For some years now, the buy-now-pay-later (BNPL) segment in the fintech domain has been growing steadily as digital lenders increasingly tap into people who do not have access to credit cards or feel reluctant to use plastic money for multiple reasons. Lately, non-fintech players like Amazon, Flipkart and BYJU’s, and legacy banks like ICICI Bank and Axis Bank have also entered the space, sensing the opportunity to cater to a wider audience.
Although credit and debit cards are the most widely used payment forms worldwide, people’s interest in alternative digital payment systems has accelerated in a post-Covid world, and India is no exception. Among the top BNPL players in the country are Bengaluru-based Simpl and ZestMoney, Delhi-NCR-based Pine Labs and Mumbai-based LazyPay.
Companies in this space provide easy access to collateral-free loans and charge a low-interest rate varying between 0 to 24%. What’s more, they offer both large-ticket financing (INR 25-100K for up to 90 days) and small-ticket funding (up to INR 25K for up to 30 days) to meet the varied requirements of borrowers looking for unsecured debts.
Much like their global peers, most BNPL service users in India raise the money for making end of the month purchases to get to the next salary or use it for its convenience as with an integrated payment gateway, users don’t need to enter a UPI pin or wait for OTP code after every transaction. What makes BNPL service different from taking a personal loan is that one only pays back (plus a small interest in some cases) the money one uses instead of the entire credit line.
In essence, the sector’s rise has been triggered by low credit card penetration (stands at 3%), a lack of short-term institutional lending and predatory interest rates charged by private lenders. The boom in online sales, a lifeline to both consumers and businesses due to pandemic restrictions, has further pushed the growth as people look for financial resources online when splurging in the digital sphere.
Industry numbers also validate this trend. According to a media report, gross transactions in the BNPL space shot up to $1.5-2 Bn in 18 months from a few million in 2019. Further, market projections show that India’s BNPL sector is expected to reach $100 Bn by the end of 2023.
However, the real opportunity for the sector lies beyond the B2C model. Like other credit institutions, BNPL platforms increase the cash flow among people, helping them make more purchases or buy high-value items that they could not afford earlier. Hence, this business model further helps online sellers improve their conversion rates and grow their revenues.
“Simpl’s offering enables the introduction of trust between the retailer and consumer by introducing a ‘khata’ like settlement of transactions post-purchase. In addition, Simpl delivers a transaction success rate of 99%+ to online retailers as opposed to the industry average where payment failures are around 20-30%”, says Nitya Sharma, CEO and cofounder, Simpl.
How Simpl Is Building A Conversion Platform
Simpl is a small-ticket, mobile-first platform that offers easy credit at points-of-sale (PoS) and ecommerce checkouts. It provides a credit range of INR 1.5-20K for a 15-day cycle with no interest but charges a small penalty as a late fee.
Interestingly, users who want to use the credit service only need to register their mobile numbers instead of the usual documents required for due diligence. But that does not give defaulters a greater leeway as the startup claims to have its very own machine learning-powered credit underwriting system in place. With more than 100 metrics in use, including user behaviour on other merchant platforms, historical behaviour, signals from app installations and more, the system runs the metrics through various decision trees and analytical matrices.
Simpl boasts of more than 25 Mn approved users and says that more than 90% of its monthly users are repeat users.
Apart from building its B2C credit line, Simpl has worked with thousands of merchant partners to develop an integrated payment option for them. This helps digital shoppers transact on those merchant platforms with one-click checkouts and often results in multiple or repeat purchases due to ease of usage. Moreover, its hassle-free checkout has reduced cart abandonment. Earlier, complexities in payment gateways or OTP failures used to drive customers away from incomplete transactions.
Simpl claims that it functions as a conversion platform and increases a merchant’s order volume by creating a better checkout experience for consumers.
“Through our partnerships with merchants across a few verticals like food delivery, we have seen the average order volume increase by 20-40% and the frequency by 1.5-2x. Payment failures also came down by 10-30% after using Simpl,” says Sharma.
At present, the company works with more than 5,500 merchant partners and caters to major players like foodtech and delivery giant Zomato, online supermarket BigBasket, hyperlocal delivery platform Dunzo, e-health platform Practo, beauty marketplace Purplle and more. Simpl claims to improve the conversion rate up to 65% for its merchant partners.
What Hindered Simpl In The B2B Space
Simpl was conceptualised to disrupt India’s small-ticket credit system. But initially, merchants were not sure whether its solutions could improve their revenues by increasing conversions.
The fintech startup was gaining traction in the B2C space as many availed its consumer credit lines, but B2B clients (read merchants) were not willing to be the first to bet on it. After reaching out to many and explaining the product and its potential, Mumbai-based cloud kitchen Faasos became the first to come on board in 2017.
A merchant only has to fill a form on Simpl’s website to initiate the onboarding process. After that, the startup’s customer relationship team reaches out to zero in on its problems and provide the most suitable solutions, ranging from improving conversions to reducing cart abandonment rate. Once the objective is defined, Simpl shares its API access to integrate its solution with the merchant’s platform. The company works closely with merchant partners for tracking issues and achieving goals.
Simpl has increased its merchant partnerships from 1,000 in 2019 to more than 5,500 in 2021. Out of these, it onboarded 2,500 merchants in 2020, when the pandemic struck the country for the first time. The company claims a month-on-month growth of 20% and an additional 7x growth in revenue since April 2021. It is aiming to grow 10x in FY22.
“Simpl is very excited at the prospect of creating a new-age full-stack financial network that enables us to empower our merchant partners in building trusted relationships with their consumers,” says Sharma.