THE BNPL MANIA
IS YOUR ELECTRIC bill lying unpaid? Or perhaps your gas bill? Is your phone recharge due, or cable bill? Is it because you are running a little low on cash or want to spend elsewhere? Well, Freecharge, a Gurugram-based fintech, has you covered with an instant one-month, interest-free loan up to ₹10,000. Not just for utilities, but similar loans with flexible repayment schemes are also available at the checkout page of an Amazon or a Flipkart, whether you buy an iPhone or a perfume. Ride-hailing firm Ola lets you pay for all trips at once, every 15 days. And in case your holiday plan seems just out of your wallet’s reach, travel aggregator MakeMyTrip is ready to finance your tickets and hotel bookings. Just buy now and pay later.
BNPL, as the loan product is popularly called, is the latest financial pied piper, leading the millennial and Gen Z generations as well as borrowers in under-served and unbanked smaller towns into the world of credit. The lyrics accompanying the tune are just as alluring—‘dream big, pay small’. And these first-time borrowers are following in hordes as they are, more often than not, denied loans in the traditional banking system since they lack a credit history.
In less than a decade, BNPL has become a global craze, spanning Sweden to Australia and the US to the UK. Unlike traditional bank loans—such as to buy a house or a car, or personal loans—BNPL is a point-of-sale product. The borrower gets the option of an instant, short-term loan with a deferred repayment tenure, including the option for equated monthly instalments (EMIs) after the end of an interest-free period. The allure of BNPL is that, unlike traditional loans, these are small-ticket loans of as low as ₹3,000 for daily consumption purposes. It’s similar to a credit card but without the hassles of an application process, card-swiping infrastructure, and separate limits for purchases and cash withdrawals. Critically, there is scant checking of a borrower’s credit bureau score and only a cursory check, if at all, of their income statements before they get the loan. Sometimes in minutes.
Little wonder, then, that BNPL has exploded
