How the installment payment market is developing
As Dmitry Seregin, director of Shares, told Rossiyskaya Gazeta, in 2023, customers using the service made purchases worth more than 40 billion rubles. Over the course of the year, the figure multiplied by 4.4, and the number of members and users also multiplied several times, he notes. For comparison, in the previous two years the volume of purchases amounted to a total of 10 billion rubles. The press service of Yandex, which offers the Split service, also noted that the BNPL market is still in an early stage of development.
This year the positive dynamics in the development of services will surely continue, market participants are confident. Volume growth is expected due to both the popularization of this payment method among the population and the connection of new partner stores.
Installment payment services appeared relatively recently in Russia: during the 2021 pandemic. BNPL, which stands for “buy now, pay later,” is a familiar tool in many countries. However, in Russia it represents a small percentage of online purchases. If in 2022 its share in e-commerce were less than 1%, by the end of 2024, according to Frank RG’s forecasts, it could grow to 1.8%.
The key players in the BNPL market are large banks and IT companies. In addition to the services “Shares” from Tinkoff Bank and “Split” from Yandex, there are others: for example, “Payment in parts” from Sberbank and “Sharing” from Alfa Bank.
And the essence is quite simple: the price of a product can be divided into parts, usually four, which must be paid every two weeks. Basically, the customer borrows, but does not apply for a loan or provide passport information. This simplicity also hides certain risks. For example, these are the unregulated amount of fines for late payments, the low degree of knowledge of clients about the emerging circumstances and the uncontrolled increase in the debt burden, the Bank’s press service informed RG. From Russia.
How are they going to regulate the market?
“We want the quota market to be as transparent as possible and to have the opportunity to control possible risks,” indicated the Central Bank. And one of the regulator’s goals is to limit the debt burden. “Therefore, we do not exclude the possibility of introducing certain restrictions on transactions with operators of installment payment services. The requirement to take into account in credit histories obligations arising when using installment payment services may also be introduced that exceed a certain limit,” the Bank of Russia said. .
Two models are currently being considered. On the one hand, it is an installment payment plan, which some BNPL services also offer, but as a credit product with a certain rate. “The regulation here should not differ from the regulation of consumer loans, otherwise arbitrage will arise. Professional lenders should offer such installment payment plans,” the Central Bank stressed.
On the other hand, there is a free installment plan, which is usually issued for two months without overpayments. There is no fee, but there are fines, generally between 5% and 7% of the total amount. “Here we are discussing the possibility of such a service being provided by specialized quota operators,” explains the regulator’s press service. “In this case, requirements will be established for them to ensure the protection of consumer rights. And the creation of a special register. The possibility of using such operators is being considered.” By order of the President of the Russian Federation, the government, together with the Central Bank, it must prepare amendments regulating installment payment services before June 1, 2024.
What do market participants think?
The press service of Yandex, which offers the Split service, reported that if the purchasing process in BNPL becomes “heavier” and ceases to be simple and fluid for the user, this could critically affect convenience and, as a result, the future. of the entire market. “This can also become a negative factor for sellers, including representatives of small and medium-sized businesses. For them, BNPL is a tool to increase sales and attract new audiences,” they explained.
Dmitry Seregin, head of the “Shares” service at Tinkoff Bank, stressed that they actively participate in the dialogue between the regulator and market participants. “We are confident that the BNPL market needs responsible regulation,” he says. “The most effective thing for BNPL is to establish a maximum term and amount, the mandatory requirement of partial payment of goods or services by the consumer on his own account, the absence of fees for the consumer and a prohibition on differentiating the cost of goods” .
According to market participants, it is necessary to establish the basic operating principles of BNPL providers in terms of mis-selling (imposing a product that is not what the customer ordered – RG note), hidden commissions and price manipulation. It’s also important to keep in mind basic “know your customer” principles, such as whether the service is used by an adult, Seregin says.
What is the difference between BNPL and a loan?
In essence, BNPL is not a credit product: in the relationship with the buyer there is no credit contract and the inherent tools to deal with arrears, unlike POS loans (which are issued directly at the point of sale – approx. “RG”), credit cards and personal loans or PDL. “Therefore, it is important not to overload a convenient technological product with a large regulatory superstructure. We believe that market regulation should be based on the capabilities of modern technologies underlying BNPL,” notes the Doli director.
In case of non-payment, it will most likely no longer be possible to use the service, notes the associate professor at the Russian University of Economics. GV Plekhanova Yulia Kovalenko. The fact is that the limit is calculated individually for each person. As a rule, it is limited to several tens of thousands of rubles. “And it must be said that data on concluded contracts are not transmitted to the credit history bureau,” notes the expert.
This means that a client who has applied for several services can also apply to the bank for a consumer loan. As a result, its debt load exceeds the acceptable level, which is what the regulator is now fighting with by tightening macroprudential regulation. The peculiarity of the financial product is that citizens buy more than necessary, as a result of which a considerable debt accumulates. The average bill for purchases using the service is 81% higher than when paying by card, says Seregin.
“When paying in installments using BNPL, the user independently chooses a comfortable payment term and terms: for two months without overpayment or for a longer period with a small commission. All information about the amount of possible overpayment and the term payment is available immediately on the product page,” notes the press service Yandex.
Tinkoff Bank service added that, if necessary, you can pay the full balance ahead of schedule at any time with just one click. In most cases, these services are used for the purchase of household items, beauty products and small appliances. The average bill, according to Split data, is about 6 thousand rubles.
