Private sector lender HDFC Bank is working on a strategy for a ‘Buy Now Pay Later’ product that would enable it to provide small ticket, short tenure loans, and possibly use it as a means for customer acquisition.

“We are working on a BNPL type of product,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking and IT at HDFC Bank. The bank already has FlexiPay, a BNPL product for its pre-approved current and savings account customers, which offers loans between ₹1,000 to ₹20,000.

“We are clear that BNPL is an important segment and we will be there but we want to do it the right way,” Rao said in an interaction with BusinessLine, but said it will follow a balanced strategy.

Hauling in more customers

“We see BNPL as two things – it’s an area where people will look at small tickets, small tenure loans as a means to getting on to the lending bandwagon,” he noted.

More importantly, BNPL is also an acquisition funnel for customers, who would come on board.

“We give them a short tenure loan, a small ticket size loan. We observe their behaviour and then upgrade them to say a credit card later,” Rao said.

The move comes at a time when the Reserve Bank of India has lifted the embargo on the lender’s business generating activities under its ‘Digital 2.0 programme’. The bank is working on a number of digital launches, which are expected to be rolled out over the next few quarters.

Fast growing segment

The BNPL segment, which is often seen as an alternative to credit cards for younger borrowers, has seen a lot of interest from customers and many lenders and fintech are launching products. A recent report by FIS said BNPL is the country’s fastest-growing online payment method. BNPL is projected to rise to 8.6 per cent of e-commerce market value by 2025, up from just three per cent in 2021, it had said.

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