Super App as BNPL Offering

Published in

FinTech 2030

5 min readSep 2, 2023

Overview

BNPL has been the talk of the town for many months now as there has been a lot of speculation revolving around the future of BNPL in India. BNPL is a short-term financing option available to users to buy the products now and pay for them later in installments. It provides customers with leverage to access the market products without paying upfront for them. FinTechs have been the torchbearers in the BNPL space, with banks trying to grab a share of the pie.

According to a report, the current GMV (gross merchandise value) of BNPL stands at a whopping USD 11.628 billion and is expected to reach USD 25.38 billion in 2028, with a CAGR of 12.2%. The growth is attributable to the fact that BNPL provides credit not only to people who can access credit cards but also to people who cannot access credit cards because of their low credit scores or other credit requirements. India is home to over 78 million credit cards, and the number is increasing over the years. Other factors that contribute to the growth of BNPL are growing internet penetration, easy credit accessibility with low requirements, attractive rewards, loyalty points, etc.

Mammoth BNPL Opportunity under RBI Scanner

The moot point is how such a mammoth BNPL opportunity came under RBI scrutiny and why RBI wants to regulate this industry even more tightly than ever.

A seesaw game is going on between “New start-ups entering the BNPL space” at one end and “RBI trying to regulate the industry tightly” at the other. There are various reasons for this. First, the RBI didn’t explicitly state the regulations that these players must abide by. Regulations like data storage, data reporting, risk management, risk compliance, and other such norms are still undefined, thereby lacking regulatory backing.

Further, RBI is not able to track the flow of money in the economy with BNPL players providing credit through prepaid payment instruments (PPI). Money paid directly to the merchant is still traceable, but money paid through PPIs is difficult to track. This concerns the RBI’s ability to monitor money flow in the economy and impacts its ability to regulate the monetary system in the country.

Charting New Frontiers with the Super App

It might be shortsighted to think BNPL just from the perspective of a short-term financing option; instead, it should be seen as a platform that can serve the whole customer journey from end to end. From searching for the products to getting them financed, all the services can be consolidated on a single platform. Thus, the concept of “Super App” comes into play.

Super App is a one-stop solution that consolidates multiple services like shopping, financing, payment, rewards, etc. in one place. Super apps are analogous to supermarkets, as both involve the integration of services and the benefits of cross-selling. For customers, it provides them immense convenience as all their requirements are fulfilled in one place, and for BNPL merchants, it provides them easy customer acquisition and opportunities to cross-sell.

Following are the potential benefits to the BNPL company in case the super app model is adopted.

New Revenue Drivers: BNPL companies can charge merchants for the promotional and advertising opportunities provided to them for the promotion of their products and services on the platform. Advertisements can help merchants grab more eyeballs, thus increasing revenue. Further, BNPL can charge a commission on the total amount of shopping done by a customer who initiated their customer journey on the super app and eventually landed on the merchant’s page for shopping.
Data Analytics: Data is the new oil, and this phrase perfectly fits the concept of super apps. Enormous data on the app can help generate valuable insights that can be sold to merchants for their business decisions. Ongoing trends, customer buying behaviour, preferences, choices, and past purchases can help merchants decide their future business plans. Through this, merchants can also offer personalised offerings to each customer based on their preferences. This helps merchants fulfill customers’ needs effectively and efficiently.
Customer Stickiness and Repeat Purchases: Rewards and loyalty points are awarded to customers for their purchases with merchants. This concept is prevalent in sectors like credit cards, online aggregators, and booking websites, and the purpose of these points is twofold. One is to acquire the customers and induce them to buy the service from them, and the second is to ensure that the customer sticks with them for future purchases and merchants reap the benefits of repeat purchases and customer stickiness.

Is India Ready for Super Apps?

India is not new to the concept of super apps and is home to super apps like Tata Neu, Paytm, Mylio, etc. But the concerning point is: how are these apps faring in Indian markets? Are these apps meeting their business expectations, or are Indians yet to adopt this model?

We can take reference from the newly launched Tata Neu Super app by the Tata group. Sensor Tower (an app intelligence firm) indicated that Tata Neu recorded a 60% drop in the number of users within a year of its launch. The growth numbers have not changed significantly since then, and the main reason behind this is that Indians follow the mentality of “One App, One Purpose”. Indians are habitual in using different apps for different needs.

Further, the mindset of a customer while purchasing groceries is different from the one while buying an expensive mobile phone. Also, established apps enjoy the loyalty of their regular customers, and these customers are not ready to switch to a different app just because it provides additional services on a single platform.

Eventually, it is a slow process of changing established customer behaviour, and the concept of a super app might remain irrelevant in the Indian markets in the near future.

References

Super App as BNPL Offering

Written by Vaibhav Goel