Gone are the days when credit cards were the only source of post payment in the world. In this age, if you don't want to go through the hassle of using credit cards, life has become easier with Buy-Now-Pay-Later (BNPL) apps. Almost all e-commerce sites have incorporated these new financial weapon vehicles to encourage consumer purchases. Indian apps like ZestMoney and Simpl have gained popularity among the country's youth. Globally, these apps have also made buying and consuming easier.
While BNPL's offerings have gained momentum during the pandemic, things are getting tougher for the industry as economic uncertainty spreads across the globe and debt mounts in some countries. So this whole concept of having a business that is completely dependent on borrowing from the future can backfire. Experts believe that BNPL will survive as an industry, but they need to earn the trust of consumers through well-thought-out business ideas and smart marketing.
The BNPL sector is here to stay
According to ResearchandMarkets.com, the medium to long-term growth story of India's BNPL industry remains strong. BNPL payment adoption is expected to grow steadily over the forecast period at a CAGR of 12.2% during 2023-2028.
Himanshu Arora, co-founder of Social Panga, believes that the buy now pay later industry will continue to grow even in turbulent times. “This youth-driven concept is taking over most of the costs of the Indian economy in a fairly short period of time. In my opinion, the buying pattern will remain the same for years to come, recession or not. This is because the Concept does a better job of matching people's income levels to their aspirations and desires so that they spend more than they do. India's economy will show positive growth in the next fiscal year, 2023, as it will be more locally focused and digitally healthier than ever before.
Trouble ahead. What can be changed?
Sumir Mathur, chief strategy officer at Dentsu Creative India, believes the new RBI standards could spell trouble for the BNPL segment. “More than recession and inflation, the new RBI rules will affect business and growth in this category. For now, BNPL has created a new category by targeting clients who do not have access to loans. However, with the RBI (RBI). fulfills its role as custodian of the client. Some industry players say this category will evolve to give customers access to credit cards. In fact, the percentage of credit card users among BNPL's customers has already increased. A new leadership will be developed. Growth will also increase. be limited because this consumer has so many other options.
Arora warns of rising inflation and says we may see a change in the marketing of the BNPL industry. Inflation will create problems for the BNPL market. Borrowing costs for BNPL companies will rise, leading to lower costs in other core areas of their business, including marketing. So we could see how they market their services in this volatile space. Emphasis will be placed only on the most important aspects of the promotion, and the budget will be reduced in the rest. It will be interesting to see marketing companies like ZestMoney, Simpl and Slice emerge next year.”
Connecting BNPL companies with e-commerce is a good business strategy, but there are risks that could deter consumers, said Harish Tibrewala, deputy general manager of Mirum India. "I think the 'buy now, pay later' concept is here to stay." We have to look at BNPL from both a business and a consumer perspective. From a brand/business perspective, this is a good sales strategy. This ensures the sale. even if the money is withheld. The sale will come within a certain period of time in business.
However, from a consumer perspective, you are actually borrowing from the future to pay for today's luxuries. In my opinion, BNPL is a good idea to value assets (eg houses or jewelry), but do it for depreciable assets like cars, vacations, phones, etc. it is risky and not recommended.
Smart marketing can be an elixir
Sanjeev Jasani, CEO of Cheil India, shares his views on how best to move the BNPL industry forward in a risky economy. “Marketing can play an important role in helping BNPL companies survive the recession. Marketing efforts can help BNPL reach new customers who may be looking for more affordable and manageable ways to shop during the recession. Can it also help build confidence and trust? , which is especially important during a recession.
BNPL companies must focus on improving financial resilience during the downturn. they need to do this to ensure they can withstand potential losses from default or reduced demand during a downturn. This can include strengthening your balance sheet and building cash reserves.
Communicate transparently with your customers. In a recession, transparency is the least a consumer can expect. As such, ensuring clear and transparent terms and conditions and your compliance with all applicable regulations will only help build trust and go a long way toward building a brand.
Ensuring long-term stability and growth. During a downturn, regular strategy adjustments and reviews are absolutely essential. This may include adjusting marketing efforts, revising pricing strategies, or changing product offerings.
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