Buy-now-pay-later offerings wane as fintechs pivot to EMI loans, consumer credit

Time of India

4 days ago

Buy now, pay later (BNPL) services, which became a hot trend in consumer
fintech
a few years ago, are falling out of favour.
What began as a way to let millions of Indians without credit cards access instant, short-term loans has come under pressure due to regulatory tightening and rising concerns over credit quality.
Now, most of the large fintechs are either shutting down BNPL offerings or transitioning to equated monthly instalment (EMI)-based lending to stay compliant and manage risks, people in the know told ET.
ETtech
Prosus-backed PayU, which operates non-banking finance company
PayU Finance
, has migrated its BNPL platform LazyPay into a KYC (know your customer)-compliant EMI checkout solution, according to the sources. The company has phased out the earlier BNPL model where customers could split payments without undergoing intensive KYC checks.
'Fintechs are finding that instalment financing is still viable, but only through a regulated, KYC-compliant setup,' said a senior executive at a large fintech company, requesting not to be named. 'The shift is forcing many players to abandon pure-play BNPL and embrace structured EMI lending.'
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The pivot follows the complete
shutdown of Paytm Postpaid
, its BNPL offering, earlier this year. Around the same time,
Mobikwik
said in its
FY25 earnings disclosure
that it had discontinued Zip Loans, its BNPL product.
At its peak in the September 2023 quarter,
Paytm
disbursed about Rs 9,000 crore worth of postpaid loans. In comparison, Mobikwik's Zip Loans disbursals stood at Rs 1,000 crore in the September 2024 quarter.
Both companies are now focused on transitioning BNPL users to longer-tenure EMI products, which allow for more structured repayment and clearer risk management for lenders.
A typical BNPL product earlier allowed users to club multiple purchases and repay in 15–30 days, often with little documentation. These models have now largely disappeared from the market.
One of the few remaining major players in this space is
Simpl
, which has avoided regulatory entanglements by staying outside the formal lending ecosystem.
'We're not offering loans to our customers. We're fighting cash-on-delivery in ecommerce, food delivery and quick commerce by building a model of trust around payments and delivery of products,' said Nityanand Sharma, founder of Simpl.
The startup does not partner with regulated entities, allowing it to sidestep direct RBI scrutiny. Sharma said most competitors used BNPL to acquire customers and cross-sell credit, which triggered regulatory pushback.
Lenders play it safe
The tightening credit environment isn't just a fintech story. Banks and NBFCs, which were the backbone of many BNPL offerings, have pulled back from the space as macroeconomic risks mount and unsecured lending portfolios swell.
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'In view of elevated household leverage, we are cautious in ramping up this (BNPL) book. We've tightened onboarding norms and will review periodically,' said B Ramesh Babu, CEO of
Karur Vysya Bank
, on a recent analyst call. The bank, which partners with Amazon for its BNPL programme, had a book of Rs 844 crore at the end of FY25.
Amazon itself signalled a shift earlier this year by announcing the
$200-million acquisition of Axio
, its BNPL fintech partner, indicating a desire to internalise credit capabilities. A senior banker working with multiple fintech platforms said, 'In this macro-financial environment, banks are becoming more risk-averse. We're focusing on affluent customers and aim to grow our unsecured book by about 25% year-on-year, but with tight controls.'
Bigger story still intact
Despite the pullback, industry insiders believe the larger narrative of unsecured
consumer credit
growth in India remains intact. What's changing is the form and structure. Rather than short-term, low-ticket loans with lax underwriting, the focus is shifting to EMI-based products with robust risk management, longer tenures and full KYC compliance.
Many fintechs are now building checkout EMI infrastructure that mimics traditional consumer durable financing but with a digital-first interface. These products can integrate directly with ecommerce platforms and offer 3–12 month payment options, backed by formal lenders.
The transformation also aligns with the
Reserve Bank of India
's broader agenda to bring fintech lending under tighter regulatory oversight.
ET had reported on May 27 that the RBI has
clamped down on default loss guarantee (DLG) structures
and instructed lenders to avoid overexposure to risky, thin-file consumers.
End of pure-play BNPL
'Pure-play BNPL without proper credit assessment or regulatory partnership is effectively dead,' said a fintech founder, who has pivoted to
EMI loans
. 'What's emerging is a more sustainable, compliant version of embedded finance.'
For now, BNPL's rapid rise appears to have hit a regulatory and risk ceiling. The next phase of growth in India's consumer credit story could be more measured, regulated, and tenure-driven.