{"id":9220,"date":"2023-10-26T13:36:03","date_gmt":"2023-10-26T08:06:03","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=9220"},"modified":"2024-03-11T14:33:09","modified_gmt":"2024-03-11T09:03:09","slug":"buy-now-pay-later-bnpl","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/","title":{"rendered":"Buy Now Pay Later (BNPL) Explained"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69efa67549fd0\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69efa67549fd0\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#What-is-Buy-Now-Pay-Later-BNPL\" >What is Buy Now Pay Later (BNPL)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#How-Does-Buy-Now-Pay-Later-BNPL-Work\" >How Does Buy Now Pay Later (BNPL) Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#Regulation-Around-Buy-Now-Pay-Later-BNPL-in-India\" >Regulation Around Buy Now Pay Later (BNPL) in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#Risks-of-Buy-Now-Pay-Later-BNPL\" >Risks of Buy Now Pay Later (BNPL)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#Growth-of-Buy-Now-Pay-Later-BNPL-in-India\" >Growth of Buy Now Pay Later (BNPL) in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/buy-now-pay-later-bnpl\/#Future-of-Buy-Now-Pay-Later-BNPL\" >Future of Buy Now Pay Later (BNPL)<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-Buy-Now-Pay-Later-BNPL\"><\/span><b>What is Buy Now Pay Later (BNPL)?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Buy Now, Pay Later (BNPL) is a <a href=\"https:\/\/razorpay.com\/learn\/business-banking\/digital-lending\/\">short-term financing option<\/a> that allows consumers to buy goods and services and pay for them in instalments over a period of time, typically with no interest.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">BNPL has become a popular payment option in India recently because it is a convenient and affordable way to purchase goods and services online, especially for young consumers with limited credit history.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How-Does-Buy-Now-Pay-Later-BNPL-Work\"><\/span><b>How Does Buy Now Pay Later (BNPL) Work?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To use BNPL, consumers simply need to create an account with a BNPL provider and provide basic information, such as their name, address, and date of birth.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The BNPL provider then conducts a soft credit check on the consumer \u2013 to confirm a steady source of income and the ability to repay. This credit check is not as stringent as checks for loans or credit cards.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Once approved, consumers can start shopping with merchants that offer BNPL at checkout. Consumers might have to pay a certain percentage of the total amount as a down payment, while the rest is financed by the BNPL provider. The consumer is then responsible for repaying the BNPL provider in instalments, typically over a period of 6 to 12 weeks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">BNPL is also called a POS instalment loan or Point of Sale financing since it is a type of credit offered at the point of sale. This means that consumers can apply for and receive credit immediately when they are making a purchase.<\/span><\/p>\n<h3>Buy Now Pay Later (BNPL) Effect on CIBIL Score<\/h3>\n<div class=\"markdown markdown-main-panel\" dir=\"ltr\">\n<p data-sourcepos=\"1:1-1:45\">BNPL can affect your CIBIL score in two ways:<\/p>\n<p data-sourcepos=\"3:1-3:58\"><strong>1. On-time payments can help improve your CIBIL score.<\/strong><\/p>\n<p data-sourcepos=\"5:1-5:12\">CIBIL scores are calculated based on a number of factors, including your payment history. If you make all of your BNPL payments on time, this can help to improve your CIBIL score over time.<\/p>\n<p data-sourcepos=\"7:1-7:59\"><strong>2. Late or missed payments can damage your CIBIL score.<\/strong><\/p>\n<p data-sourcepos=\"9:1-9:40\">If you miss or delay your BNPL payments, this can have a negative impact on your CIBIL score. Late payments are reported to the credit bureaus, and they can stay on your credit report for up to seven years.<\/p>\n<p data-sourcepos=\"11:1-11:206\">It is important to note that not all BNPL providers report to the credit bureaus. If you are unsure whether or not a particular BNPL provider reports to the credit bureaus, you should contact them directly.<\/p>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Regulation-Around-Buy-Now-Pay-Later-BNPL-in-India\"><\/span><b>Regulation Around Buy Now Pay Later (BNPL) in India<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\"><img decoding=\"async\" class=\"alignnone wp-image-9223 size-full\" src=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/learn-content\/uploads\/2023\/10\/Screenshot-2023-10-26-at-1.34.05-PM.png\" alt=\"buy now pay later landscape in india\" width=\"1168\" height=\"704\" srcset=\"https:\/\/d6xcmfyh68wv8.cloudfront.net\/learn-content\/uploads\/2023\/10\/Screenshot-2023-10-26-at-1.34.05-PM.png 1168w, https:\/\/d6xcmfyh68wv8.cloudfront.net\/learn-content\/uploads\/2023\/10\/Screenshot-2023-10-26-at-1.34.05-PM-300x181.png 300w, https:\/\/d6xcmfyh68wv8.cloudfront.net\/learn-content\/uploads\/2023\/10\/Screenshot-2023-10-26-at-1.34.05-PM-1024x617.png 1024w\" sizes=\"(max-width: 1168px) 100vw, 1168px\" \/>In India, Buy Now Pay Later (BNPL) companies are considered to be intermediaries between lenders (banks and non-banking financial companies) and borrowers (consumers). As such, they fall under the purview of the RBI, which is responsible for regulating lending and borrowing in the country.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The RBI has taken a keen interest in BNPL companies, given their rapid growth in recent years. However, the regulatory framework for BNPL is still evolving. Currently, there are no specific regulations governing BNPL companies. However, they are subject to the general provisions of the RBI Act, 1934, and other applicable laws.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The RBI has issued a number of <a href=\"https:\/\/rbi.org.in\/Scripts\/NotificationUser.aspx?Id=12382&amp;Mode=0\" target=\"_blank\" rel=\"noopener\">guidelines<\/a> for BNPL companies, including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Mandatory credit checks on consumers before offering credit<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cannot offer credit to consumers who have a bad credit history<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Limited credit to be offered to consumers<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Provide consumers with clear and transparent information about the terms and conditions of their products and services<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Risks-of-Buy-Now-Pay-Later-BNPL\"><\/span><b>Risks of Buy Now Pay Later <\/b><b>(BNPL)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Overspending:<\/b><span style=\"font-weight: 400;\"> BNPL can make it easy to overspend, especially if you are not careful. It can be tempting to purchase items that you cannot afford right away, and it can be easy to lose track of how much you are spending.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Late payment fees: <\/b><span style=\"font-weight: 400;\">If you miss a BNPL payment, you may be charged late payment fees. These fees can add up quickly, and they can make it difficult to get out of debt.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Damage to your credit score: <\/b><span style=\"font-weight: 400;\">If you make late payments on BNPL loans, your credit score could be damaged. This could make it difficult to qualify for loans and other forms of credit in the future.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Debt collection:<\/b><span style=\"font-weight: 400;\"> If you are unable to repay your BNPL loans, the debt could be turned over to a collection agency. Collection agencies can use aggressive tactics to collect debts, and they can damage your credit score.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Addiction: <\/b><span style=\"font-weight: 400;\">BNPL can be addictive. The ease of purchasing items without having to pay for them upfront can lead to compulsive spending.<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Growth-of-Buy-Now-Pay-Later-BNPL-in-India\"><\/span><b>Growth of Buy Now Pay Later (BNPL) in India<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The BNPL market in India is growing rapidly, with a<\/span><a href=\"https:\/\/www.mordorintelligence.com\/industry-reports\/india-buy-now-pay-later-services-market\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\"> compound annual growth rate (CAGR) of over 300%<\/span><\/a><span style=\"font-weight: 400;\">. This growth is being driven by a number of factors, including the growing popularity of e-commerce, the increasing penetration of smartphones, and the rising demand for affordable credit options.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The first ever BNPL (Buy Now, Pay Later) company in India is widely considered to be ZestMoney. Founded in 2015, ZestMoney was one of the first companies to offer BNPL financing in India.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some other leading BNPL providers in India include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Paytm Pay Later<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">ZestMoney<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Simpl<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Affirm<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Slice<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Future-of-Buy-Now-Pay-Later-BNPL\"><\/span><b>Future of Buy Now Pay Later (BNPL)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The future of BNPL in India is bright. The market is expected to grow significantly in the coming years, driven by the factors mentioned above. BNPL providers are also expanding their offerings to include new products and services, such as longer-term financing options and BNPL for businesses.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Gross Merchandise Value of the BNPL industry is expected to grow at a compounded annual growth rate of 400% by 2026.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As the RBI regulates the BNPL industry, we can expect some limitations like limited credit, caps on fees and charges and more stringent credit checks.<\/span><\/p>\n<p><strong>Read more:<\/strong><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/current-account-opening-documents-required\/\"><span style=\"font-weight: 400;\">Current Account Documents<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/what-is-current-account\/\"><span style=\"font-weight: 400;\">What is Current Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/what-is-a-business-account-for-startups\/\"><span style=\"font-weight: 400;\">Business Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/mab-monthly-average-balance-current-account\/\"><span style=\"font-weight: 400;\">Monthly Average Balance<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/blog\/business-banking\/zero-balance-current-account-business\/\"><span style=\"font-weight: 400;\">Zero Balance Current Account<\/span><\/a><\/p>\n<p><a href=\"https:\/\/razorpay.com\/learn\/business-banking\/types-of-current-accounts\/\"><span style=\"font-weight: 400;\">Types of Current Account<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is Buy Now Pay Later (BNPL)? Buy Now, Pay Later (BNPL) is a short-term financing option that allows consumers to buy goods and services and pay for them in instalments over a period of time, typically with no interest. BNPL has become a popular payment option in India recently because it is a convenient<\/p>\n","protected":false},"author":151156542,"featured_media":9222,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[3729,3728],"class_list":{"0":"post-9220","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking","8":"tag-bnpl","9":"tag-buy-now-pay-later"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/9220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156542"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=9220"}],"version-history":[{"count":3,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/9220\/revisions"}],"predecessor-version":[{"id":10313,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/9220\/revisions\/10313"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/9222"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=9220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=9220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=9220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}