Buy Now Pay Later, (BNPL), is a tactic used by offline amd online retailers and e-commerce / quick commerce platforms alike, to entice potential buyers to spend on discretionary purchases, especially ones involving high impulse / high purchase prices.
India’s apex agency, the Reserve Bank of India has come down heavily on one such firm Simpl.
The company, which has been enabling B2C transactions through informal credit across retail platforms, mostly online, has been asked to shut down its operations with immediate effect.
The company was recently in the news for violations in attracting Foreign Direct Investment. The company had alledgly got investments as an Internet Technology firm, providing such services, where as in real, the company was in the business similar to that of a Non-Banking Financial Corporation (NBFC).
Nitya Sharma, former VP. Goldman Sachs and Chaitra Chidanand, former VP at Stanford Angels and Entrepreneurs founded Simpl in 2015.
Over 26,000 outlets are connected with the Simpl platform and potential consumers can instantly purchase products from these outlets and check-out without paying anything.
Customers get a 15-day period to pay the amount to the platform, or pay a small fee towards interest. This is the sole source of its income.
Simpl has till date raised USd 83 Mn and counts DIA Investments, Hard Yaka, FJ Labs, Honeycomb Investments, Valar Ventures and IA Ventures as its Investors over the years.
The Reserve Bank of India said in its letter to Simpl, “It was found through investigations that Simpl (the entity) is operating a payment system involving payment, clearing, and settlement functions without a Certificate of Authorisation.
This constitutes a violation of the provisions of the PSS Act, 2007.”
Editor’s Note
Amazon Pay and Flipkart Pay are the two major players in the segment, while a bunch of others too are in the fray, vying for a share of the BNPL market.
Once upon a time popular players such as PayTM and MobiKwik discontinued their BNPL operations, since they did not have the necessary approvals to function like an NBFC.
Short-term credit in the Indian Retail ecosystem is nothing new.
In fact, for over 3 decades, corner shops, also known as Kiranas, offered a credit period for their consumers, so their sales continued to grow, even as those in the neighbourhood would eventually pay the shopkeepers, once they get their salaries.
This informal, yet decent credit management system well-existed even before CIBIL came in to organised credit during mid-2000s.
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