Buy Now, Pay Later (BNPL): India - UK Comparison

Abstract

The Buy Now, Pay Later (BNPL) financial service has experienced rapid expansion, notably in the UK and India. BNPL allows consumers to defer payments for purchases, dividing them into interest-free instalments typically spanning four payments or fewer. This service has gained popularity for its convenience, helping consumers manage budgets and enhance purchasing power without accruing interest.

The swift growth of BNPL services has sparked regulatory concerns, especially regarding consumer debt and financial stability. Regulators in the UK, EU, US, and Australia are increasingly advocating stricter oversight. Leading players in the BNPL market include Klarna, Afterpay, Affirm, and Zip, driving innovation and competition. The global BNPL market is expanding, with significant growth anticipated in Europe, Africa, and the Middle East. Strategic partnerships and fintech innovations are critical growth drivers, although heightened regulatory scrutiny and competition from traditional financial institutions present challenges.

In 2020, the UK BNPL market surged to £2.7 billion, surpassing the peak volume of payday loans. The COVID-19 pandemic accelerated BNPL adoption, supporting consumer spending during economic difficulties and boosting average order values. The UK market continues to expand rapidly, driven by broader consumer adoption beyond luxury items, attracted by the flexibility and ability to spread costs over time. Major players such as Klarna, Clearpay, and Laybuy are expanding and forging strategic alliances to capitalize on market growth across all age groups. In India, the BNPL market is poised to grow from USD 3.5 billion to USD 50 billion by 2026, propelled by increasing e-commerce activities, particularly among millennials. The pandemic accelerated BNPL adoption by 50% in 2020, with consumers appreciating its flexibility and transparency. Key players like Axio, ePayLater, and Slice are leveraging this growth, although regulatory challenges and potential consumer debt remain significant concerns.