Buy Now, Pay Later (BNPL): A Complete Guide for Indian Consumers

by KarNivesh | 15 September, 2025

Buy Now, Pay Later (BNPL) has emerged as one of the fastest-growing financial services in India, redefining the way consumers shop both online and offline. With the Indian BNPL market projected to reach a staggering ₹6,930 billion by 2030, this payment option is gaining traction as a flexible alternative to credit cards and traditional loans. Yet, while it offers convenience and affordability, BNPL also comes with certain risks that every consumer should carefully weigh before adopting it.

Flowchart showing the step-by-step process of Buy Now Pay Later (BNPL) in online shopping, from selecting BNPL option to transaction approval and purchase confirmation.

What is Buy Now, Pay Later (BNPL)?

BNPL is essentially a short-term credit facility that allows consumers to purchase goods or services immediately and pay for them in installments over time. Unlike conventional credit cards or personal loans, BNPL generally requires minimal paperwork, provides instant approvals, and, if payments are made on time, often comes with zero interest.

The process is simple: at checkout, the consumer selects BNPL as a payment method, receives approval within minutes, pays a small share upfront (commonly 25%), and repays the balance through fixed installments. For instance, if you buy a smartphone worth ₹88,280 (equivalent to $1,000), you might pay ₹22,070 upfront and the remaining ₹66,210 over three equal installments.

Flow diagram explaining the Buy Now, Pay Later (BNPL) payment process involving customer, merchant, and BNPL company.

Growth of BNPL in India

The BNPL wave in India is being driven by rising e-commerce adoption, low credit card penetration, and limited access to formal credit for many consumers. In 2019, BNPL accounted for just 0.1% of Asia-Pacific e-commerce sales; by 2023, this figure jumped to 5.8%. In India alone, the BNPL market reached ₹2,726 billion in 2025 and is expected to grow at a compound annual growth rate (CAGR) of 20.52% to hit ₹6,930 billion by 2030.

This extraordinary growth reflects a shift in consumer behavior, where affordability, convenience, and instant gratification outweigh the hassles of traditional credit systems.

BNPL Market Growth: Global vs India Market Size Projections (2019-2030)

Leading BNPL Players in India

Several companies have entered the BNPL space, creating a diverse ecosystem:

• Traditional players like OlaMoney Postpaid, Flipkart Pay Later, and Amazon Pay Later integrate BNPL directly into their platforms.

• Fintech specialists such as LazyPay, Simpl, and Bajaj Finserv Insta EMI Card cater to small-ticket purchases, digital services, and larger consumer durables.

• Banks like HDFC Bank (FlexiPay) and ICICI Bank (PayLater) have also launched their own BNPL solutions.

This mix of fintech innovation and banking adoption highlights the sector’s rapid mainstream acceptance.

Regulatory Challenges

The Reserve Bank of India (RBI) has kept a cautious eye on BNPL growth. In 2022, it restricted the use of prepaid payment instruments (PPIs) for credit lines, forcing many BNPL firms to rethink their models. The RBI now treats BNPL as a credit product under digital lending norms, meaning providers must be regulated entities.

These tighter norms have reshaped the industry. For instance, ZestMoney shut down in 2024 after grappling with defaults and compliance hurdles, while Freecharge Pay Later was discontinued. Such developments highlight the importance of sustainable practices in the sector.

BNPL vs Credit Cards

While both BNPL and credit cards serve the purpose of deferred payments, they differ significantly:

• Interest Rates: BNPL often charges 0% interest if payments are timely, though late fees between ₹265–₹883 (earlier $3–$10) apply. Extended BNPL plans may carry interest rates of 10–24% annually. In contrast, credit cards typically charge 18–49% annually.

• Approval Process: BNPL approval is instant and requires minimal documentation, making it more accessible to first-time credit users. Credit cards involve detailed applications, income proofs, and full credit checks.

• Credit Score Impact: BNPL generally reports only defaults, not timely repayments, meaning it does little to build credit history. Credit cards, on the other hand, are powerful tools for improving credit scores when used responsibly.

How BNPL Companies Make Money

The “interest-free” nature of BNPL may appear puzzling, but companies generate revenue in several ways:

• Merchant Fees – BNPL firms charge merchants 2–8% of transaction value. For example, on a ₹88,280 purchase, a merchant might pay ₹1,766–₹7,062 in fees.

• Late Fees – Missed payments incur flat charges between ₹265–₹883.

• Interest on Extended Plans – Longer repayment schemes beyond the standard 4–6 installments often carry 10–24% annual interest.

• Affiliate Commissions – BNPL companies earn by promoting certain products or acting as sales channels for merchants.

Benefits of BNPL

• Financial Flexibility: Consumers can spread payments over time, reducing immediate financial stress.

• Interest-Free Financing: On-time repayments mean no interest costs.

• Accessibility: Even those with limited credit history or income can access BNPL.

• Speed and Convenience: Approvals take minutes, and payments are automated.

Risks of BNPL

While attractive, BNPL also carries risks:

• Debt accumulation from multiple BNPL accounts

• Late fees and penalties adding up quickly

• Confusing repayment schedules across providers

• Overdraft risks due to auto-debits

• Limited consumer protections compared to credit cards

These factors make BNPL a double-edged sword, requiring disciplined usage.

Who Uses BNPL in India?

BNPL adoption is highest among Gen Z (39.7%), who prefer mobile-first credit options, followed by millennials, especially for travel and lifestyle purchases. Older generations use BNPL more cautiously, primarily for healthcare or essential needs.

Electronics (35.1% share) dominate BNPL spending, with healthcare and wellness emerging as the fastest-growing category. Fashion, lifestyle, travel, and entertainment are also popular.

The Road Ahead for BNPL in India

BNPL is poised for continued growth, particularly in offline retail, healthcare, and bank partnerships. At the same time, evolving RBI regulations will likely enhance consumer protection and transparency. Future innovations may integrate BNPL with UPI, AI-driven credit assessments, and blockchain for secure transactions.

Conclusion

BNPL represents a significant evolution in India’s digital payment landscape. By 2030, with a market size of ₹6,930 billion, it is set to become a mainstream financial tool. However, while it offers undeniable benefits like interest-free credit and accessibility, the risks of debt traps and poor financial discipline remain.

For Indian consumers, the smarter approach may be to use BNPL alongside credit cards strategically—BNPL for short-term, interest-free purchases and credit cards for credit-building and rewards. Ultimately, the key to making the most of BNPL lies in responsible financial behavior, timely repayments, and informed decision-making.