Credit cards battle BNPL, betting on ambitious value


MUMBAI : Wary of the growing Indian buy now, pay later (BNPL) market, credit card issuers are betting that credit cards remain an ambitious product, leaving plenty of opportunities for both payment categories .

BNPL allows borrowers to repay for up to 15 days on e-commerce sites, although some companies also offer short Equivalent Monthly Payments (EMIs). Experts believe that the rise of these innovative financial products may not be in direct competition with credit cards. Instead, it may allow some of these borrowers, many of whom are new to the credit markets, to create a credit history for future bank lending needs.

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Internet-based consulting firm Redseer estimates India’s BNPL market is expected to grow 15-fold over the next five years to $ 45-50 billion, from $ 3-3.5 billion in FY21 The number of BNPL users is expected to overtake credit card users to 80 million to 100 million by FY26, according to the report. These numbers were cited in a report from Macquarie on September 29.

According to Macquarie, although BNPL is an opportunity, it focuses on low-cost loans to new customers and the maximum credit limit offered by BNPL is less than 100,000, much lower than that offered by credit cards.

“BNPL is helping me expand the credit card universe because new loans (with no credit history) are always a challenge for a credit card customer. So I see it very positively, ”said Shailendra Singh, Managing Director and CEO of BoB Financial Solutions Ltd. ), started its activities in 1994.

Singh said the construction and design of a credit card is so unique and different that no product in the banking industry can compete with it.

Others believe that BNPL and credit cards cater to different customer segments and can therefore coexist. “While I see BNPL as a worthy competitor to credit cards, I think the segments they target are different. In general, banks are focused on the major customers for credit cards and therefore we expect that a majority of the population can be served by BNPL for their short term credit needs, ”said Aditya Damani, founder of the fintech Credit Fair for consumer loans.

Damani explained that BNPL products are more accessible than credit cards and that the ease of payment through these products is better than traditional plastic cards. “Just as landlines were hard to come by in India then the mobile revolution made calling easier, credit cards are hard to get and BNPL should fill that void,” Damani added.

True, experts estimate that only 3-4% of Indians own a credit card and therefore see immense opportunities in cards.

“There is a large emerging market for daily digital payments, especially on the credit side as credit is also becoming a daily feature rather than just luxury and optional items, which means groceries, transportation, daily expenses. especially as the line between online and offline payments is blurred, ”said TR Ramachandran, group country manager (India, Sri Lanka and Bangladesh) for Visa during the recent launch of a co-branded credit card.

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