Digital EMIs see new offline frontiers

Digital EMI or ‘Buy Now Pay Later’ credit products which were largely offered offline at white-good and electronic stores, a model pioneered by the likes of Bajaj Finserv Ltd, are now seeing traction in newer segments like auto-dealers, fashion retail stores, restaurants and small-town traders, with banks getting more comfortable in offer smaller ticket-size loans.

As customers in metros returned to their hometowns and banks deployed debit card-based EMIs, smaller cities are also warming up to these credit offerings. Even retail brands have joined banks and are willing to offer customers credit for purchases, absorbing the interest rates on zero-cost EMIs.

“Contrary to the aspirational upper middle class customers, which would take EMI at offline purchase points to upgrade their buy, there is a new category of ‘need-based’ customers coming now, as covid and work-from-home has increased dependence on electronics. Hence, paying for purchases in installments is finding more viability," said Rajeev Agrawal, founder and CEO of enterprise payments solutions provider Innoviti.

For Pine Labs, touted to have a lion’s share among fintechs in the offline EMI market, ‘Buy Now Pay Later’ based purchases were up by 30% year-on-year this October. On its platform, Tier 2 and beyond cities contribute to 54% of the overall transaction value of EMI products.

“With covid the need for electronics, smartphones and white goods has shot up, leading to a 50% increase in average basket sizes. Individuals are buying more on EMI, and trying not to spend it all at once," said Kush Mehra, chief business officer, Pine Labs.

Apart from facilitating EMIs for banks at point of purchase, Pine Labs, over the past year has also launched products such as ‘Instant EMI’ for smaller ticket sizes, which allow users to scan the company’s QR at merchant locations, and avail instant credit for basket sizes above ₹5000. It has already enabled 50,000 merchant touch points with its ‘Instant EMI’ product, and provides EMI solutions across 150,000 merchants in the country, at present.

“Cars and two-wheelers are new breakout segments, with ₹30-35 crores worth of monthly EMI purchases being generated by this segment," Mehra adds.

In spite of this, 90% of EMI-purchases at offline stores, largely remains for white goods and electronics.

Pine Labs’ competitor Mswipe joined the rush and launched its digital EMI platform in October after piloting it for nearly two years. Taking a brand-centric marketplace approach, Mswipe’s EMI platform allows brands to push offers at its offline merchant network, and provide customers zero-cost EMIs, in a bid to push inventory faster at offline retail points.

“Typically retail brands have to go through multiple hoops to get customers to buy their products. Through our offering, any brand can choose the stock units they want to offer EMI or discounts on, select lenders and instantly make credit live at offline merchant checkouts. We want to democratise credit for even smaller merchants, instead of just large format stores," said Manish Patel, founder and CEO of Mswipe, a merchant fintech platform.

Mswipe is working with 16 banks, enabling close to 20,000 merchants daily to offer brand credit. It is working with brands such as Ceat tyres, Sleepwell mattresses, Exide batteries, with average transaction sizes in the ₹20,000 range.

Innoviti launched its ‘free EMI wallet’ solution towards June-end, to help customers avail of merchant-led zero-cost EMIs in order to close deals faster.

“With customers becoming more comfortable with electronic payment methods at offline stores, digital EMIs are finding a new market with these customers. Also, banks are aggressively pushing credit through debit-card EMIs to less risky customers, since they have an existing relationship with these account holders and have a view on their cash-flows," says Bhavik Hathi, managing director at Alvarez & Marsal (India), a management consultancy.

The next phase of expansion for fintechs are kirana stores, with both Pine Labs and Mswipe looking to equip neighborhood stores with credit-offering capabilities in the next four months.