Digital payments spurred BNPL model, mom-and-pop stores

Rise in digital payments has led to an increasing trend of timely repayment by customers who mostly resort to the buy-now-pay-later (BNPL) model from their local mom-and-pop shops, with as many as 30 lakh customers settling their dues on time post-Diwali, according to a study.

India’s informal BNPL model witnessed a surge in repayments this Diwali season with repayments 12 per cent higher than average, and the merchants booked 15 per cent growth in their business during the two-week festive season, according to a study by digital bookkeeping app OkCredit.

While people are shopping more on credit, they are paying back too through the traditional BNPL -- a form of buying at local stores without paying upfront-- at the millions of mom and pop stores, it said.

Most of these shops usually struggle to get their dues back in time, however, this festive season saw more than 30 lakh customers coming forward to settle their credit. Merchants in eateries, school supplies, travel, jewellery, and Kirana shops saw the highest growth in customers, OkCredit said.

It said more repayments have enabled merchants to extend more credit, which in turn has led to a growth in customers. Credit given per active merchant on OkCredit went up by 23 per cent and these merchants added 1 million customers in the festive period.

“Digital payments have played a huge role in helping mom and pop stores recover credit. As per OkCredit’s data, the number of credit lines settled digitally have gone up by 100 per cent since last year, showing adoption of online payments in digital bookkeeping,” it said.

The increased repayments and growth in retail SMBs (small and medium businesses) also points to a healthy recovery in the economy, especially tier-2 and tier-3 towns, as these towns account for a significant chunk of OkCredit’s merchant base, it said.

There has been a 70 per cent increase in retail SMBs adopting a digital solution to manage their books, it said, adding out of 35 states and union territories, 25 have seen business growth as compared to the last year.

Others have remained more or less stagnant.