Top online shopping brands such as Flipkart, Amazon, Paytm, and Byju's are banking big on India's nascent but rapidly increasing Buy-Now-Pay-Later (BNPL) sector ahead of the forthcoming festive season.

Millions of Indians who went online shopping in the wake of the Covid-19 pandemic where many without credit cards, claimed to be opting for interest-free credit at online checkout points, and facilitators. It’s said that most fintech firms like Zest Money, Simpl, Lazypay, Pine Labs, and Capital Float are willing to take on the risk.

For one, Flipkart's subsidiary, Flipkart Advanz is facilitating such transactions, while Amazon has teamed with non-banking financial business Capital Float.

Paytm on the other hand, has partnered with Aditya Birla Finance to offer BNPL as half of its Postpaid service. Byju's and Unacademy have teamed with Lazypay and Capital Float, respectively, in the ed-tech space.

On its app, ICICI Bank offers pay-later services, while Freecharge, which is owned by Axis Bank, has also entered the market, while personal sector banks are experimenting with this phase.

According to Tracxn, India has 33 BNPL-focused firms, which are a mix of fintech NBFCs and fee service providers that serve as platform facilitators. Tracxn data also stresses that the sector had received a total financial influx of around $17.7 million in India corresponding to $11.6 million, $48.5 million, and $19.1 million in total funding in 2020, 2019, and 2018, respectively.

However, industry insiders have highlighted that the size of India's annualized BNPL market in gross transaction value has expanded from a few million dollars in 2019 to around $1.5 billion-$2 billion in less than 18 months, aided by the behavioral change created among customers following the COVID-19 pandemic.

Community interfaces between retail marketplaces, retailers, and lenders enable these transactions offstage. The mannequin is widespread in both retail and online shops, with Pine Labs and others among the leading players.

A typical mannequin, according to industry insiders, would have a banker partnering with a service provider and a platform via a hard and fast transaction pricing mannequin. As there is no interest, clients are charged a Merchant Discount Rate, otherwise known as a transaction service fee is expected to be around 1.5 percent.

“We are already funding two million transactions every month, and we expect the disbursement to treble in the run-up to Diwali. Apart from our e-commerce partnerships, the demand is mostly driven by three sectors namely travel, ed-tech, and direct-to-consumer brands”, says Gaurav Hinduja, Co-founder and MD, Capital Float, a NBFC with a specialised arrangement with BNPL.