IPO: Hits and Misses 36

Buy Now, Pay Later: Flourish with Gen Z demand or fade under RBI Scrutiny

Introduction

Credit is an important element in trade and commerce. Over the years, credit has taken different forms like loans, debentures, bonds, credit cards etc. Buy Now Pay Later (BNPL) scheme is one form of credit which can be traced back to 19th century, where consumers purchased expensive goods and paid it in instalments at a later point in time. With the advent of technology, BNPL itself became a new business model, where lot of fintech companies integrated the system with ecommerce where the customer is able to access instant credit at the point of sale. It is a kind of short term financing that bridges the gap between the income of the customer and their needs, and it is mostly provided on an interest free basis. The major players in the Indian BNPL market include LazyPay, Zest Money, Amazon Pay Later, Flexmoney, Simpl etc. This system has revolutionized the retail segment by inducing customers to buy more and often beyond their limits. When the top line of firms increase due to BNPL schemes, we should not close our eyes to the moral hazard it can create. It should be noted that availability of easy credit and buy now pay later schemes was one of the reasons for the Great Depression in 1929.

How Companies Use BNPL as a Strategy

BNPLis a financing option for point-of-sale that has gained popularity recently, especially with younger demographics. This can be proved by prospect theory.

1.Off-card financing solutions 2.Virtual rent-to-own models 3.Card-linked installment offerings 4.Vertical-focused larger-ticket plays 5.Integrated shopping apps

How the front runners approach their Go-toMarket strategy?

Klarna To reach potential BNPL clients, Klarna acquired the British price comparison website Price runner. The likelihood that you are interested in BNPL is higher if you give price a lot of thought. Additionally, when you intend to make a buy, you're more inclined to compare pricing, a wonderful match.

Affirm has made early investments in solid alliances and enables the Shopify Shop Pay and Amazon BNPL services.

Afterpay Block purchased Afterpay in January 2022, and it now benefits from its mature ecosystem. Block is the owner of the music streaming service Tidal, Cash App, a supplier of mobile payments. This offers a solid foundation for connecting to the consumer and merchant networks using a single BNPL solution.