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Mumbai-based communication professional Chirag can well afford an iPhone 11, paying upfront. However, he opted to buy it through a six-month EMI (equated monthly instalment) scheme.
Ditto for Harshita, an employee in the financial services sector, who recently purchased a two-wheeler, a refrigerator and an LED TV — all on EMI schemes.
The purchasing behaviour of Chirag and Harshita reflects the mindset shift of a growing number of Indian consumers, who are opting for EMIs or ‘buy now pay later’ (BNPL) schemes.
The pandemic-induced economic uncertainty, job loss and pay cuts have forced them to look for options that will help them conserve cash.
Ezetap, a digital payments company, recorded a 220 per cent (year-on-year) growth in the EMI volumes in July 2021 compared to February 2020.
“The ability to process EMIs through different form factors like credit card, debit card, point of sale and NBFC channels, the general consumer preference for EMIs during pandemic times, and the growing preference for BNPL options among millennials and Gen Z consumers are the key factors driving EMIs,” says Bhaskar Chatterjee, Head of Products at Ezetap.
Digital drive
In a report, ‘The (Covid) Era of Rising FinTech’, full-stack financial solutions company Razorpay said that digital transactions have grown 80 per cent from the first 250 days of lockdown (March 25 to November 29, 2020) to the next 250 days (November 30, 2020 to August 6, 2021).
“With increased adoption of online payments by businesses, all modes of payments saw an increase in usage during these 500 days. Newer payment methods like pay later and cardless EMI also saw a steady growth of 220 per cent and 207 per cent, respectively, indicating consumers’ growing demand for affordable payment options,” the company said. According to National Payments Corporation of India (NPCI) digital payments statistics, the monthly NACH debit of recurring payments (includes recurring payments EMI, Insurance premium, etc.) has jumped from 41.36 million transactions worth ₹35,351.11 crore in April 2020 to 57.73 million transactions worth ₹61,303.46 crore in July 2021.
“Covid has impacted cashflows for almost everyone. They are holding on to as much liquidity as possible, which is evident from their reliance on EMIs,” Amit Kumar, Founder, GalaxyCard, said.
Banks have also been launching a slew of BNPL products. While ICICI Bank offers pay-later services on its app, Axis Bank recently launched a new BNPL product, focussed on new-to-bank customers, through its subsidiary Freecharge.
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