Is Buy-Now-Pay-Later dead?

Oh, and we're also building a community!

If you’re a Slice or Uni card user, you’ve probably seen some changes happen in the recent past. Well, if you haven’t, or if you’re not a user at all, today we’ll see what’s happening in this space, and whether this is even a viable business any more.

Psst: We also have an announcement at the end of the article: We’re building a community that you can join too! But first, let’s look at Buy Now Pay Later (BNPL).

The back-story of BNPL

The entire BNPL business boils down to one fact - Credit cards are not available for everyone. Although most of you would have a credit card, some of you who are probably still in college or don’t have any past credit history, may not be eligible to get one, because banks don’t issue them so easily.

So here’s where BNPL companies innovated. They launched a prepaid card and tied up with a financing partner at the back-end (mostly an NBFC), which gave you a credit limit (something like an overdraft limit, or a loan) that you could use. So essentially, if your Slice card had a 1 lakh rupee credit limit, it meant that you were eligible to swipe your card for up to Rs. 1 lakh every month, without paying any interest on it.

Now, essentially Fintech companies were giving a credit product on a prepaid card, which was a grey area. So while both these products in isolation are good, when mixed together, they become like a Long Island Ice Tea cocktail and give you crazzyy dance moves 🍹🍺🍾

Okay, on a seious note - RBI said that the guidelines for prepaid and credit products are different, and it issued a circular saying that Fintechs need to stop mixing prepaid cards and credit products.

And that’s when all these BNPL companies found themselves in a soup - this one guideline attacked their whole business.

What did BNPL companies do then?

So recently, Slice sent out an email to its users saying they’ve updated their business model. I’m assuming the other Fintechs will also follow suit. Here’s what they did:

1. For anyone who needs credit, they've introduced a product called "Slice Borrow", where customers will get credit in their bank account for a flat fee and can repay the loan in one month without any interest, or can split up the payment in as many as 12 months with interest. No card interaction here - everything happens from the app

2. The card will remain as a prepaid card which users will first need to load from their bank account and then use (if they want to). The cashbacks and offers will still be valid

What now?

Well, I’ve been a fan of BNPL companies - they actually brought about financial inclusion in different sense - by enabling millions of people to access credit when they couldn’t do so otherwise. The problem with their business was - One, they were operating in a grey area, and two, they weren’t communicating the business model to their users.

Now with these changes, Slice becomes just another prepaid card operator that also provides personal loans - with no differentiation or innovation per-se.

So does this mean the end of BNPL companies?

I don’t think so. You see, in a country with only about 30 million credit card users totally, Slice itself managed to get a user base of 12 million in less than 3 years. Uni and the rest had a few more million users. So they have a decent customer base already. And even if these customers just go to them for loans, it’ll generate decent revenue for them. Having said that, their user acquisition speed will come down massively, and now they’ll probably have to focus more on user retention than user acquisition.

Eventually, only time will tell how this pans out. But this is a classic case of how one regulation can affect multiple businesses in an industry so drastically. As they say,

Innovation generally precedes regulation.

Announcement! Join the community! 🥳

With WhatsApp launching its community feature, we won’t wait for another minute!

So today, we’ve just launched our own Personal Finance community on WhatsApp, which 5,000 members can be a part of! You can join it in two ways:

1. Join only the community (so that you NEVER miss these newsletters and updates)

2. Also Join the discussion group if you want to have interactions!

PS: Joining the community does not disclose your number to other members.

So join the community HERE and get even better at managing money! It only supports 5,000 members, and we’re already 40,000+ folks on LinkedIn and Substack. So hurry and join it before it gets full! 😁

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Thanks for reading this till the end. See you next week! 😎