According to a report by Credit Suisse Group AG, India’s digital payments market is expected to grow to $1 trillion by 2023, an increase of five times from the current $200 billion market. (iStock)
According to a report by Credit Suisse Group AG, India’s digital payments market is expected to grow to $1 trillion by 2023, an increase of five times from the current $200 billion market. (iStock)

Virtual credit cards: buy now, pay later for those with no credit lines

  • LazyPay and Simpl are two of the most popular pay later services, which have been catching up in India
  • Simpl uses machine learning-driven models (which it calls trust models) to understand the user, extend their credit lines and more

New Delhi: Shouvik Das pays monthly bills for electricity, rent and other regular expenses. The 28-year-old recently added another bill to that list—one that includes miscellaneous expenses. He uses apps like LazyPay and Simpl to pay for food orders, and even to buy clothes sometimes, choosing to pay for these items at a later date.

“We realised that the defacto payment mode for India was khaata (or tab), and wanted to find a way to digitize this user experience," says Nitya Sharma, CEO and co-founder of Bengaluru-based Simpl.

LazyPay and Simpl are two of the most popular pay later services, which have been catching up in India. The services essentially act as small time moneylenders for users, allowing them to pay for services and products online without spending their own money. They aggregate all the expenses a user has made and send a combined bill at a prescribed date. Simpl was the first service to offer a pay later service in India.

Failing to pay this bill on time incurs overheads and interests, and some can even report users to the credit bureau in case they fail to pay on time. These are basically virtual credit cards, and even use Aadhaar verification etc. to offer spending limit to customers.

Pay later services have been growing in India. LazyPay and Simpl, for instance, are both integrated into food delivery services like Zomato and Swiggy. So users can order food through those apps and pay through their pay later accounts, rather than using credit cards, debit cards or other options.

Lazypay was nearing 100,000 pay later transactions per day, Amrish Rau, the then chief executive of PayU (the company that runs LazyPay) told the Economic Times in December 2018. The number is likely to have risen by now. Simpl, on the other hand, has over 2 million transactions per month at the moment, according to CEO Nitya Sharma.

The companies use technology to build a tab that can work across merchants and platforms. Simpl, according to Sharma, even uses machine learning-driven models (which it calls trust models) to understand the user, extend their credit lines and more. Simpl currently allows a maximum limit of 20,000, while ePayLater allows customers to have larger credit lines.

These companies also use technology to understand the user’s eligibility to use their platforms and ensure that they will pay back the amount they owe. “You can only minimize the risk in lending money, you can’t make it zero," says Akshat Saxena, co-founder of ePayLater. Saxena says his company uses thousands of data points, including credit histories, to profile customers. And if absolutely required, these companies can also send people to physically get the money back, though the sum of money being lent at the moment doesn’t really require the same.

While Simpl doesn’t yet report customers to the credit bureau, both ePayLater and LazyPay have the authority to do so.

Further, according to Simpl’s Sharma, merchants can integrate Simpl’s services to their platforms in about four hours, and the company can even do real time credit checks for approving people. Real-time checks are also being done by ePayLater, using its proprietary machine learning algorithms. Although the online space is synonymous with digital payments, these companies also look to monetize from the offline market. Simpl, for example, says it is starting to work with offline merchants now and Sharma expects the offline business to be bigger than the online business in six to nine months.

According to a report by Credit Suisse Group AG, India’s digital payments market is expected to grow to $1 trillion by 2023, an increase of five times from the current $200 billion market. Digital payments unicorn Paytm has also announced its Paytm Postpaid service, which will allow users and merchants a way to get line of credits from the platform. Services like Simpl, LazyPay and ePayLater are a part of this market. They may usher in the next step in digital payments in the country.

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