People are switching to BNPL as its affordable and gets quality stuff

The Buy Now, Pay Later (BNPL) payment system acts as a means for people to be able to afford branded items. The instalment scheme system has moved online as well. The market for it is huge, and the players have a lot to mine.

BNPL payment Snapmint abhineet

There is a growing culture of buying things online. From fashion products and headphones to high-end expensive laptops, they are all available on EMIs now. The Gen Z segment of the populace is spearheading this change in consumer behaviour. SME Futures spoke to Abhineet Sawa, Co-founder of Snapmint on growing culture of BNPL and how his platform makes the topmost brands affordable and accessible to all due to their instalment payments system.

Edited excerpts:

Since you keep the paperwork minimal, how do you keep a record of every transaction and how do you keep a check on the instalment payments on your platform? What steps do you take if the payments are delayed?

Firstly, paperwork for me is the old way of doing things. When providing the EMI instalment purchase option to our customers, we ensure that the customer has the ability to pay, the intent to pay and is contactable. As long as these things are ensured, everything is taken care of. For these, we don’t need paperwork, they can be done digitally.

Post-COVID, the financial ecosystem has evolved drastically. In India, for instance, KYCs can be done online today. Previously, a form needed to be filled, which you had to physically submit. The country has evolved; on paper and paperless are immaterial as long as you are doing the work with due diligence. Digitally, when a customer engages with your platform, they leave a comprehensive data footprint which can be leveraged to project information about them. That is what helps us to make sure that we are not relaxing the rules or taking additional risks.

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The first part is underwriting; doing the proper checks. There are some technologies that we employ to keep the fraudsters out. We also maintain certain checks on our customers, about how much should be the maximum amount of the transactions that we can allow them to make. There’s a limit which we give. Every customer gets a different limit, and that way, some level of the risk is taken care of.

In our case, 80 to 90 per cent of our customers pay on time or before time. There are the 5 to 6 per cent customers who forget to pay a couple of times. They get a leeway of two to three days; we don’t penalize them; we don’t charge them any late fee either. We send out messages alerting them that any further delay in payments will decrease their credit score. When we send such messages, a lot of the customers do pay up. The next step, as per the regulations is that we report it to the bureaus, and this decreases their credit score, which eventually compels them to pay up. By this stage, 90 to 96 per cent of the customers would have paid. To the other 3 to 4 per cent, we send a legal notice. If it goes beyond 60 to 90 days, there is a knock on their doors from our collection agency. That’s the whole process.

Buy Now, Pay Later (BNPL) is still a very unpenetrated market. What scope do you see for it in India?

BNPL, in India, has been there forever in the offline world. Big companies like Bajaj have been there for the last 15 years. They’ve done tremendous work in the offline space. But the online market has remained largely unserved; there are not many players in this arena today and it is at a very nascent stage in terms of the number of customers in the online segment that are opting for instalment-based purchases. We have been seeing a 3x-4x growth in the last two years and in the last one year, we have seen 6x growth.

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If you look at India as a market, it sells its entire FMCG category in sachets. People buy shampoo sachets, being fully aware that they would have to buy it again soon. People still have the propensity to buy in parts and even some of the personal care companies are using the sachet method because the customers clearly prefer that. Customers have higher aspirations and a lot more options nowadays, but due to the current inflation, these high aspirations have grown higher than the salaries have.

But people still have money and can pay; they want to buy products that have more value and that embody their high aspirations. Therefore, instead of settling for a lower quality product, they are switching to instalment payments as they enable them to buy high quality products.

One, we are seeing that there are a set of categories now where EMIs have become the norm. It was already an established mode of payment in the furniture, TV and mobile phone arena. In the offline space, it is an easily available option and now it is rapidly penetrating the online space as well. But something that was not available in the offline space were EMI schemes for items with a smaller transactional value, items like headphones, fashion products and wellness or personal grooming products. These categories can now be purchased in instalments.

The second thing is that when we started, we spoke to many people who are related to this market. We understood that traditionally it was like a financial product related purchase. The decision-maker was generally a male for these kinds of purchases, but we have seen over the last 1 to 2 years that there has been a huge adoption of this trend by women, especially by the younger ones.

How do you see the competition in your sector? What help has the government given you?

In India, there are 700 million users online; 550 million people with PAN cards and only 30 million people have a credit card. On the e-commerce sites, the instalment option is present but only for the top niche segment of the customers and a majority of the customers remain unserved. The market is extremely large today. In my perspective, the competition is not that intense yet because there is a huge market that needs to be served. Everyone builds a niche around themselves; from people opting to solve just one type of purchase use case to people opting to solve only a particular customer type case. Offline, even the geographical facts become important like when someone takes a transport loan or when someone takes a car loan. There are some who only specialize in the purchase of consumer durables.

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The government is doing many things. It is working a lot on making the ecosystem more digital-friendly. Big improvements in the entire payments ecosystem are being made. Improvements like the KYC being brought online and made easier or the setting up of recurring payments that can be done with just one click instead of having to go through tedious processes, or the account aggregator forms via which we can access our customers bank cash flow/transactions in one step with their due consent. 

What is Snapmint’s approach towards the BNPL market? How do you plan to increase your customer base?

We work with a lot of brands. Post-COVID, a lot of brands have launched their own websites. The brands which were once working only offline have also started to maintain an online presence. They are now building their own D2C channels and are pushing them aggressively. Besides, there are a plethora of online first brands that have come into the market. They are growing pretty fast. Today, we are partnering largely with the D2C brands, be it online first or offline first.

Now, the brands have also become conscious and are only working with the people who have Non-Banking Financial Company (NBFC) licenses to ensure that they are working in accordance with the correct regulations. This is because recently there have been a lot of regulatory changes that have come in and they have impacted some of the non-regulated players.

Many brands have started putting us on all the products that they sell. They display Snapmint as an option. Instead of just saying that there is a Rs 5,000 smartwatch, they will say that you can buy it in three instalments instead of buying it in one go. That is one way through which our customers discover us.

Moreover, we do a lot of marketing for our app. We have 7 million users who have downloaded our app. Having tons of brands on board helps us to gain customers because when they check out our app, they too find the Snapmint instalment payment option affordable and easy to pay with.

Q. Since the entire process is online, how do you ensure seamlessness?

Our core focus is to make our customers’ experience as easy as possible by keeping the paperwork as less as possible. We don’t want our customers to go through extensive amounts of paperwork. 

There are many customers who are left behind as they don’t have the required credit score to buy a particular item. This way, the customers who can pay and have all the intent to do so are left behind. Just handing out instalment schemes to a limited set of affluent high credit score customers is not the way to go. The Snapmint approach makes the products from various brands accessible to more people — by enabling them to get their products via instalment payments/EMIs with minimal documentation. 

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 We are also constantly working on different data sources and on the new developments that the government is bringing to have a more integrated system. Like for instance, the Central KYC (CKYC) data which we use to leverage data and the account aggregators ecosystem. We leverage that to pull the data from the customer and ask the customer to submit the required documents.

What is the roadmap that Snapmint intends to follow?

For the next one to two years, our focus will largely be on growing our D2C brand partnerships.

We need more and more customers to find us, and we want to provide Snapmint purchase options on more brands to our already extant customer base.

Beyond that, we aspire to be the preferred payment option for all the transactions that our customers do. For that, we want to add more categories to our list, like for example the travel category. Categories like travel are high in budget for the customers and making travel essentials like hotel bookings and travelling expenses EMI-enabled will bring more versatility to our business.

Then there are categories like insurance and other offline dominant categories for which we will try and bring online solutions. Eventually, we might even provide personal loans to our customers and credit to our merchants for their business needs.