facility of equated monthly instalments after the end of an interest-free period. The BNPL offerings are attractive since they are small-ticket loans, often for daily consumption purposes. While they are like credit cards, these don’t have the hassles of an application process, card-swiping infrastructure, and purchase and cash withdrawal limits. Put simply, they could be a consumer’s dream.
No wonder, then, that the BNPL market is set to surge to a hefty $45-50 billion, or `3.37-3.75 lakh crore, by 2026, from just $3-3.5 billion (`22,500-26,250 crore) now, and become almost as big as the traditional credit markets like personal loans and credit cards. However, as Teena Jain Kaushal and Anand Adhikari write in our cover story, there are major downside risks with more and more first-time consumers, often without any credit history, lining up for such BNPL schemes, particularly in the smaller cities and towns. While hidden costs and inadequate disclosures often make it tough for new-to-credit customers (estimated at about 50 per cent of those availing BNPL credit) to understand the nuances of these offerings, there is also the danger of increasing non-performing assets on the lenders’ side as there is often very little information available about the borrowers. It is no surprise that globally, too, regulators in the US and the UK are keeping a close watch on the BNPL segment.
Meanwhile, as India gets ready for the Union Budget of 2022-23, we take a close look at what the nature of GDP growth could be, and whether the economic recovery could be V-, K-, or even W-shaped, with various economists and experts putting out different possibilities. While some experts, including policymakers, feel India would likely see a sharp, Vshaped upturn, there are many who feel the widening chasm between a strong corporate sector and a struggling micro, small and medium enterprises segment will lead to a K-shaped recovery with the two tails of the alphabet showing the different trajectories of the two sectors. With the Omicron variant of Covid-19 casting a shadow over the economy, all eyes will now be on Finance Minister Nirmala Sitharaman’s next Budget.
As we welcome the new year, our team of reporters also brings you the trends and the people who are likely to dominate discussions and headlines in the coming year, and the key developments to keep an eye on. I wish you and your families a very happy, healthy and prosperous 2022.