Rate hikes, margin pinch put pay-later companies in a tough spot

economictimes.indiatimes.com:

BNPL ventures have been facing growth challenges, said founders and other executives. Rising interest rates and narrower margins are among the main challenges. Rupifi, ePayLater and others in the online segment are feeling the heat, with eB2B marketplaces scaling down or tightening operations across categories.

With offline channels including general trade and modern trade still occupying more than 90% of the wholesale market, new-generation B2B BNPL players are looking for salvation there. But the traditional side of the industry isn’t easy to navigate. “Eventually, every financier will have to look at the offline space, considering general trade is still 90% of the B2B market.

However, it is a tough market to crack considering it requires high touch with low digital penetration,” said Aurko Bhattacharya, cofounder of BNPL startup, ePayLater. EPayLater disburses loans worth over Rs 250 crore every month, mostly through offline channels of modern and general trade.Status Check Online wholesalers like JioMart were earlier offering discounts as deep as 20-25% to partners, trying to outpace competition from traditional distributors. That has fallen to 5-7% this year, insiders said.

Certain eB2B marketplaces have started adding convenience fees, discouraging retailers further. “All these factors cumulatively have had an impact on margins of BNPL players operating in this space,” the industry executive said. Brands are offering lower discounts and credit costs are swelling due to the rise in benchmark rates, squeezing BNPL platforms on both fronts.