MACROECONOMIC IMPACT
AARUSHI JAIN || 24BC667
ARSHIA GUPTA || 24BC610
Introduction to Buy Now, Pay Later
Buy Now, Think Later? The Credit Revolution Disrupting Finance.
Short Term Small Growing
Period of Time Interest Free
Loan Instalments Popularity
BNPL is a type of short-term loan that lets shoppers pay for products in small instalments spread over a set period of time.
Unlike other types of loans, BNPL loans are typically interest-free and rarely carry other service fees, making them suitable
for people on a tight budget.
EXAMPLE:
Google Pay, Razor Pay, CRED, PhonePe, etc.
How Does BNPL Work?
Customer makes an Merchant offers Customer signs Instant e-KYC and Product is delivered Customer pays BNPL
online purchase BNPL as a payment up/logs into BNPL credit assessment to the customer provider later
option service
The customer shops on an e- At checkout, BNPL appears as an The user selects BNPL and either Some BNPL providers quickly verify The merchant ships the product even Repayment takes place in zero/low-
commerce site and proceeds to alternative to debit/credit cards, signs up or logs in to the provider’s identity and assesses credit risk before payment is collected. interest EMIs over a defined period.
checkout. CoD or UPI. platform. using digital tools.
Revenue Streams
Late Payment Fees: Transaction Fees: Interest income:
Late payment fees and penalties are one of the This fee is a fixed amount per transaction or a commission BNPL players provide short-term interest-free loans for
main revenue sources for BNPL providers. When on every purchase, a straightforward revenue stream for purchases. However, they also provide higher-tenure credit
customers fail to make timely payments, they the BNPL firm and can be used to cover operational costs over 3-12 months at zero interest cost or at an average APR
may incur additional charges. and generate profit extracted from the seller. of ~24%. The higher-tenure credit is available for large-
ticket size purchases (typically above INR 5K).
Implications on Consumption
Let’s take a look at how BNPL affects consumption.
Substantial High-value items
Increase in
Spending
01 02 are more
accessible.
IMPLICATIONS
Accelerated e-
commerce growth 03 04 Increasing
digitalization
in India.
Inflationary Pressures: A Hidden Cost?
Increased Demand Impact on Pricing Impact on Consumer Regulatory Concerns
With BNPL, consumers can buy items As demand increases, businesses may Spending Potential inflationary effectsc all for
now and pay later, potentially leading respond by raising prices, especially if increased transparency in pricing
to a greater willingness to spend on supply is limited or production costs The ease of BNPL can also lead structures, focus on responsible
impulse purchases or higher-priced are rising. This can lead to an artificial to a higher risk of overspending consumer lending practices to
items than they might otherwise afford. price increase, where even consumers and accumulating debt, which mitigate the risks associated including
This increased ease of purchase can paying cash may experience higher can have negative ensuring that consumers understand
lead to a surge in demand for goods prices due to the increased demand consequences for consumers. the terms and conditions of BNPL and
and services. driven by BNPL. the potential risks of using the service.
1 2 3 4
Effects on Monetary Policy
Let’s take a dive into how BNPL affects Monetary Policy Decisions.
Weakened Interest Undermining
Rate Transmission Monetary Indicators
1 3
2 4
Elevated and Hidden Policy Response Lag
Consumer Spending
Economic Implications & Concerns
Short-Term Long-Term Debt Vulnerability in Amplification of Consumer
Economic Cycles Recessions Business Cycles Spending Trends
If BNPL leads to unsustainable When faced with job losses, BNPL amplifies booms by May shift purchasing habits
Stimulation consumer debt levels, the wage cuts, etc. users are more fueling excess spending and from necessities to
With flexibility to manage potential for a long-term likely to default on repayments. worsens downturns through discretionary goods. This can
finances more effectively, impact on economic stability BNPL providers without rising defaults and credit affect sectors differently,
there's potential for increased arises, result in an uptick in safeguards like large capital pullbacks. This increases leading to an uneven economic
spending, driving economic defaults, may impact financial buffers or access to central economic volatility and calls for landscape where some markets
growth. institutions. bank liquidity—they face severe tighter regulation. flourish while others stagnate.
stress during downturns.
1 2 3 4 5
Rising Risks to Financial Stability
Let’s delve into the risks related to Financial Stability because of BNPL.
BNPL encourages excessive borrowing
without clear understanding of
repayment obligations, increasing
Household Overleveraging
01
default risk.
02 Credit Outside
Regulatory Purview
Consumer Financial
Vulnerability 03
If a major BNPL provider collapses or
04
Potential Contagion defaults spike, there could be ripple
Risk effects across retail and credit sectors.
Trends & Data
01 USD22bn BNPL market
by FY26; ~5% of digital
USD560bn BNPL market
by FY26;(Global): 02
P2M payments (India): The global BNPL payment market is
expected to grow by 13.7% on annual
India’s BNPL is at a point with basis to reach US$560.1 billion in
rising ecommerce and digital 2025. This upward trajectory is
P2M payments fuelling deferred expected to continue, with the market
payments forecast to grow at a CAGR of 10.2%
Growth during 2025-2030.
03 CAC, credit -cost drivers:
While the customer acquisition
costs are significantly lower
BNPL players scaling up:
BNPL players in India are currently
in the growth phase, driving up
04
compared to credit cards, the their engagement levels with high
peruser spends and revenue burn rates. As the BNPL players
potential is also lower. reach a critical mass, we expect
the operating losses to recede
and unit economics to stabilise.
Conclusion Scale
Expand your market presence,
optimize operations for scalability,
and continuously innovate to stay
ahead of the competition and
Launch sustain growth.
Deploy finalized products, execute
strategic marketing campaigns, and
collect valuable user feedback to
Build refine your offerings and enhance
user experience.
Design prototypes and develop
minimum viable products (MVPs) to
validate your ideas, ensuring they
Explore meet user expectations and market
demands.
Research market trends, identify
potential niches, and define the
needs of your target audience
through comprehensive analysis.
THANK YOU!
