Buying now, paying later will soon become the preferred payment option: Vandhana Parkavi Valaguru, Sezdle India
Can you briefly explain how the Buy Now, Pay Later feature offered by Sezzle works?
Sezzle’s Buy Now Pay Later (BNPL) option is very simple. At the time of purchase, a user only needs to pay 25% of the billed amount. Two weeks later he pays another 25%, four weeks later another 25% and at the end of the sixth week the remaining 25%. This way, a customer receives payment for any purchase in four installments over six weeks without interest. Unlike some of the other BNPL players, we allow buyers to split each purchase rather than follow consolidated billing.
Credit cards also offer free credit and easy payment options to customers. How is BNPL different?
There are several differences between a credit card and BNPL. For one thing, we don’t charge users an annual fee while most credit card companies charge an annual fee. Second, credit cards follow a consolidated billing system, in which users are billed for the full amount spent during the billing cycle. If a card’s billing cycle is November 1 through November 30, a purchase made even on November 29 will be billed in December. In contrast, BNPL treats every purchase as unique, and the ability to pay in four installments is available with every purchase, giving users the flexibility they so badly need. Additionally, Sezzle allows users to budget better as users pay for each purchase rather than accumulating a lump sum and paying all at once.
The general feeling is that if something is free there must be a trap somewhere. If you charge no interest on the buyer’s credit, where exactly do BNPL companies expect to earn?
Sezzle believes in transparency and that’s why our merchant and user base has grown exponentially. When we say there is no catch, we mean it. A buyer pays nothing more if the down payments are paid on time. Sezzle earns a merchant commission every time a purchase is made with Sezzle.
How has BNPL developed over the past few quarters? Has the pandemic affected growth?
BNPL is one of the preferred and fastest growing payment methods. The overall size of the industry was approximately $ 6.9 billion in 2020. It is expected to reach $ 52.8 billion by 2028. This represents a growth of 650% in less than a decade.
The pandemic has helped bring BNPL into the mainstream, however, even in the current phase where we are past the peak of the pandemic, BNPL adoption is increasing. Traders and buyers love BNPL. What buyers appreciate most about BNPL is the transparency and flexibility it offers. The use of BNPL is no longer limited to high value purchases like electronics, buyers use it for their daily needs including personal care, nutrition and food.
How does BNPL contribute to financial inclusion?
Obtaining credit has traditionally been viewed as a cumbersome and slow process. However, with BNPL going mainstream, that is changing. BNPL enables buyers of all demographic profiles and democratizes credit by making it accessible to all.
Do you think BNPL can help improve consumption during the holiday season?
BNPL empowers buyers and will continue to do so even during the holiday season. At this time of year, purchases are increasing in all segments, be it clothing, jewelry, consumer electronics and durable goods. BNPL’s shopper-friendly model will also boost shopping this holiday season.
What is the growth projection for the coming year?
From the periphery to that of consumer means of payment, BNPL has come a long way. The growth can mainly be attributed to transparency and ease of use. Technology is another factor that helps buyers and traders. For the remainder of this year and beyond, BNPL’s growth trajectory will only be on the rise. Very soon you will find the BNPL payment option available in most offline stores, just as UPI is now.
Your business model is built around an ecosystem of small businesses. Has it resulted in better sales?
For Sezzle, every trader is important. We continue to empower companies, regardless of their size. Since launching in India in 2020, Sezzle has built relationships with over 800 merchants across all categories. These merchants have benefited from an increase in the average order value, an increase in the number of prepaid orders and, ultimately, an increase in sales.