BNPL is exciting, but MSMEs are yet to reach the 50 per cent adoption level: Anubhav Jain, Rupifi 

BNPL is the rage in India’s fintech space and this subsegment is forging ahead at a 65 per cent year-on-year growth, as per a report by Redseer.  

Anubhav Jain-Rupifi

India has been witnessing tremendous growth in the Buy Now Pay Later (BNPL) section of its fintech space as more and more e-commerce platforms, food-techs and various Business-to-Business (B2Bs) are adopting and providing BNPL services to their consumers. The big techs like Zomato, Swiggy, Amazon, Flipkart, and many more have adopted the BNPL feature as well resulting in the exponential growth of the BNPL space.  

According to a report by management consulting firm Redseer, India’s BNPL market will soar to $45-50 billion by 2026 from $3-3.5 billion now. Redseer also estimates that the number of BNPL users in the country may rise from 10-15 million to 80-100 million customers by then.  

This growth was catalysed during the pandemic and the subsequent lockdowns, when people began facing financial problems and BNPL came to their rescue. The report states that consumers are rapidly adopting BNPL due to ease of use, discounts and their evolving credit needs. However, India’s MSME (micro, medium and small enterprises) sector has not reached even a 50 per cent adoption rate yet, says Anubhav Jain, CEO & Co-founder, Rupifi, a digital B2B platform that offers loans, working capital, and BNPL solutions to small businesses. 

SME futures interacted with Anubhav Jain on how BNPL is growing in the MSME sector of the country. And he firmly believes that there has never been a better time for small businesses to adopt embedded finance to boost themselves. 

Edited excerpts: 

How is BNPL different from the usual credit card systems, and why is it beneficial for both the businesses and the consumers? 

While consumer BNPL offerings are becoming popular as a good alternative to credit cards, SME or B2B BNPL differs significantly from traditional financial credit products. 

With the B2B industry undergoing significant changes in operating models and processes, there is a need for varied solutions to meet the different credit needs of SME customers. Hence the SME BNPL product that can be offered both in the closed-loop and open-ended variants, addresses these credit needs of the SMEs. A closed-loop BNPL solution is one of the easiest ways of enabling financial inclusion for SMEs as the facility is backed by actual transactions between a supplier / distributor / B2B marketplace and the SME, thereby reducing the credit risk significantly.  

The transaction history between the seller and the SME also helps to ascertain the repayment track record. The reduced risks help Rupifi and our lender partners to extend affordable credit lines to SMEs for growing their businesses. On the other hand, an open-ended variant assesses the SME as a whole in terms of their risk and ability to pay and can be used by the SME for transactions across a wider spectrum of supplier ecosystems.  

SMEs who have shown an impressive track record and business growth using a closed-loop BNPL solution can eventually be eligible for open-loop BNPL and other financial solutions from lenders. 

Furthermore, BNPL options for SMEs have proven to be beneficial as they can repay their transactions as and when they want and are charged interest only on the amount used and the number of days for which the credit is utilised (almost like an overdraft facility). This flexibility ensures that the SME using the BNPL option does not feel the burden of any monthly obligation or EMI (Equated Monthly Instalment) like it happens with credit cards and hence can plan their funds/cash flow accordingly.  

How has the growth of the BNPL model been in India during the pandemic?  

BNPL has emerged as an exciting intersection of both a payment and a credit product. That said, in a country where MSMEs have benefitted from the adoption of digital payments, the sector is yet to reach even a 50 per cent adoption rate. The lack of awareness has not only impacted digital transformation but has also impacted access to formal financial services and working capital needs. 

In the current scenario where credit has dried up even more for smaller businesses, it is important to understand the requirements of the businesses and create BNPL products that drive superior customer experience and business growth. We at Rupifi, after talking to B2B marketplaces understood that even the smallest B2B marketplaces needed to offer 15-60 days of credit. Hence, we embedded our core product, B2B BNPL, as a payment instrument and launched our core product two years back right in the middle of the pandemic. 

Catering to 70,000+ SMEs in over 250 cities across the country, we have managed to record an impressive 50 per cent MoM growth in disbursals in the last 12 months. 

The Indian market offers immense potential for BNPL. So far, the product has witnessed faster adoption and growth in the digital B2B models and ecosystems. There will be more penetration in these ecosystems going forward. In addition, we expect the next wave of disruption in conventional supply chains and sectors supported by digital processes to drive exponential growth for BNPL in the coming years. 

B2B payments on B2B commerce platforms and marketplaces are still evolving. They are more complicated than credit cards, owing to the inherent complexity in the transaction. Most of the payments made by SMEs to their suppliers are not made instantly but on a deferred basis. This is especially important since this has a direct bearing on the working capital management of the SME. Hence B2B BNPL with all its complexities and features is a game-changing trend.

Currently, we are witnessing a lot of traction and adoption of B2B BNPL solutions amongst digital B2B marketplaces and conventional supply chains where digitization projects are being undertaken. Additionally, B2B BNPL, unlike Consumer BNPL or credit cards, is a stickier product and is critical to the growth of the entity using the BNPL. It is also much more complex in terms of its technology framework, owing to its multiple use cases such as – refunds, returns, partial deliveries, substitute deliveries, customized credit cycles for different products and sectors, etc.

It presents as a much lower risk for the provider, since a non-payment or delay in payment on a B2B BNPL can be linked to a stop-supply arrangement by the supplier, distributor, or marketplace – aiding in better collections, repayments and credit discipline among SME borrowers. 

What makes Rupifi different from the other BNPL players? 

The idea of Rupifi was born out of the need to address the problems that the SMEs were facing with respect to working capital. After talking to different marketplaces, we realised that the only way to solve the problem for even the smallest SMEs was through embedded transaction use cases that could meet their working capital needs at the source and empower them to grow their business. 

Rupifi, an embedded B2B payments player with credit access offers multiple solutions to SMEs to help them conduct their businesses efficiently. However, we operate with a tech-first approach, and have worked towards building a seamless end-to-end digital solution, right from providing APIs for integrating with the marketplaces to facilitating real-time customer activations and limit drawdown; from dashboards for real-time insights on transactions, disbursals and repayments to B2B payments solutions that offer a complete checkout experience to the marketplaces, Rupifi has been actively working to redefine how SMEs do business. 

Vis-à-vis e-commerce, how are the small businesses adopting BNPL in the current scenario?

E-commerce in India has also seen tremendous growth in the past decade led by consumer technology. The rising penetration of smartphones and the availability of low-cost internet and mobile data has also fuelled the growth in retail commerce in India not only in the metros but also in the ‘tier 2’ and ‘tier 3’ markets. Considering today’s scenario, we believe that there has never been a better time for small businesses to adopt embedded finance to boost their business. 

While digital payment solutions have been around for a few years now with higher adoption in the consumer segment, the pandemic has accelerated the pace of adoption amongst the SMEs for their transactions. This has provided a platform to players like us to create innovative credit and payment solutions for SMEs. 

With SME BNPL, we have evolved from just a credit product to a more mainstream financial product, that offers a plethora of solutions from small-ticket checkout on consumer platforms to closed-loop products on marketplaces. Our team at Rupifi is working constantly to enhance our product offerings to ensure seamless business operations for the SMEs and as we go forward, we will further scale the B2B payments offerings to provide a complete checkout experience to the B2B marketplaces.