A recent survey conducted by logistics company Pickrr highlights that a substantial 60% of users cease shopping from a brand due to prolonged checkout processes. This issue poses a significant threat to companies by reducing end-of-sales revenues. In response to these challenges, numerous ecommerce enablers have introduced solutions, with Buy Now Pay Later (BNPL) emerging as a popular financing option in India.
BNPL not only enhances brand conversion rates and reduces cart abandonment but also fosters repeat and high-value purchases by granting consumers easy access to funds. Its lenient lending criteria and immediate capital access have propelled BNPL into a global trend. McKinsey’s Consumer Lending Pools data suggests that BNPL players worldwide capture annual revenues ranging from $8 billion to $10 billion, diverting significant sums from traditional banks.
This trend has made a notable impact on the Indian market as well. Simpl, a Bengaluru-based checkout network, experienced remarkable growth between 2019 and 2021. The fintech company’s B2C customer base surged by 3.5 times, increasing from 7 million to 25 million, while their merchant partners multiplied by 15 times, rising from 1,000 to 15,000. Presently, Simpl boasts over 20,000 merchant partners and has achieved a remarkable tenfold growth in the past 18 months.
How it all started
In 2015, Nityanand Sharma, a credit professional with experience in US-based hedge funds and financial institutions, returned to India, only to have his credit card application rejected. Undeterred, he secured lines of credit from local merchants due to his reputation as a reliable customer.
Recognizing the challenges in the market and the potential impact on ecommerce brands, Sharma co-founded Simpl. This mobile-first platform offers customers spending limits ranging from INR 1.5 to 20K at checkout, with a focus on small-ticket, high-volume transactions.
Simpl operates on 15-day billing cycles, imposing no interest on timely payments. Late fees are charged for extended cycles, but the primary revenue source is per-transaction fees paid by merchant partners.
Customer onboarding relies on data shared by merchant partners, processed through rigorous algorithms. Once approved, users can make purchases with a one-click checkout in seconds.
While Simpl has seen rapid growth in its user and merchant base, its early days were far from easy. Convincing the initial set of merchants, the pioneers of the network, presented the biggest challenge. Sharma once humorously stated, “The first 10 merchants are impossible, the next 100 are very hard, but the subsequent 10,000 are easy.”
Operating on the principle of the ‘Network Effect’ and being among the first to introduce this model, Simpl encountered initial resistance from merchants.
Pay-In-3 solution
In May of the previous year, the startup introduced an extended payment option as part of its service portfolio. This offering, dubbed “Pay-In-3,” enables users to divide the purchase amount into three equal installments, extending the repayment window to 90 days, a significant contrast to the standard 15-day timeframe.
Simpl emphasizes that Pay-In-3 primarily serves as a budgeting tool. From a revenue standpoint, it operates in line with the company’s core business, with merchants continuing to be charged per-sale fees.
The fintech company has plans to expand its services further, providing users with tools to effectively manage their finances and gain control over high-value purchases with more extended repayment schedules.
Vikas Sharma, the co-founder, expressed enthusiasm about the new offering, stating, “We are very excited about our new offering. Besides creating more customer value, it will help us onboard a wide range of merchants. Every new merchant we bring in also increases the utility of our platform.”
Fraud Prevention and User-Centric Approach
Prioritizing simplicity in both onboarding and user interface, the startup employs its proprietary AI and ML-driven fraud detection technology. Remarkably, the company maintains a default rate of less than 1.3% despite rapid user acquisition. The team at Simpl, including data scientists, anti-fraud experts, and risk analysts, has developed and continually enhances a robust model. Utilizing an ML-powered algorithm, the system monitors a user’s transaction behavior by capturing essential metrics. Initially, spend limits are set conservatively, varying based on individual spending patterns, and incrementally increase with each successful repayment. Customer repayment behavior serves as a trust-building mechanism.
Vikas Sharma, co-founder of Simpl, underscores the significance of delivering a stellar user experience for the best customers of their merchants. To mitigate unintended use, they’ve crafted an array of fraud prevention tools and algorithms that effectively maintain low default rates. Their primary focus remains on attracting the right customers and retaining them long-term.
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