Let’s break it down to understand what this move means for banks, businesses, and end-consumers. 

How does offering credit lines via UPI to consumers affect banks? 

As mentioned earlier, banks don’t need to issue credit or debit cards to provide customers with this type of credit line. One, this saves them a significant amount in disbursal and distribution costs. This move also allows banks to develop new-age credit products catering to consumers’ evolving needs. Third, banks can extend this offering to non-customers (potential customers) using their interface to make UPI transactions. 

How does offering credit lines via UPI to consumers affect businesses? 

Suppose you are a business that already accepts UPI payments from customers. Basically, having the option to pay for purchases using credit lines via UPI makes buying extremely convenient and more affordable for your customers. This can mean higher revenue for your business by increasing sales, ticket sizes, and customer delight. 

How does offering credit lines via UPI to consumers affect consumers? 

Consumers, especially those who find it difficult to get traditional credit, will significantly benefit from this move. This is because credit lines via UPI use modern, alternative methods to determine one ‘s creditworthiness. They also don’t need to hold a credit or debit card to avail themselves of this credit product. It also rids them of the need to carry multiple credit and debit cards. Lastly, they get the convenience of UPI and the advantage of credit to fulfil all kinds of purchasing needs. 

Let’s sum it up with an example 

ABC Bank is offering pre-approved credit lines of up to Rs 50,000 to their existing and potential customers. They look at data like transaction and credit history linked to bank and UPI accounts to create a list of customers eligible for this offering. Now, merchant XYZ already accepts UPI payments for purchases on their online store. This merchant starts allowing their customers, who are also customers of ABC Bank, to purchase products using credit lines via UPI. The customers are very happy as they now have better purchasing capacity and the convenience of digital payments to buy their favorite products. Even the bank and merchant are happy as this leads to more business. 

The post RBI Approves Using Credit Lines via UPI: Everything You Need to Know appeared first on PayU Blog.

India, too, is expected to see a significant increase in BNPL adoption, primarily because of the growth of eCommerce and its symbiotic relationship with buy now, pay later, and other credit modes. 

This article discusses the importance of adopting BNPL for businesses to make themselves future-proof. 

The Potential of BNPL Companies in India

The country is moving towards building a robust digital ecosystem. Many consumers use digital solutions and services to manage their finances. Hence, every business must meet the ever-changing demands of its consumer base while embracing technology and innovation.

It comes at a time when an Experian Global Insights Report: April 2022 found that BNPL transactions grew 21% in India in the second half of 2021, compared to a global average of 18%. 

The report also pointed toward the increased customer acceptance and financial inclusion amongst the customers towards buy now, pay later as a service and BNPL companies. 

If we talk numbers, India’s BNPL loan market stands at around USD 3.5 billion today, with approximately 10 million customers adopting it. It is expected to touch USD 50 billion valuations by 2026 with over a 6x increase in customers to up to 100 million.

Buy now, pay later companies in India can act as an alternate source of credit for a credit-starved economy. With more and more people accepting its utility, it is quickly becoming a significant influencer in eCommerce shopping. Thus, it is becoming a viable substitute for India’s loan ecosystem and those who are otherwise denied financial help. 

BNPL Services: A Crucial Enabler in Making Business Future-Proof

Buy first, pay later services are touted as one of the key ways to make a business future-proof. Here’s how: 

Reduction in Cart Abandonment

Cart abandonment has stuck out like a sore throat for eCommerce businesses, and a lot of times, the reason behind it is the lack of funds to complete the purchase. However, with BNPL cards, customers can pay at their convenience and split payments easily, which would propel them to complete their purchases more often than not. 

Increased Sales

BNPL is trying to revamp the customer’s thought process of purchasing items only when they are comfortable with the payment process. With the advantage of splitting and paying as per convenience, more and more customers are expected to join the bandwagon, generating more eCommerce sales. 

Higher Average Customer Lifetime Value (CLV)

For eCommerce brands to be successful, customer lifetime value plays a key role. If you search the internet, you will come across a plethora of stats stating how BNPL is improving the credit India scenario and propelling CLV with a minimal increase in risk. 

Wrap Up 

As an economy, India is on the brink of a credit revolution. With more and more affordable credit services, such as BNPL, threatening the existence of traditional systems, like credit cards, we expect a manifold increase in its adoption in the upcoming years. 

But for merchants to be a part of the revolution, they would require credible partners to help them scale. We at PayU India are a leading payment gateway capable of making the process of establishing and managing BNPL efficiently. 

Click here to get in touch with PayU India. 

FAQs

Will BNPL loans in India beat credit cards?

Currently, it lags behind credit cards and mobile wallets in terms of volume; A Goldman Sachs report states that it is expected to be the fastest growing online payment method in the 2020-24 phase, with a 2x increase in market share from 3% at the beginning of the period to 9% as it ends. 

Is BNPL good for merchants?

BNPL offers many advantages, such as increased order and customer lifetime value for merchants. In addition, it also helps improve loyalty, making it an excellent addition for businesses. 

The post Potential of BNPL in India and Why You Need This to Make Your Business Future-Proof appeared first on PayU Blog.

Needless to say, this impacted sales across a plethora of brands and industries. For instance, despite the existence of heightened demand for electronic appliances, the consumer durables industry experienced 30% lower sales in 2020 as compared to 2019. 

In such a scenario, the need of the hour was to enhance affordability for the masses. It became imperative that consumers are equipped or enabled to purchase big-ticket as well as small-ticket goods based on their needs and not just affordability. This ushered in what has now become a go-to payment option for most buyers in the country: No-Cost EMI. 

What is No-Cost EMI? 

Simply put, EMI stands for Equated Monthly Installment. As is obvious from the

full form, EMI means a fixed monthly payment provided by a borrower to a creditor on a set day every month.

Coming to No-Cost EMI, it is an offer by which you pay your EMI provider only the product price, equally divided over your repayment timeline.

To give an example, if you purchase a smart TV for INR 60,000 but cannot pay the entire amount at the time of purchase, you can resort to splitting the total amount across a fixed number of months and then paying that split amount on a fixed day every month until the total cost of the purchased product has been paid for. However, you are not expected to pay any amount over and above the original price as interest. This is what makes No-Cost EMIs a lucrative payment mode for most buyers!

Growth of No-Cost EMIs in India 

With EMI as a payment mode being available on most online commercial platforms, more and more customers are opting for it. In 2020 alone, Ezetap recorded a drastic increase of 220% in the total volume of EMIs processed in 2021. 

As the interest charged from customers is completely discounted in No-Cost EMIs, it is the most preferred or chosen option. 

Here are some reasons why No-Cost EMIs have become increasingly popular amongst buyers: 

• It is easy on the wallet and keeps your liquid money for you to be used throughout the month. 
• Customers can choose the tenure over which they would want to pay back the total amount, thereby controlling the amount of money they will pay every month. 
• No extra amount needs to be paid by the customer apart from just the product price.

No-Cost EMIs become a Regular 

Hence, it is safe to say that while the pandemic ushered in No-Cost EMIs, the Indian buyer is now habitual of this payment mode. What was considered a short-term fix to grow sales amidst economic slowdown and a global health emergency, is now turning into a part and parcel of the quintessential buying behaviour of the Indian shopper. Thus, we can safely conclude that No-Cost EMI payments are not just a passé but are here to stay for a long time to come. 

What’s important to note here is that with the growing dependence of the Indian buyer on No-Cost EMIs, businesses also need to tailor their payment modes and enable No-Cost EMIs for their consumers. No-Cost EMIs have now become a key to escalating conversions and consequently garner profits for any and every business out there. So, if you are a business owner looking for measures to push sales, here is one formula you can use immediately. 

Frequently Asked Questions

The post No-Cost EMI: Passé or Popular? appeared first on PayU Blog.

With Buy Now Pay Later, the recovery against the instalment payment schemes offered to the customers is taken care of by a third-party BNPL provider. A recent entrant in the financial sector, Buy Now Pay Later apps had already captured 3% of the e-commerce market share by the end of the last year. It is estimated that this may rise to over 9% by 2024. 

There are several key benefits behind the popularity and the promising future of Buy Now Pay Later apps. Let’s explore.

Benefits of Buy Now Pay Later 

BNPL stands to benefit merchants in more ways than one. And that is what we try to look at here,

• Higher sales: For buyers, BNPL companies offer the opportunity to buy products, as per their BNPL credit limit. The instalment option encourages buyers to buy products that they would have otherwise skipped, thus increasing the conversion rate and reducing cart abandonment.
• Wider audience: Online sales automatically open the doors to customers, with customer credit history not necessarily a stumbling block to the transaction. Merchants having tie-ups with BNPL apps like PayU can cater to prospective buyers from all across the world. 
• Higher high-value sales: BNPL poses a challenge to credit cards as a viable option for buying expensive products. it doesn’t impose high-interest rates. An interest-free period is followed by a competitive rate of interest. Buyers can now purchase high-value products from merchants through BNPL without worrying about the price.
• Higher average order value: The affordable repayment process means they can spread out their expense over a period. With no immediate need for payment, customers shop more, and as a result, their order value increases. 
• Improved customer experience: Pay later accounts offers customers the convenience of a digital process and seamless API integration. Customers selecting to pay through PayU can then pay interest-free within a limited period or repay with a low-interest rate charged.

A Bain & Company study also concluded that merchants experienced higher conversion, increased order value, and a new customer breakthrough through BNPL than credit card payment options. 

Also read: What Are Payment Gateway Charges

What Buy Now Pay Later (BNPL) Apps Need to Overcome

There are a few challenges that merchants may face while using BNPL solutions. As a service provider, PayU seeks to overcome these challenges and merchant onboarding a smoother and more satisfying experience.

• Accreditation challenges: Accreditation for BNPL integration includes registration and approval of the BNPL provider and the acquiring and nodal banks. Besides, supplemental documentation may be required to verify merchant identity, legitimacy of the business, and correctness of information provided.
• Higher merchant fees: There is a fee involved in BNPL services, and providers offer different packages to merchants. Merchants can select the package that suits their budget. PayU supplements the cost burden with excellent offerings like large volume discounts, custom pricing for large businesses and a dedicated account manager, to name a few.
• Integration challenges: Merchants may have to spend on tools and technology to integrate the BNPL system. It is required to integrate the payment modes in the checkout process. 
• Multiple options: There are many BNPL service providers, each with several packages of BNPL services. Selecting one can be confusing for the merchant. 

Conclusion

One may note that for the challenges it poses, Buy Now Pay Later may end up providing cost benefits to the merchant. With Buy Now Pay Later India is expected to see the latest payment optimization and payment security features in trade transactions, enabling merchants to handle global payments seamlessly.

Want a pay later payments solution for your business that will accelerate the growth of your business? Start with PayU Affordability Suite

Frequently Asked Questions

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