Razorpay, one of India’s leading payment getaways, has released the 10th edition of its (COVID) Era of Rising Fintech, outlining the growth it witnessed during the past year.
Among the most staggering figures shared in the report, the company said it recorded a surge in its buy now, pay later (BNPL) business, which it said grew by 611% during the 2021 calendar year and by 569% in 2020.
BNPL arrangements, a type of short-term financing that allows consumers to make purchases and pay for them later through regular interest-free installments, are booming in India on the back of surging e-commerce activity and demand for easy loans.
At MobiKwik, another Indian payment services provider, BNPL nearly double in two years, the company said in late 2021. For the financial year ending March 31, 2021, MobiKwik said income from the BNPL segment accounted for nearly a fifth of its 3.01 billion rupees (US$40 million) revenues.
“Only 60-70 million Indians have access to credit today, which means 93% of India has no access to credit,” Upasana Taku, co-founder of MobiKwik, told Reuters.
“It will become the fastest revenue driver for the business because there has been a 45X growth in the BNPL transactions in the last two years. New user addition is very high; repeat rate and average ticket size is going up.”
And the trend is showing no signs of slowing down. Indian Internet-focused consulting firm RedSeer estimates that there were about 10-15 million BNPL users in the country in 2021. That figure is projected to rise to 80-100 million customers by 2026. During that timeframe, the firm estimates that India’s BNPL market will grow over ten-fold to reach US$45-50 billion by 2026 from US$3-3.5 billion in 2021.
The surge in BNPL activity is part of the broader digital shift observed in 2021, Razorpay said, noting that the year saw digital payments effectively become mainstream.
Between 2020 and 2021, online payments at Razorpay more than doubled, growing by 104%, the company said, and digital transactions became a popular choice in everyday households, as evidenced by the rise in transactions relating to telecom (+3,640%) and utility bills (+2,353%).
Looking closely at the different payment methods used by customers, Razorpay indicated that the United Payments Interface (UPI), India’s instant, real-time payment system, recorded the highest growth, rising 174% from 2020 and 2021. In 2021, UPI was Indians’ preferred mode of payment with a 63% market share, followed by cards (26%), and e-mandates (1.58%).
The report also notes rising digital adoption amongst small and medium-sized enterprises (SMEs), claiming to observe a 1,500%+ increase in wholesale e-commerce between 2020 and 2021.
Razorpay growth metrics, Source: 10th (COVID) Era of Rising Fintech, Razorpay
Striving to turn the country into a digital powerhouse, India’s public sector has been a key catalyst for rapid digitalization with initiatives such as Aadhaar, a digital identity platform, UPI, and eSign, an online electronic signature service.
These platforms are part of the India Stack, an initiative introduced more than ten years ago which seeks to create a unified software platform for governments, businesses, startups and developers. The India Stack aims to promote financial inclusion, improve the delivery of public services and benefits, and increase competition domestically.
During the presentation of the Union Budget 2022 on February 01, Finance Minister Nirmala Sitharaman unveiled more initiatives aimed at boosting the digital economy.
These include the forthcoming launch of a central bank digital currency (CBDC) in 2022-23, continued financial support for the digital payment ecosystem, the setup of 75 “digital banking units” in 75 districts, the launch of a so-called Digital University with cutting-edge information and communications technology (ICT) expertise, and the introduction of the National Digital Health Ecosystem, an open platform consisting of digital registries of health providers and health facilities, a unique health identity scheme, a consent framework, and universal access to health facilities.
Besides this, the government also proposed the digitization of land records and announced the DESH-stack e-portal for skilling, reskilling and upskilling. E-Passports with embedded chip and “futuristic technology” will also be rolled out in 2022-23 with hopes of enhanced convenience for citizens in their overseas travel.
In H4 2021, India was home to 825 million Internet users, up from 795.18 million at the start of the year and reflecting an approximate rise of 3.8%, according to Invest India, the national investment promotion and facilitation agency.
