The Emergence of BNPL: A Case Study in Slice
Interested in the IPL? Maybe Mumbai Indians is your favourite team (or arch rival). Well, we hear there’s a new sponsor on the block for MI. If you carefully look at the Mumbai Indians jersey, you’ll notice their newest principal partner - Splice - in a whopping Rs. 100 crore deal for three years. Maybe you’ve looked at their out-of-the-box advertisements as well.
In this article, we are going to look at the rise of Slice, and the booming BNPL trend. So keep reading!
Buy Now Pay Later (BNPL)
Before getting to know more about Slice, we first need to know about the emerging Buy-Now-Pay-Later trend.
In simple terms, a BNPL scheme is a type of Point-of-Sale (POS) financing and is quite synonymous to a credit card. Yet there are a few differences in terms of hidden fees, charges, interest-free credit period, etc.
This scheme allows users to make purchases without having to worry about paying the full amount upfront. A cash down-payment can be made and the rest can be financed via credit. This scheme is also applicable for relatively small purchases like mobile phones, personal computers, etc.
Usually, there is no interest involved for the time period for which the loan is extended. However, if the borrower fails on the timely repayment, an interest and a penalty fee may be levied. The credit score of the customer might also be affected. The credit period ranges from 15 days to over 3 months.
What are the major developments in this space?
When the COVID-19 pandemic hit, it heralded a wave of conscious spending among the millennials and Generation-Z. Members of this cohort became more apprehensive of parting with huge sums of cash in one go and searched for alternative methods of financing their purchases.
Enter BNPL.
What this system addresses is the consumer’s desire to break his expenses into affordable chunks which can be paid over a period of time rather than all at once.
BNPL companies earn from both the seller and the buyer. They typically levy a 2-8% fee on the buyer and also charge a commission from the seller.
In recent times, there has been a massive increase in the number of fintech firms in this space. Recently, Apple and Goldman Sachs announced that they’ll come together to introduce ‘Apple Pay Together’. Sweden’s Klarna is Europe’s most valued fintech startup at a valuation of $45 billion. Australia’s AfterPay was acquired by Jack Dorsey’s Square for $26 billion - the biggest acquisition in Australia.
About Slice
Slice is a fintech company based out of Bangalore, Karnataka, India founded by Rajan Bajaj in 2016. It is an ‘app-based credit card challenger’ in India.
* A challenger bank is a relatively new retail bank created out of the need for a space not properly served by the larger, more established banks. These banks make the use of new cutting-edge technology to lure customers and improve customer-experience.
Slice initially started by enabling customers to make EMI payments to vendors. In 2019, in partnership with Visa, it launched the Slice card.
Slice, and other such companies, majorly try to address the needs and desires of the Millenials and Gen-Z who often have limited budgets, limited access to credit facilities and a proper digital experience which removes unnecessary hassle.
It allows users to ‘slice’ the total amount payable into 3 equal installments and also gives instant rewards for timely repayments. Slice also provides insights into the customer’s expenditure, the option to convert dues into equated monthly installments (EMIs) and regular reminders to pay off dues. According to Bajaj, “This creates good habits in the user.”
Investors and Funding
According to Crunchbase, Slice has a mix of equity and debt financing in its capital structure. In November, 2021, it raised funds to the tune of $220 million with Insight Partners and Tiger Global Management being the lead investors, propelling it to the exquisite Unicorn Club. Blume Ventures and Gunosy Capital are the most recent investors. In February, 2017, it acquired Trustio, a peer-to-peer lending company.
Conclusion
As a lone business vertical, BNPL has often been adjudged non-viable. Modern businesses often look at BNPL as a means of customer-acquisition so that they can redirect customers onto more profitable services.
Reportedly, Slice has also been working on a UPI interface competing with the likes of the behemoths of the industry like PayTM and Google Pay.
Who do you think will emerge as the victor? Tell us in the comments section!
Do you think that the buy now, pay later system (which Apple has also just adopted) will allow people to make more unnecessary purchases?