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The ‘Buy Now Pay Later’ business has made inroads into the personal lending market in recent years. Sashank Rishyasringa, MD and co-founder, Capital Float, speaks to Mint about this. His company had raised $50 million in equity funding in September, led by Lightrock India, Sequoia Capital India, Ribbit Capital, Creation Investments, and Dinesh Hinduja family office. Edited excerpts:

How has your BNPL business fared as the economy opened up post-pandemic?

There has been a sharp uptake in BNPL over the past 1.5 years as customers are moving more towards online commerce. In this year’s festive season/Diwali, Capital Float added about 800,000 new customers which is a 75% increase in customer adds as compared to last year. BNPL is very popular among millennials in the 25-40 years age group. We financed about 450 crores worth of purchases in this period (Diwali) which is 2X more than last year. It led to us crossing the 3 million customer milestone which certainly was a standout moment for us. A majority of this growth can be attributed to the increasing adoption by customers outside the tier-1 cities. For instance, cities like Lucknow or Vishakhapatnam drove a larger amount of sales this year compared to last year as 50% of our customers come from tier-2 cities.

Who does BNPL serve?

Our approach is to take a low and grow approach by starting off with small bite-sized credit and increasing it over time in a thoughtful manner. A large share of customers may not be using credit card users and BNPL is one of the few credit products they use. 40% of our 3.5 million customer base is self-employed individuals who are typically not the target group for the traditional banking sector as they tend to focus on the salaried professionals working for MNCs and large companies.

However a significant share of our customers do use a credit card. For card users, once you set up a BNPL facility with us, it can be a one click check out. You don't have to enter your card number. Cards also have a higher failure rate than BNPL, for instance because you have exceeded your limit. In BNPL, you only see the option if you have an available limit because we have deep integration with merchants. In the last two years, cards have actually dropped as a share of online payment volumes and what has taken up the slack is digital payment modes like UPI. BNPL is like a lending successor to UPI. It is mobile first and doesn’t need you to have a piece of plastic.

Why should a customer opt for BNPL over traditional lending?

We approve in real time when you check out from the merchant website online. If you are at the checkout page, you can apply and you get approved instantly. There is a subvention element to this business (merchants pay us a subvention amount). The draw for the merchants is higher conversion of users to actual sales.

What is the default rate?

We are an RBI regulated NBFC. All the RBI norms for KYC and credit bureau reporting apply. If customers don’t pay on time, a late fee is levied. We have a 1.5% NPA (non-performing asset) rate and that has been steady despite a very rapid period of growth.

Were you affected by the recent RBI rules on auto debit transactions?

No. Those RBI rules are for card payments. We use e-NACH (National Authomated Clearing House) and UPI autopay, which are not affected by the rules.

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