Table of Contents
In the wake of the COVID-19 pandemic, consumers turned to online shopping for their essential needs. As a result, BNPL emerged as more than just a payment option but also a way to reduce borrowers’ financial stress by offering no-cost EMI options. The relationship between e-commerce and BNPL is promising, and the fintech sector in India is fast expanding as BNPL, and digital payments become more widespread. BNPL is especially popular among Gen Z consumers, young millennials, and first-time credit applicants who may have been neglected by traditional banks.
According to research by ResearchAndMarkets.com, the Buy Now Pay Later market in India is the fastest-growing market globally. In 2022, the payments made through BNPL in India grew by almost 71.5% annually to reach US$12,355.8 million. The BNPL market size is expected to increase by around 12%, from US$7,204.5 million in 2021 to US$97,717.0 million by 2028.
As people’s preference for online payments grows, the use of the BNPL payment method has risen exponentially in the country during the previous two years. According to Experian, BNPL transactions in India increased by 21% in H1 2022, which is 3% more than global growth.
As India is moving towards a digital economy, the growing usage and rising awareness imply that BNPL is here to stay. Therefore, here is an attempt to define and explore its benefits, risks, and disadvantages, and guide how and when to use it.
What is BNPL?
It is a payment option that allows customers to buy goods or services without paying the entire amount upfront, a convenient alternative to traditional credit cards and loans. Instead of paying the entire amount upfront, payments can be made in installments over a set period; it could be a few weeks or months.

Personal loans, house loans, and salary overdrafts have historically been the primary emphasis of consumer loans supplied by traditional banks. However, a new generation of fintech lenders is broadening the scope of consumer loans by providing credit for modest expenditures such as online shopping, food delivery, and other e-commerce categories. The Buy Now Pay Later model, structured similarly to existing checkout financing alternatives like debit and credit card-based EMIs, comes into play here. However, the model emphasizes smaller purchases, which may appeal to younger consumers and those seeking a more flexible payment alternative.
Indian BNPL services industry is divided among –
- By channel – Online and Point of Sale,
- By enterprise – Large enterprises, small and medium ones and,
- By end-user – Consumer products like Electronics, Clothes, Healthcare, Entertainment, and others.
Benefits of BNPL
Convenience is one of the primary advantages of BNPL. It allows customers to buy the items they need or want without paying a large sum of money upfront. This is especially helpful for those on a tight budget who would otherwise have to postpone their purchase or save up over a longer period ,also provides more payment options, allowing customers to select the plan that works best for them.
Another advantage is that it can help in building credit scores. Customers can demonstrate their creditworthiness by making regular, on-time payments, which can help improve their credit scores. Especially for those who have just started or have a limited credit history. Additionally, it provides various benefits over traditional credit cards. For instance, the elimination of common areas of friction, such as documentation requirements, credit score reviews, and numerous rounds of identification, may be time-consuming and annoying for many individuals. it on the other hand, provides a more simplified and flexible approach. frequently eliminates the need for significant documentation and credit score criteria, making the application process faster and easier.
Risks of BNPL
While it has advantages, there are some risks to consider. The most dreaded risk is the possibility of overspending. Because the cost is spread out over a longer period, it is often tempting to buy more than you can afford. This will hamper your finances and increase your chances of going into debt.
Another risk associated with it is the high cost of borrowing. Their services frequently include fees, such as late fees or interest, which can quickly add up. This can cause borrowing costs to be much higher than expected, which can be difficult for those on a tight budget.
Disadvantages of BNPL
The disadvantages are not limited to the risks and high borrowing costs. If you continue to miss or make late payments, can hurt your credit score. It will harm your future creditworthiness, making it more difficult and expensive to obtain loans, credit cards, and other financial products.
Another disadvantage of BNPL is the possibility of addiction. The ease of use and flexibility of it can lead to a shopping and spending addiction, which can lead to financial difficulties and mounting debt.
Furthermore, unlike a credit card, it does not offer any rewards when you use it to make a purchase.
How to use it and when?
Regardless of their reliance on technology, many millennials strongly desire financial education. The demand can be seen in the increasing popularity of online financial courses and personal finance blogs aimed at assisting millennials in better understanding their finances. Financial literacy is an urgent need, and millennials seem to have recognized the need for it.
Control
Despite the risks, it can be a valuable tool when used responsibly. To get the most out of it, you must:
- Do research: First and foremost, you must research your Buy Now Pay Later service provider and comprehend the terms to which you are agreeing. It will protect you from negative consequences in the future.
- Use BNPL only for necessities: Use it only for necessities, such as bills or necessary purchases, rather than for discretionary spending.
- Make a budget: Ensure to set a budget for spending and stick to it. Do not overspend, and avoid using it for unaffordable purchases.
- Choose a budget-friendly plan: Choose a plan that works best for your budget and avoid plans with high fees or interest rates.
- Timely payments: Late fees can be avoided along with good credit score maintenance only if you make your payments on time.
Conclusion
Buy Now Pay Later in India has progressed from a basic credit instrument to becoming the primary driver of credit development in India. As it grows in popularity, consumers must be aware of the risks involved and make wise decisions while utilizing these services. Providers must also assure appropriate lending practices to safeguard customers and sustain the stability of the financial system.
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
- Mahakumbh 2025: The Effects on UP Economy - February 6, 2025
- Understanding the sectoral trends of the Union Budget 2025 - February 6, 2025
- Budget 2025 Expectations: Sectorwise Insights & Market Trends - February 4, 2025