The BNPL payment industry in India has recorded strong growth over the last four quarters, supported by increased ecommerce penetration.

According to PayNXT360, BNPL payments in the country are expected to grow by 22.9% on an annual basis to reach US$14,289.4 million in 2023.

Medium to long term growth story of BNPL industry in India remains strong. BNPL payment adoption is expected to grow steadily over the forecast period, recording a CAGR of 12.2% during 2023-2028. The BNPL Gross Merchandise Value in the country will increase from US$11,628.8 million in 2022 to reach US$25,387.2 million by 2028.

The buy now pay later space has grown significantly amid the growing traction for flexible payment methods among consumers in Tier II and Tier III cities of India. The trend is expected to further accelerate over the next three to four years. The payment method has resonated with consumers across age groups and classes and has become the default payment choice for many in the country.

Despite regulatory hiccups, consumer BNPL spending is expected to grow significantly in Q4 2022, largely due to the year-end festive and holiday season. The payment method is expected to increase its penetration in both the online as well as offline market, as consumers turn to flexible payment options amid rising inflation and cost of living.

Fintech firms are experiencing huge demand for BNPL services for both online and offline purchases

The Reserve Bank of India announced a slew of regulatory measures that have had a direct impact on the operations of BNPL players in India. Despite the regulatory hiccups, the sector is projected to record strong growth in Q4 2022, amid the rising demand for consumers. For instance,

  • LazyPay, ZestMoney, and KreditBee are among the many BNPL providers that have experienced high demand for their services in Q4 2022. Consumers, in increasing numbers, have resorted to the BNPL payment method to fund their festive-related purchases, which has significantly driven the volume in the country. For KreditBee, the loan disbursement increased by more than 100% during the festive season in 2022, compared to 2021. Much of the demand for BNPL services was driven by consumers in Tier II and III cities in India.
  • The demand was not only evident for online purchases. Pine Labs, one of the leading fintech firms in the country, has witnessed a strong surge in the usage of BNPL services for offline payments. The firm had projected BNPL transactions worth INR 50 billion in October 2022 alone. This represents a growth of 100% compared to any month on average. To capitalize on the growing demand, the firm also announced a tie-up with 100,000 stores for BNPL services in October 2022. From the short to medium-term perspective, Pine Labs is expected to boost its presence in Tier III and IV cities across India.

While the payment method has been under growing scrutiny from the central bank, the demand has continued to increase in India, and PayNXT360 expects the trend to further continue over the next three to four years. Rising inflation and cost of living will further support consumer adoption in India.

Providers are focusing on the travel industry to drive their BNPL transaction volume and value in India

After two years of pandemic-induced restrictions, travel activities have posted a strong rebound in the Indian market. To capitalize on the growing tourism and travel demand, BNPL players are forging strategic alliances with travel-based platforms in India.

  • In October 2022, CASHe, an AI-driven financial wellness platform, announced that the firm had entered into a strategic alliance with IRCTC, the online travel platform to book train tickets. Under the collaboration, the two firms have launched a travel now pay later service, thereby allowing travellers to repay their ticket purchase in installments.
  • There is a strong demand for BNPL in the travel segment. SanKash, the firm that focuses on offering travel-related BNPL service, announced that the firm recorded a 102% increase in travel loan amount in Q2 FY23 compared to Q1 FY23. The majority of the demand has been driven by consumers in the age group of 20-30.

With the demand expected to further increase in Q3 and Q4 FY23, due to year-end holiday trends, PayNXT360 expects more firms to record strong growth in the travel segment. This will also drive more strategic alliances in the Indian market from the short to medium-term perspective.

Prepaid payment instrument providers are banking on the BNPL segment to drive growth in India

The digital payment market has recorded strong growth over the last few years in India. However, the growing market has resulted in a cut-throat competitive landscape. To further strengthen their position and drive growth in the competitive market, prepaid payment instrument providers are banking on BNPL capabilities.

  • Paytm, the third-largest mobile wallet provider by market share is banking on its credit strategy, which includes BNPL, personal loans to consumers, and merchants, to drive growth. In Q2 FY23, BNPL loans accounted for 55% of the total INR 73.13 billion loans disbursed by the firm. The firm is also using BNPL to drive the growth of its other credit products. For instance, 40% of personal loans have been disbursed to BNPL customers. This shows that BNPL is part of the larger strategy of the firm to cross-sell and drive growth.

With the robust growth achieved by Paytm in its BNPL segment, PayNXT360 expects other prepaid payment instrument providers, including PhonePe – the market leader, to incorporate BNPL play into its service offering from the short to medium-term perspective. This will further drive the competitive landscape in the Indian BNPL market, thereby driving industry growth over the next three to four years.

This report provides a detailed data centric analysis of Buy Now Pay Later (BNPL) industry, covering market opportunities and risks across a range of retail categories. With over 75 KPIs at country level, this report provides a comprehensive understanding of BNPL market dynamics, market size and forecast, and market share statistics.

It breaks down market opportunity by type of business model, sales channels (offline and online), and distribution models. In addition, it provides a snapshot of consumer behaviour and retail spend dynamics in India. KPIs in both value and volume term help in getting in-depth understanding of end market dynamics.

PayNXT360’s research methodology is based on industry best practices. Its unbiased analysis leverages a proprietary analytics platform to offer a detailed view on emerging business and investment market opportunities.