Authored by Anup Agrawal
India is fast emerging as one of the worst-hit countries due to the coronavirus pandemic. The fulminate increase in cases, as the country emerged from a strict nationwide lockdown and has adversely affected economic growth.
Companies across sectors have adopted cost-cutting measures including significant salary cuts thus making people relook at their spending patterns. For instance, people are making fewer discretionary purchases and focusing on savings to pay off existing EMIs and bills.
Having said that, with the lifting of the lockdown, economic activities for Indians are gradually resuming as they start moving out of their homes. Though the markets are optimistic about consumer spending to achieve the feeling of normalcy, the spending level/behavior may not match the pre-COVID-19 days in the next few months.
A consumer sentiment report from BCG states that people are likely to trade down (buying cheaper brands or lower variants) in discretionary categories and trade up (expensive brands) for staples and household care. However, with safety a priority, people will eventually resume their old shopping behavior while low purchasing power will push them towards alternate financial sources to satiate their shopping desire.
Meeting consumer aspirations with 'Buy Now Pay Later'
Alternate financial solutions, such as ‘buy-now-pay-later’ (BNPL) can help alleviate financial strain, without the burden of interest, if paid within a set time frame. Such solutions can help consumers meet aspirations and allow them to purchase desired products, with more financial wiggle room. For example, if someone is short on money during the month and doesn’t want to pay interest can opt for BNPL options to defer the payment while keeping the ease of the transaction intact.
Cashless to lead the way forward for financial inclusivity
India is witnessing a shift in payments to a digital-first approach. It is eyeing 1 billion digital transactions per day backed by the success of payment convenience. This slow and steady transition to cashless payments will make it easier for consumers to adopt BNPL solutions that are commodious, user-friendly and save people from decision fatigue at checkout.
At the same time, as consumers across economic strata grapple with the financial burden on the pandemic, BNPL can allow people from all sections of society (urban, semi-urban, rural) to access micro-credit – increasing financial inclusivity. With smartphones and data connectivity penetrating deeper into India’s geographies, BNPL solutions can help put purchasing power back in the hands of everyone.
Innovation for ease in credit is need of the hour
Innovative digital lending solutions that ease the financial complexities in tough times, such as the current pandemic, are the need of the hour. In addition to offering credit, counseling consumers with pertaining regulations that may impact their financial behavior is key.
For instance, apart from the BNPL solution it offers, LazyPay introduced Credit Shield in April to help consumers be cognizant about their financial health and credit score. The service provides consumers with a credit report, credit health check, timely reminders on missed loans and payments, misreporting of loans, and credit card payments.
Hand-holding consumers beyond lending and ease in applications and services will help consumers gradually step out of economic strain. An easy credit option for daily purchases, such as ordering breakfast on a food app to shopping online will be a flag-bearer of preference in the digital lending landscape. A simple one-click payment experience that is more like a service than a transaction can be the key differentiator in the digital lending space.
Anup Agrawal is Business Head at LazyPay. Views are personal