The Rise Of Buy Now Pay Later (BNPL) Models In India: Addressing Consumer Protection Challenges In The Digital Credit Ecosystem
- IJLLR Journal
- Nov 6
- 2 min read
Updated: Nov 7
Rafiya Tabassum, Presidency University, Bangalore
ABSTRACT
Buy Now Pay Later (BNPL) has emerged as one of the most transformative innovations in the fintech sector, offering consumers short-term credit at the point of purchase both online and offline. In India, the BNPL segment has grown exponentially over the past few years, fuelled by increasing smartphone penetration, the rapid expansion of e-commerce platforms, and a surge in digital payment adoption following the COVID-19 pandemic. BNPL has positioned itself as an accessible and flexible alternative to credit cards, particularly among young, first-time borrowers who lack traditional credit histories. While it promotes financial inclusion and enhances consumer spending capacity, this unregulated credit boom has also triggered concerns surrounding consumer protection and systemic stability.
The absence of a specific regulatory framework has allowed diverse business models ranging from fintech startups to e-commerce giants to operate under minimal oversight. This has resulted in several challenges, including inadequate credit assessments, lack of standardized disclosures, hidden fees, over-indebtedness, misuse of personal and transactional data, and limited access to effective grievance redress mechanisms. Although the Reserve Bank of India (RBI) introduced the Digital Lending Guidelines, 2022, to ensure greater transparency and accountability, ambiguities remain regarding their application to BNPL intermediaries and partnerships between regulated and unregulated entities.
This paper examines the evolution of BNPL in India and analyzes the adequacy of existing legal and regulatory safeguards from a consumer protection perspective. It evaluates gaps within the current framework and compares India’s approach with regulatory developments in other jurisdictions such as the United Kingdom and Australia, where authorities are moving towards bringing BNPL fully within credit regulation. The study ultimately proposes a balanced regulatory roadmap for India that strengthens consumer protection through clear disclosures, proportionate risk assessments, enhanced data privacy measures, and standardized redressal mechanisms, while maintaining an environment conducive to fintech innovation and inclusive digital credit growth.
Keywords: Buy Now Pay Later (BNPL), digital lending, consumer protection, Reserve Bank of India (RBI), fintech regulation, UPI, digital credit, financial inclusion, e-commerce, digital payments, credit risk, data privacy, financial technology, regulatory framework, RBI Digital Lending Guidelines, consumer rights, grievance redressal, credit transparency, responsible lending, digital finance ecosystem, online credit models, comparative regulation, financial literacy.
