JUNE 20229India currently has around 22-25 million BNPL users, according to Benori Knowledge, a global provider of custom research and analytics solutions.WHY PLAN B IS CRUCIAL IN FINTECH AND FOR ITS CUSTOMERSFollowing the Reserve Bank of India's recent prohibition on loading credit lines onto wallets and prepaid payment instruments, card-based fintech firms have begun working on Plan B to ensure business continuity. Several fintech firms have approached major banks to investigate alternative credit models. These include opening a bank account with lenders as well as an add-on debit card to disburse loans, issuing co-branded credit cards instead of PPIs, and disbursing credit as cash directly into a customer's existing bank account.PARTNERSHIPS WITH CO-BRANDINGIn addition to issuing prepaid cards, the affected fintech firms are considering collaborating with banks to create a co-branded credit card. The bank will issue the credit card, while the fintech entity will acquire and manage customers. This, however, will limit the ability of fintech firms to operate in this space. As a result, card-based fintech firms are continuing to use the traditional method of disbursing credit into a customer's bank account until there is regulatory clarity on the issue.WILL THE NEW BUY NOW, PAY LATER GUIDELINES AFFECT CUSTOMERS?The term BNPL may be new to many Indians, but the concept of allowing customers to split bills is as old as consumer credit. Regardless of the RBI's restrictions, high-risk borrowers are expected to continue using BNPL apps for various online transactions, as obtaining credit from a bank is a major challenge for them. These apps are also appealing to the middle-class population because they offer exclusive deals with food delivery apps, mobility apps, and e-commerce platforms.Furthermore, BNPL is in high demand in tier 2 and 3 cities, where many consumers seek small-ticket credit for specific needs but are not eligible for credit cards. In such cases, BNPL apps are the ideal solution for them to conduct hassle-free online transactions.
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