Page 36 - Banking Finance September 2022

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facilities are provided by select e-retailers and fintech
organizations. Interest - free credit period can go up to 48
months. You have to pay the fixed EMI on the scheduled
date. Unlike credit card you cannot earn cash back, reward
points, airmiles on purchases. The interest rate is up to 24%
and is not fixed like credit card , it can vary depending on
various factors.

Transparent and low-cost pricing model: BNPL usually follows
a transparent and low-cost pricing model because a lot of
the offers are subsidised by brands so that the customer
gets the best value of the offering. Lizzie Chapman, CEO
and Co-founder, Zest Money, says, "Unlike credit cards that
are meant to deceive the customer with hidden charges and
exorbitant interest rates, BNPL is transparent. The customer
knows exactly how much he/she will be paying."
their topmost priority when it comes to get quick
Completely digital and instant sign up process: Anyone sitting profitability.
in any part of the country can sign up and avail of the
For consumers safety should be the first criteria to look
service. Credit Cards on the other hand require weeks and
forward.While downloading apps, make sure that the app
a lot of paperwork. With digital KYC, one can get instantly
is from a lender who is a licensed lender. If a company is
approved and start transacting.
not holding RBI license, it should clearly state under whose
More accessible: When compared, experts say, credit cards license it is offering the product. Before downloading, check
who is publishing the app, take a look at the company's
are for high CIBIL customers, people in metros and salaried
website and make sure it is an established and registered
folks. Only 65 million people in India use credit cards.
company in India.
Chapman of ZestMoney adds, "BNPL by nature is designed
for a much bigger market, including new to credit customers
In the light of many fake lending apps are being busted by
or people with insufficient credit history. Most BNPL players
law enforcement agencies, regarding the licence check if
use an alternative data and proprietary model to approve
these customers. Also, Indians are leapfrogging credit cards it clearly mentions the same on its website, along with the
RBI guidelines that it follows, including the grievance
to BNPL."
redressal mechanism and the interest rate policy.
Who are all eligible? Moreover, never download apps which ask for contacts as
they may be misused for coercion.
1. You must be a resident of India.
2. You must reside in a major tier 1 or tier 2 city. The biggest worry is misleading advertisements. Most BNPL
3. You must be aged above 18 years. The maximum age options claim no fees or zero interest, but you need to
of eligibility in some cases can be up to 55 years. understand what is the real cost of the loan. Even if
companies say zero per cent, they are supposed to declare
4. You must be a salaried individual/professional or
their IRR - Internal Rate of Return, so the consumers, for
businessman.
their own protection, need to make sure that the company
5. You must have a bank account and all the KYC
or the app is disclosing all of these.
documents in place.
Challenges:
What the consumers should watch out
There are companies that use BNPL as payment product
for? where credit reporting does not happen. This kind of an
Most of the Indian consumers do not give safety and security approach creates a gap when evaluating a consumer for

36 | 2022 | SEPTEMBER | BANKING FINANCE