Latest Financial Fad: ‘Buy-Now, Pay-Later’ Loans Fuel India’s Festive Recovery

Indian consumers are raking up buy-now-pay-later (BNPL) installment plans to purchase everything from washing machines to vacations online as the country’s longest festive season gets underway.
According to a report in “The Economic Times”, the popularity is swelling for these BNPL small-sized loans that typically amount to less than Rs 5,000 ($67) as the labour market recovers from the pandemic shock.
 Those payments have been growing at least 20%-30% over the past three months, according to fintech-firm executives. They are expected to increase by about 66% on an annual basis in India to $11.6 billion this year, a survey by Research and Markets showed.
Initially developed to cater to the under-served and unserved section of the population and the new generation that’s geared towards instant gratification, the new type of Buy Now Pay Later isn’t limited only to that; it is rather open to all, thereby unlocking previously untapped opportunities for consumers, merchants, and fintech companies alike.
The ET report quoted Bhavin Patel, co-founder and chief executive officer of LenDenClub, a peer-to-peer (P2P) lending platform saying”Things are very positive, people have got their jobs back. The buy-now, pay-later model is the most popular source of borrowing for customers who need small size loans quickly to tide over immediate cash needs.”
The ET report also quoted Yogi Sadana, chief executive officer of fintech lender CASHe. Saying “BNPL is aided by two things, one is the festive season and second is Covid-19 as people are becoming more comfortable with purchasing online. We are growing about 30% to 35% on a monthly basis, in terms of the number of loans we provide every month. The pick-up is phenomenal.”
According to the ET report, rising vaccination rates coupled with decreasing coronavirus cases are fueling optimism that people are more willing to spend on goods and jewelery this year. Those consumers are increasingly turning to installment plans from retailers such as e-commerce giants Inc., Flipkart Internet Pvt. and Ant Group Co. backed Paytm, as well as smaller fintech firms like LenDenClub, Simpl, ZestMoney and CASHe. Patel claimed that LenDen has seen loan applications treble to 170,000 in September from February and expects a further increase to 250,000 in December. 
More broadly, spending per credit card was up 54% in August from the year before, according to a Bank of America Corp. report. 
For fintechs, such loans are filling a sweet spot. They cater to customers who typically wouldn’t either qualify to borrow from a traditional bank or would have to wait longer than getting a loan within a few hours. 
Mr Patel said it is a win-win for all three players -- the borrowers who get loans quickly, the lenders who earn 10-12% average returns and the fintech/ P2-P firm who earn a 5-6% fee by getting the borrowers and lenders on a common platform. 



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Changes in Our Business Model
25th Sept 2020
Greetings from Moneylife Advisory Services
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
What remains the same:
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  • We will have to suspend the restructuring tool.
What changes:
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Over the next few weeks our site and our communication to you will reflect these and other additional changes.
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
Debashis Basu