From big-ticket items to small purchases, Indian consumers are not hesitating to avail card-linked credit financing options at the point of sale to check out products from their wish list this festive season.
Undoubtedly, one of the most dynamic and fast-evolving industries in India is the Retail industry. Driven by an aspirational middle-class population and the rising purchasing power, India’s retail industry is growing in leaps and bounds. A major catalyst in this growth is the tech-led innovation being seen in the credit financing space. From big-ticket items to small purchases, Indian consumers are not hesitating to avail card-linked credit financing options at the point of sale to check out products from their wish list this festive season. Dubbed Buy Now Pay Later (BNPL), these credit financing options are often misunderstood for many reasons.
Debunking the myths around No-Cost EMIs
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1. Cost of the product includes the interest (hidden charges): One of the biggest misnomers around no-cost EMIs is the claim that product prices are elevated to adjust for the discounts. In the era of heightened consumer awareness, availability of multiple shopping options both online and at offline retail stores, today’s smart shoppers can instantly do price comparisons from multiple sources before committing to a purchase. Increasing the cost of the product to accommodate a Pay Later financing therefore is not in the interest of the brands trying to sell to consumers.
2. Consumers are gullible: Consumer financing has always existed, what has improved exponentially is how these are delivered to the end consumer aided by technology. Today, with just a few taps on a POS terminal, consumers can have quick access to their approved line of credit from their banks and avail no-cost EMIs. The experience has shifted from paper-based, documentation-heavy, human interactions with an in-store financier, to paperless and swift approvals all thanks to the cutting-edge tech stack sitting on top of these terminals. This notion that consumers are gullible and tend to commit to overspending is just blatantly questioning their financial prudence.
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3. Impacts the credit scores: Like I mentioned in the previous point, BNPL is the new and improved avatar of consumer financing that has existed for many years now. Will it completely eradicate the menace of credit defaults? The answer is an emphatic ‘No’. To factor such risks banks already have adequate credit score mechanisms in place and fintechs are merely providing the platform for such credit-worthy consumers to get access to their line of credit. The impact on credit scores for any defaulting consumer will be the same as it will be while availing credit from any other alternate (read: traditional) source of credit. Therefore, this allusion that no-cost EMIs specifically will impact credit scores on account of any defaults in repayments needs to be read in the correct perspective of how the consumer financing space operates.
There are also some interesting trends that we are witnessing in this space. A seismic shift in behavior from both consumers and merchants is evident.
For consumers:
- Brand allegiance is a thing of the past as today’s shoppers only want the best value for money.
- EMIs are fast emerging as a smart payment choice especially by millennials and Gen Zers.
- Contrary to popular belief that only white goods and electronic products are picked on EMIs, today’s smart shoppers are taking the EMI route to shop for non-electronic products like furniture, lifestyle, healthcare, and even planning their travels through EMI-linked payment options.
- Consumers are also safeguarding their purchases by opting in for add-ons like warranty and making their purchases affordable by opting for trade-in offers.
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For merchants:
- Our merchant partners have upgraded their point-of-sale payment acceptance infrastructure from just the card acceptance machines to the Smart touchscreen POS terminals that give a comprehensive EMI catalog view and process EMI transactions quickly.
- Heightened awareness among merchants around checkout financing is pretty evident considering how not just big box retailers but most small and medium businesses have opted for Pay Later integrations.
- The ease at which store payment operators can explain to the customers the available EMI linked offers on the touchscreen POS interfaces is what makes the adoption seamless.
The popularity of digital BNPL offerings is a sign of progressive India where technology has led to a win-win for both the aspirational consumers and retailers who are looking to sell more, sell often to their customer base. The unmet credit demand of Indian consumers through time-consuming traditional channels is a space now being disrupted by new-age fintechs who are layering robust tech stacks to facilitate credit flow from banks to their consumers. BNPL, and no-cost EMIs specifically, is perceived as an avenue for retailers to ramp up the average cart size of consumers, convert the casual store walk-ins into sales while also opening their doors to first-time credit seekers.
