In an exclusive interview, Abhineet Sawa walks us through the noteworthy aspects of EMI Financing:
1. What is the current EMI model in the Indian market? What are the many categories, and how do finance corporations profit from them?
EMI finance is not a new concept in India. For the previous two decades, people in India have made large purchases such as televisions, refrigerators, and automobiles on installments. However, only roughly 45 million of the 200 million internet buyers have access to a credit/debit EMI card. This generates a significant disparity in the availability of all categories at various price points, such as fashion, electronics, and beauty.
Credit penetration is even lower among the Gen Z workforce, tier 2-4 audiences, self-employed, and non-salaried individuals (such as housewives). Thus, EMI democratizes the issue by providing these consumers with hassle-free credit. As a result, brands/merchants have an opportunity to leverage sales.
The vast majority of transactions are no-cost EMIs or no additional charges to the customer. The merchant bears the cost of the financing. This is the primary source of revenue for fintechs who provide Split Payment. Another source of money is the additional interest component generated by customers, which may be levied if the merchant is unwilling to subvert the transaction.
2. Please describe the significance of EMI finance and the Indian firms that are involved.
Installment is viewed as a crucial enabler in purchase decisions by a customer purchasing a home/car/bike. The traditional point of view never acknowledges the requirement for monthly payments at lower price points, say under $10,000 or $5,000. However, recent trends indicate that Splinter payments are also required in this area. As a result, many ecommerce firms use split payments to increase sales. It can reach a larger audience, including Generation Z and tier 2-5 audiences. That is why brands notice a 15-20% increase in revenue when using Snapmint over other payment methods. They also experience a 20-45% increase in order value. Furthermore, marketers are seeing a growth in the share of prepaid orders, which reduces COD and RTO concerns.
3. Why are large brands involved in this approach, either directly or through financial partners?
Big brands that have partnered with BNPLs or Split payments have seen revenue and client base development. They deal directly with partners like Snapmint for two reasons: a simple online approach and a high acceptance rate. Any buyer who does not have physical paperwork can complete the process online in two minutes. As an RBI-registered NBFC, we have robust underwriting capabilities. Customers can finish our approval procedure in a matter of minutes. Second, we have the highest customer approval ratings. Snapmint is simple to integrate with the majority of ecommerce platforms. Integration with Shopify, Woocommerce, and other comparable platforms takes less than 10 minutes.
4. Has the EMI finance model been affected by covid? Can you describe the future of the Indian BNPL market?
Post-Covid has increased the number of customers who shop online. 700 million consumers are already online, allowing them to take advantage of split payment services from wherever in the country. The RBI and the government have pushed for a slew of web-friendly enhancements to the ecosystem, including online KYC, recurring payments via UPI, and account aggregator-based structural financial data sharing. A small increase in credit costs has offset split payment adoption today. Split payment has a lot of potential in India. Remember that only 45 million PAN card holders in India have access to credit card purchasing. Inflation has recently been exceptionally high, and more people are in need of budgeting alternatives such as installment EMIs. As a result, users are quickly adopting brands like Snapmint as a payment mechanism for their purchases.
5. How do you see BNPL's growth in India in the medium to long term?
"Indian Split payment market grew at a CAGR of ~321% by Gross merchandise value (total value of the loans disbursed to consumers), during FY'19-FY'21" *. These figures are driven by the demand for EMI finance for the previously indicated groups. Online penetration is increasing, and India's young population is wanting to buy on credit. We allow our clients to buy in a variety of areas, including technology, fashion, cosmetics, and personal care. Most importantly, Snapmint intends to do so in complete openness. There are no hidden fees or requirements for physical documentation. We presently have over 10 million app downloads. In the last year, our transaction volume has increased sixfold.
6. Target Group for Splinter payment model and workflow.
As previously said, there are two categories of purchasers in India. The first are the affluent 45 Minnesotans who have access to credit-based purchasing, and the others who do not have access to installment payment-based shopping. Our objective is to democratize credit access. This category includes those who are new to credit or have poor credit. It is more cost effective to buy on installments for the 500 million clients who have a PAN card but do not have access to it. 60% of the labor force is either unemployed or employed in unorganized/SME industries. We find substantial uptake among customers who bank with public sector banks, which account for 70% of all customers. They are not the normal targets of banks and credit card issuers. The Gen Z demographic purchases a lot of clothes, electronics, and gadgets under $5,000. BNPL has been adopted by brands in various sectors. We are seeing widespread adoption in tier 3-4 communities with inadequate physical banking infrastructure. Snapmint provides them with a clear means to make these credit-based purchases. They can do so on 0% interest EMI with no paperwork required. Customers perceive split payment as a means to sachetise their purchases, which translates nicely for the Indian economy.
Our approval process is fairly straightforward, lasting approximately two minutes. Every channel and segment has its own customer onboarding process. We have worked and continue to endeavor to make ourselves as accessible as possible through all channels, both offline and online. We are working hard to eliminate the necessity for paperwork.
7. In the Indian market, many corporations provide EMI services for a wide range of products and services. What are your thoughts on how the market has treated you as a novice to the industry?
Large financial institutions have restricted themselves to rich clientele and high-priced product areas. Most of them only provide EMI purchases to the top 50 million people with excellent credit, and only in specified categories such as home furnishings, appliances, autos, and so on. Splinter payment is resolving the liquidity issue for those living outside of the 50 million. This includes the groups we described earlier, such as those with poor credit, Generation Z, and those who are new to credit. Platforms like Snapmint serve them in ways that go beyond the typical categories served by incumbents. Men nowadays buy shoes and smartwatches in installments, and women buy cosmetic goods in installments as well.
