Visa and Mastercard, global card networks, plan to launch their individual ‘Buy Now, Pay Later’ (BNPL) platforms by the end of FY22 in India.
BNPL is a credit option provided to customers at e-commerce and shopfronts to defer payments that are free of cost or convert the transaction amount into EMI (equated monthly interest) at 0 % interest. This facility is available to all, including the people who do not have credit cards.
Mastercard and Visa are searching for partners who will help to create a platform that would facilitate retailers and e-commerce platforms to directly tie up with banks to offer BNPL mode of payment to their customers.
Both Visa and Mastercard have reached out to various card-issuing local banks with their product propositions.
Visa has also approached several payment gateways for strategic tie-ups.
ZestMoney, Paytm, Capital Float, PayU’s Lazypay, and Pine Labs are providing BNPL services. This market has seen momentum over two years after the growth of digitalization and preference of online shopping by customers.
Last month, Mastercard announced the launch of its own BNPL network in the US, Australia, and the UK. It is being done when global fintech companies like PayPal, Square, and Klarna are competing aggressively one this segment.
Visa also launched the BNPL initiative in Malaysia and Canada and is on the way to establishing a global BNPL vertical. South Asia’s executive team would head this vertical.
Mastercard believes that BNPL would increase the average sales by 45% from existing customers.
This model will have a financier who will tie up with a merchant and a platform for collecting a fixed transaction fee, around 1.5%. A transaction fee will be charged as the BNPL facility is being provided without any interest rate.
The plans to launch the BNPL facility were after the RBI announced the rigid card data storage norms. The merchants will be prohibited to store the card information of their customers due to which the merchants will not be able to provide EMI options and customized discounts.
The new rules will dampen the credit card market, and BNPL will provide an opportunity to make large payments.
Over the past few years, the National Payment Corporation of India (NPCI) – Unified Payment Interface (UPI) and Bharat Bill has helped scale digital payments in India.
Amazon, Flipkart, Paytm, and Byju’s are offering BNPL services. Millions of people can get interest-free credit at checkout points on e-commerce platforms amid the festive season. Banks are ready to underwrite the risk.
India’s annualized BNPL market is $1.5-2 billion, which was just a million dollars in 2019.
The model can be enabled through the integration of merchants, financiers, and retail marketplaces. Bajaj Finance is the leading player in the offline part of the model.
BNPL service can be offered after the customer’s credentials get authenticated at the checkout points. The repayments are flexible, depending upon the credit score of the customer.
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