With several payment companies now offering the ‘buy now pay later’ (BNPL) service, it has emerged as a feasible and appealing credit alternative for e-commerce purchases in India, says GlobalData, a leading data and analytics company.

An analysis of GlobalData’s E-Commerce Analytics reveals that the e-commerce market in India grew by 12.2% in 2020 and will end 2021 with a growth of 17% to reach INR4.5 trillion (US$61.6bn). It is expected to further grow at a compound annual growth rate of 18.2% to reach INR8.8 trillion (US$120.3bn) in 2025.

In countries like India with low credit card penetration (five credit cards per 100 individuals), BNPL is emerging as an alternative credit tool among consumers, especially tech-savvy millennials. It provides consumers with the flexibility to pay for their purchases at later dates with low or no-interest, making them an attractive proposition for consumers.

Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “COVID-19 has adversely affected the consumers’ disposable income, creating demand for short-term consumer financing. The increasing credit demand coupled with growing preferences for e-commerce, has made the BNPL service as one of the preferred short-term borrowing tools among the consumers.”

According to GlobalData’s 2021 Banking and Payments Survey, *55% survey respondents indicated that they used BNPL service for buying goods and services online in past six months.

BNPL concept, which is already popular in the APAC markets like Australia and New Zealand, is now gaining prominence in India with the growing number of payments and fintech companies offering this service. LazyPay – a well-known brand offering pay later option, has over one million customers and has registered over 10 million transactions till date. Other well-known brands operating in this space include ePayLater, Simpl, ZestMoney, Capital Float.

Leading e-commerce providers are also offering their own BNPL solutions. For instance, Amazon launched its pay later solution called ‘Amazon Pay Later’ in April 2020. This solution has already gained popularity among Indian online shoppers, registering 10 million transactions with over two million consumers until June 2021.

According to GlobalData’s 2021 Banking and Payments Survey, *Amazon Pay accounts for 16.4% share of the total Indian e-commerce market in 2021 much higher compared to 11.3% in 2020, with its BNPL service being one of the driving factors.

Amazon’s main rival in India – Flipkart also offers BNPL service called ‘Flipkart Pay Later’ with over 2.8 million customers as of July 2021.

Sharma concludes: “Indian payments landscape is evolving at a rapid pace. The country’s large young population, gradually rising consumer spending, growing preference for online channels and electronic payment methods will all support growth of BNPL business model, and this could possibly challenge the existing credit models for online purchases in the long-run.”

*GlobalData’s 2021 Financial Services Consumer Survey which was conducted online in Q1-Q2 2021 among 52,742 consumers in 42 markets globally.