Friday, March 31, 2023

Dvara Analysis Weblog | Report: The prices of utilizing Purchase Now, Pay Later (BNPL) merchandise (Up to date November 2022)


The Report was up to date in November 2022 based mostly on session and suggestions obtained from BNPL suppliers after the Report’s publication. Substantive updates to the content material of the Report have been indicated with a caret (^) mark in brown textual content.

Purchase Now, Pay Later (BNPL) merchandise have turn into one of many fashionable modes for patrons to make retail purchases in India. These merchandise are being positioned as challengers to bank cards that may make credit score extra accessible to prospects at little to no price. But, the precise prices prospects could incur haven’t been documented within the Indian context. Our report titled “The costs of using Buy Now, Pay Later (BNPL) products: Understanding the different kinds of costs Indian customers can incur in using BNPL products” makes an attempt to fill this hole.

Our findings on this report put the highlight on key elements of the BNPL market, primarily –

    i. Financial prices that prospects could incur once they use BNPL merchandise.

    ii. Conduct-related issues that BNPL prospects could face and the following non-monetary prices that they might incur.

These findings are supposed to assist stakeholders achieve extra perception into the BNPL market and determine buyer safety gaps that should be addressed.  

Analysis Methodology

The methodology we comply with on this examine presents a helpful method to monitor and determine buyer safety issues in nascent product markets. We examined the BNPL market primarily by way of two totally different approaches–

  1. Analysing phrases and circumstances (T&Cs) of ten distinguished Indian BNPL suppliers

    . We used the insights from this evaluation to (a) develop a financial prices matrix presenting the totally different prices prospects could incur and (b) determine buyer safety gaps that may create vital dangers for patrons.

  2. Utilizing BNPL merchandise personally.

    We registered and made a purchase order with a BNPL product from 5 of the ten suppliers. This helped us perceive the client expertise with every product and determine potential divergence with the costs and provisions talked about within the T&Cs. These experiences helped us refine our findings in (1).

Findings and takeaways for buyer safety

Our findings counsel that prospects utilizing BNPL incur financial prices corresponding to prices of utilizing bank cards and are inclined to opposed dangers rising from gaps in buyer safety. A few of our key findings embrace–

    a. The prices prospects incur might be divided into pre-default and post-default prices.

    Pre-default prices embrace curiosity prices, processing charges, autopay charges, carry ahead curiosity, becoming a member of charges and card-related prices. The APR on BNPL merchandise assorted between 0 to 36%, processing charges assorted between 0 to fifteen% of the sanctioned quantity, and different prices assorted between INR 0 to INR 500. Submit-default prices contains late charges assorted with the excellent quantity and was normally between INR 0 to INR 2000. Nonetheless, for some suppliers, like Unicard, the charges went as excessive as INR 3000 for dues between INR 2 lakhs to INR 10 lakhs. It’s unclear if the APR charged by BNPL suppliers is inclusive of all prices. If not inclusive, the financial prices of BNPL merchandise could also be nearer to that of bank cards. This should be validated with a bigger examine of prices incurred by prospects over time

    b. BNPL suppliers’ T&Cs are misaligned with key buyer safety laws, contravening key conduct obligations

  • Some suppliers’ T&Cs and Key Details Statements (KFS) omitted key particulars concerning the BNPL product like the costs prospects can incur.

  • Financiers retained the suitable to reject functions unilaterally with out giving causes for rejection.

  • Some suppliers explicitly maintain prospects chargeable for assessing suitability of the credit score being supplied. Different suppliers are silent about who’s accountable to evaluate suitability. ​

  • Some suppliers’ T&Cs had probably illegal provisions – like a waiver of buyer safeguards below usury legal guidelines and different legal guidelines regarding charging of curiosity. ​

  • Credit score reporting practices are not often disclosed to prospects. Suppliers additionally don’t disclose how utilizing BNPL merchandise can have an effect on prospects’ credit score scores. 

  • Suppliers’ T&Cs have broad and ambiguous clauses relating to non-public information use, giving suppliers leeway for utilizing private information for broad functions. 

  • Some suppliers talked about the opportunity of charging an undisclosed, non-refundable processing charges for buyer functions.

c. The onboarding course of for all suppliers was clean and absolutely digital however omitted vital details about the product

(like its prices). This data was not prominently displayed at the beginning of the onboarding course of. These particulars have been solely obtainable on the suppliers’ web sites.

d. BNPL suppliers could must align with the Cost and Settlement Programs Act, 2007 (PSSA).

At present, some BNPL suppliers appear to be settling funds immediately with retailers with out due authorisation from the RBI.

e. BNPL suppliers can also must align with the RBI Grasp Course on issuing bank cards, 2022.

It seems that BNPL merchandise could fall throughout the scope of the definition of a bank card below the RBI’s Grasp Course on issuing bank cards launched in April 2022. If that’s the case, BNPL suppliers could should make vital adjustments to their practices and enterprise fashions.

Our findings counsel that the financial and non-monetary prices related to utilization of BNPL merchandise are substantial and usually are not at all times identified to the client earlier than subscribing to the product. The opacity across the prices mixed with some probably illegal clauses, reveal severe buyer safety dangers that BNPL debtors are uncovered to. These findings refute the narrative of BNPL merchandise as low- to no-cost credit score options to bank cards.

Additional, The BNPL promise of credit score inclusion seems to be weakened by a set of things. The primary set of things could make BNPL merchandise much less reasonably priced for patrons. These elements embrace (a) probably increased delinquency charges amongst BNPL prospects which may in flip improve credit score prices for suppliers and curiosity prices for future prospects, and (b) a rise in prices to prospects on account of adjustments in BNPL supplier enterprise fashions and retailers’ pricing preparations. One other set of things could make BNPL merchandise and credit score much less accessible. These embrace (a) unexplained rejection of consumers’ BNPL functions, and (b) inconsistent reporting of consumers’ repayments to credit score bureaus.  

The methodological method adopted on this examine can present a helpful template for market monitoring of nascent however quickly rising monetary merchandise. For example, our findings from the examine counsel that prospects are at a threat of (a) unknowingly incurring debt, (b) borrowing credit score that’s unsuitable for them, and (c) being topic to attainable harms from weaker buyer safety safeguards. These findings align with these from regulatory investigations into the BNPL market in markets with extra mature BNPL merchandise. Regulators and suppliers should pay attention to these penalties to plot measures to enhance buyer safety within the BNPL market. 

The total report is out there here.

Cite this weblog:


Srinivas, M., & Prasad, S. (2022). Report: The prices of utilizing Purchase Now, Pay Later (BNPL) merchandise. Retrieved from Dvara Analysis.


Srinivas, Madhu and Srikara Prasad. “Report: The prices of utilizing Purchase Now, Pay Later (BNPL) merchandise.” 2022. Dvara Analysis.


Srinivas, Madhu, and Srikara Prasad. 2022. “Report: The prices of utilizing Purchase Now, Pay Later (BNPL) merchandise.” Dvara Analysis.

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