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The Indian BNPL market could become the largest in size globally and is expected to grow 10x 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 analytic solutions. The market was at a nascent stage of $3.5–4 billion in 2021.
“One of the most interesting trends to play out against the backdrop of the accelerated adoption of e-commerce platforms in India, is the rise of the BNPL payment option,” as per the eport.
Rising demand
In terms of e-commerce, BNPL is expected to constitute 14 per cent of transaction value by 2026, growing nearly 5x from 3 per cent in 2021.
“India’s large youth demographic, rising consumer spending, growing preference for online channels and electronic payment methods, exponential e-commerce growth, transparency with costs and benefits, and frictionless payment experience are expected to contribute to the market growth over the forecast period,” the report said.
Further, the low penetration of credit cards at 5 per cent is not enough to address consumer credit demand, it added.
India currently has around 22-25 million BNPL users, which are estimated to reach 90-100 million by 2026.
Impact on consumer decisions
Benori conducted the survey with over 1,000 users. 90 per cent of users said they are more likely to shop from stores, both offline and online, that offer BNPL at check-out. Similarly, 75 per cent confirm using BNPL when shopping on e-commerce websites and apps. The BNPL option is most commonly used to purchase electronic products (71 per cent), followed by fashion and lifestyle accessories (67 per cent), and commonplace, everyday shopping items (57 per cent). The preference for BNPL is driven by its low or no interest rates, followed by flexibility and convenience and non-eligibility for credit cards, as per the report.
The number of BNPL users is closing the gap to the number of users using credit cards. Nearly half the respondents claimed to be using both BNPL and credit cards for payments; 45 per cent said that they would prefer to make their payments through BNPL, even if they own a credit card.
In terms of users, 60 per cent of those more inclined to adopt BNPL fell into the GenZ and millennial categories.
“This points to BNPL becoming a ubiquitous mode of payment in the future as it sees increased acceptance from the young, digitally savvy segment of the population,” it said.
“Further, BNPL as an alternative mode of payment is adding to the spending capacity of consumers and is also encouraging overspending,” it added.
Credit demand
90 per cent of respondents said that they spent more money than they had intended because of BNPL, with 40 per cent revealing that using BNPL caused their monthly spending to increase by 30 per cent. This increase climbed as high as 50 per cent for 33 per cent of the respondents. The trend was prevalent across Tier 2 and Tier 3 cities as well. The survey also indicated that on average, women spent more money when using BNPL than males.
Users surveyed also expressed a preference for a credit limit of over ₹50,000 and a repayment period of 30 days, exceeding by far what is currently being offered by most BNPL providers.
Ashish Gupta, Co-founder and CEO of Benori, said, “While there has been a huge increase in online purchases amidst the pandemic, inflation and reduced disposable income led to the emergence and boom of short-term financing solutions. Both these elements propelled the growth of BNPL services in the country.”
“While BNPL currently represents only a small share of the e-commerce spending, there are signs that there is still plenty of room for BNPL companies to grow in this segment. Additionally, with easy access to a digitally driven credit facility, BNPL is also addressing the gaps in consumer credit demand that credit cards are unable to meet. Our research findings validate this and emphasise the favourable factors bolstering 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.
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