EMI Trends across Financial Institutions & the Indian Businesses
An MBA graduate in Finance & Marketing from Indian School of Business, Abhineet has 19 years of experience in Branding & Marketing. His success stories include Oyo, Ola, Holachef, Inrea and Sodel Solutions. Since 2008, the focus has been on solving big data problems, 'realtime' predictive technologies and algorithms primarily Adtech, Consumer Marketing and Media and growing eCommerce brands.
1.What is the EMI model that is currently in the Indian market? What are the differenttypes and how do finance companies generate their revenue out of it?
EMI financing is not new in India. People have been making big purchases like TV, fridge, automobiles on instalments offline for the last two decades in India. However, out of 200 Mn online shoppers, only about 45 Mn of them have a credit/ debit EMI card facility.This creates a huge gap in availability of all categories along different price points like apparel, electronics, beauty etc.
Credit penetration is even worse in the Gen Z sector who are just entering the workforce, tier 2-4 audiences, self employed and non-salaried individuals (like house wives). Thus, EMI democratises the issue by offering hassle-free credit to these consumers. This in turn creates an opportunity for brands/merchants to leverage sales.
Majority of transactions are no cost EMIs or no extra charge to the customer. The merchant pays for the financing cost. This is the major stream of revenue generation for fintechs offering Split Payment. Another way for revenue generation is the additional interest component coming from customers, which may be charged if the merchant is not willing to subvent the transaction.
2.Please explain the relevance of the EMI financing and the Indian businesses connected to it.
A customer buying a home/car/bike sees instalment as a significant enabler in purchase decisions. At lower price points, say below 10k or 5k the traditional point of view never acknowledges the need for instalment payments. However, the current trends show that there is a need for Splinter payments in this segment too. Many ecommerce brands thus leverage split payments to drive sales. It is able to reach a wider audience including Gen Z and tier 2-5 audiences. That is why brands see a 15-20 percent spike in sales on Snapmint orders vs other payment options. They also see 20-45 percent higher order value. Additionally, brands see increased share of prepaid orders, reducing the COD and RTO related challenges.
3.Why are Big brands working directly or through Financial partners in this model?
Big brands that have associated with BNPLs or Split payments see growth in terms of revenue and customer base. The reasons they work directly with partners such as Snapmint are two fold, a convenient online process and high approval rate. It's a 2-minute online process for any buyer without physical documentation. We have a strong underwriting ability as a RBI registered NBFC. Our approval process takes only about a few minutes for customers to complete. Second, we have the highest approval rates for customers. Snapmint is easy to integrate with most ecommerce stacks Integration with Shopify, Woocomerce and similar platforms takes less than 10 minutes of the Brand's time.
4. Has the EMI finance model got any effect due to covid? Can you explain the future of the BNPL market in India?
Post-Covid has brought more customers online. 700 Mn consumers are now on the internet, to leverage split payment offerings by sitting in any remote corner of the country. RBI and the government have pushed numerous online friendly upgrades in the ecosystem such as online KYC, recurring payments on UPI and account aggregator based structural financial data sharing. Given a slight increase in cost of credit has offset split payment adoption today. There is a huge scope for split payment in India. Remember that out of 550 Mn PAN card holders, only 45 Mn have access to shopping on Credit in India. Off late, inflation is extremely high and more people need budgeting solutions like instalment EMIs. Thus, customers are rapidly adopting brands such as Snapmint as a payment method for their purchases.
5.In the medium to long term, how do you anticipate BNPL company growth in India?
"Indian Split payment market grew at a CAGR of 321 percent by Gross merchandise value (total value of the loans disbursed to consumers), during FY'19-FY'21". These numbers are driven by the need for EMI financing for the segments we mentioned above. Online penetration has increased and the young population of India is looking to buy on credit. We are enabling our customers to buy in several categories such as electronics, fashion beauty and personal care. Most importantly, Snapmint aims to do this with full transparency. There are no hidden costs and no physical documentation. We currently have 10 Mn+ app downloads. Our transaction volume has grown 6x in the last one year.
6.Target Group for Splinter payment model and workflow.
As pointed above, there are two types of buyers in India. The first one are the affluent 45 Mn who have access to shopping on credit, and the rest who don't have access to instalment payment based shopping. Our mission is to democratise access to credit. This means people who are new to credit or have thin credit. With the 500 Mn customers who have PAN card but do not have access to shopping on instalments, it is pocket friendly to buy on instalments. 60 percent of the workforce is unemployed or is in unorganised/SME sectors. We see a strong adoption with customers who are banking with public sector banks which contributes to 70 percent of all customers. They are not the usual targets of banks/credit card issuers. The Gen Z segment, they are buying a lot of fashion, electronics and gadgets in the sub 5000 price points. Brands in these categories have embraced BNPL. We see huge adoption in tier 3-4 towns where physical banking infrastructure is limited. Snapmint offers them a transparent way to make these purchases on credit. They can do so on 0 percent interest EMI without the hassle of documentation. This translates well for the Indian economy as customers see splinter payment as a way to sachetise their purchases.
7.Big firms in the Indian market offer EMI services for a variety of products and services. What do you think of the market's treatment of you as a newcomer to the industry?
Big financial firms have limited themselves to affluent customers and high price point categories. Most of them only offer EMI purchases to the top 50 Million who have thick credit files and for only certain categories like home furnishings, appliances, automobiles, and more.Splinter payment is solving this liquidity problem for the people outside this 50 Mn. This includes the ones we mentioned above like people with thin credit, Gen Z, new to credit etc. Platforms like Snapmint operate for them and go beyond the traditional categories serviced by incumbents. Today we have men buying shoes and smartwatches on split payments and women buying beauty products on instalments too.
1.What is the EMI model that is currently in the Indian market? What are the differenttypes and how do finance companies generate their revenue out of it?
EMI financing is not new in India. People have been making big purchases like TV, fridge, automobiles on instalments offline for the last two decades in India. However, out of 200 Mn online shoppers, only about 45 Mn of them have a credit/ debit EMI card facility.This creates a huge gap in availability of all categories along different price points like apparel, electronics, beauty etc.
Credit penetration is even worse in the Gen Z sector who are just entering the workforce, tier 2-4 audiences, self employed and non-salaried individuals (like house wives). Thus, EMI democratises the issue by offering hassle-free credit to these consumers. This in turn creates an opportunity for brands/merchants to leverage sales.
Majority of transactions are no cost EMIs or no extra charge to the customer. The merchant pays for the financing cost. This is the major stream of revenue generation for fintechs offering Split Payment. Another way for revenue generation is the additional interest component coming from customers, which may be charged if the merchant is not willing to subvent the transaction.
2.Please explain the relevance of the EMI financing and the Indian businesses connected to it.
A customer buying a home/car/bike sees instalment as a significant enabler in purchase decisions. At lower price points, say below 10k or 5k the traditional point of view never acknowledges the need for instalment payments. However, the current trends show that there is a need for Splinter payments in this segment too. Many ecommerce brands thus leverage split payments to drive sales. It is able to reach a wider audience including Gen Z and tier 2-5 audiences. That is why brands see a 15-20 percent spike in sales on Snapmint orders vs other payment options. They also see 20-45 percent higher order value. Additionally, brands see increased share of prepaid orders, reducing the COD and RTO related challenges.
3.Why are Big brands working directly or through Financial partners in this model?
Big brands that have associated with BNPLs or Split payments see growth in terms of revenue and customer base. The reasons they work directly with partners such as Snapmint are two fold, a convenient online process and high approval rate. It's a 2-minute online process for any buyer without physical documentation. We have a strong underwriting ability as a RBI registered NBFC. Our approval process takes only about a few minutes for customers to complete. Second, we have the highest approval rates for customers. Snapmint is easy to integrate with most ecommerce stacks Integration with Shopify, Woocomerce and similar platforms takes less than 10 minutes of the Brand's time.
4. Has the EMI finance model got any effect due to covid? Can you explain the future of the BNPL market in India?
Post-Covid has brought more customers online. 700 Mn consumers are now on the internet, to leverage split payment offerings by sitting in any remote corner of the country. RBI and the government have pushed numerous online friendly upgrades in the ecosystem such as online KYC, recurring payments on UPI and account aggregator based structural financial data sharing. Given a slight increase in cost of credit has offset split payment adoption today. There is a huge scope for split payment in India. Remember that out of 550 Mn PAN card holders, only 45 Mn have access to shopping on Credit in India. Off late, inflation is extremely high and more people need budgeting solutions like instalment EMIs. Thus, customers are rapidly adopting brands such as Snapmint as a payment method for their purchases.
5.In the medium to long term, how do you anticipate BNPL company growth in India?
"Indian Split payment market grew at a CAGR of 321 percent by Gross merchandise value (total value of the loans disbursed to consumers), during FY'19-FY'21". These numbers are driven by the need for EMI financing for the segments we mentioned above. Online penetration has increased and the young population of India is looking to buy on credit. We are enabling our customers to buy in several categories such as electronics, fashion beauty and personal care. Most importantly, Snapmint aims to do this with full transparency. There are no hidden costs and no physical documentation. We currently have 10 Mn+ app downloads. Our transaction volume has grown 6x in the last one year.
6.Target Group for Splinter payment model and workflow.
As pointed above, there are two types of buyers in India. The first one are the affluent 45 Mn who have access to shopping on credit, and the rest who don't have access to instalment payment based shopping. Our mission is to democratise access to credit. This means people who are new to credit or have thin credit. With the 500 Mn customers who have PAN card but do not have access to shopping on instalments, it is pocket friendly to buy on instalments. 60 percent of the workforce is unemployed or is in unorganised/SME sectors. We see a strong adoption with customers who are banking with public sector banks which contributes to 70 percent of all customers. They are not the usual targets of banks/credit card issuers. The Gen Z segment, they are buying a lot of fashion, electronics and gadgets in the sub 5000 price points. Brands in these categories have embraced BNPL. We see huge adoption in tier 3-4 towns where physical banking infrastructure is limited. Snapmint offers them a transparent way to make these purchases on credit. They can do so on 0 percent interest EMI without the hassle of documentation. This translates well for the Indian economy as customers see splinter payment as a way to sachetise their purchases.
7.Big firms in the Indian market offer EMI services for a variety of products and services. What do you think of the market's treatment of you as a newcomer to the industry?
Big financial firms have limited themselves to affluent customers and high price point categories. Most of them only offer EMI purchases to the top 50 Million who have thick credit files and for only certain categories like home furnishings, appliances, automobiles, and more.Splinter payment is solving this liquidity problem for the people outside this 50 Mn. This includes the ones we mentioned above like people with thin credit, Gen Z, new to credit etc. Platforms like Snapmint operate for them and go beyond the traditional categories serviced by incumbents. Today we have men buying shoes and smartwatches on split payments and women buying beauty products on instalments too.
