CXOToday has engaged in an exclusive interview with Mr. Abhineet Sawa, Co-founder at Snapmint
- What is EMI financing and how does it work for e-commerce transactions?
Essentially, splitting the payment (EMIs) while buying a product is called EMI financing in e-commerce transactions. Indians have been making big purchases like TV, fridge, and automobiles in instalments offline for the last 2 decades in India. When it comes to e-commerce, however, out of 350 Mn UPI users, only about 45 Mn of them have a credit/debit EMI card facility. This creates a huge gap in the availability of all categories along different price points like apparel, electronics, beauty, travel etc. Credit penetration is even worse in the Gen Z sector which is just entering the workforce, tier 2-4 audiences, self-employed and non-salaried individuals (like housewives). Thus, EMI democratises the issue by offering hassle-free credit to these consumers. This creates an opportunity for brands/merchants to leverage for sales.
The majority of transactions are no-cost EMIs or with no extra charge to the customer. The merchant pays for the financing cost. EMI financing has helped e-commerce brands to grow in different markets. Their reach now extends beyond tier 1 audiences to tier 2-5 city audiences. They’ve also been able to reach out to GenZ. It has been found that EMI financing can be a great enabler for aspirational purchases of GenZ, the middle-income segment.
- Please provide more information about the significance of EMI finance and the Indian companies involved.
Since the outbreak of Covid, companies are heavily investing in D2C channels for various reasons. EMI financing is a key driver to convert customers. Instead of selling discounted products or lower-priced products, split payment solves customer affordability and drives conversions. Indian brands are able to see 12-15% higher conversion. Brands see ~30% higher order value on Snapmint orders vs other payment options. Many e-commerce brands thus leverage split payments to drive sales. Additionally, brands see an increased share of prepaid orders, reducing the COD and RTO-related challenges.
- In terms of service, how are you breaking through the clutter among heritage brands?
Big financial firms have limited themselves to affluent customers and high price point categories. Most of them only offer EMI purchases to the top 50 Million who have thick credit files and for only certain categories like home furnishings, appliances, automobiles, etc. EMI financing is solving this liquidity problem for the people outside this 50 Mn. This includes people with thin credit, Gen Z, new to credit, etc. Platforms like Snapmint operate for them and go beyond the traditional categories serviced by incumbents. Today we have men buying shoes and smartwatches on split payments and women buying beauty products in instalments too.
Snapmint also specialises in providing instant credit with low documentation at merchant websites. While most incumbents require customers to make document-intensive sign-ups on their portal, Snapmint services can be leveraged by any new customer on the Merchant website, in a 2 step process.
- How do you manage EMI payments without using traditional paperwork?
Unlike the traditional way of getting EMI financing, online verification today is convenient, hassle-free, and requires minimal to no physical documentation. Most of the payment platforms use underwriting to predict credit history, all in under 2 minutes. This is done online in a convenient way after Digital India’s initiative. Snapmint is licensed by the RBI which means that we have permission to access certain databases to evaluate our customer’s creditworthiness. Post Covid RBI has made multiple upgrades to Indian lending and payments infrastructure. Digital KYC methods, Account aggregators, and recurring payment setup are some digital steps that make online customer onboarding far easier
- What are the risks associated with EMI financing in e-commerce for both customers and retailers?
As of now, the risks are quite minimal. As pointed out above, digitisation has decreased chances and paperwork. In the limited number of cases where a customer chooses to delay payments beyond due dates, we do report the same to credit bureaus. Even in that case, Snapmint understands that there are genuine customers that can forget at times. That is why, we have systems set up like reminders, and auto-pay to help them.
EMI service providers although they look similar there are numerous nuances in how and to whom EMI is offered. For retailers, the risk lies in choosing the right EMI payment method. Many split payment partners are not RBI approved, which can lead to discontinuity of services. Many times in the process EMI service providers offer low approval rates or ask for heavy documentation. This can impact merchants’ conversion rate and customer experience.
- How do the use of technology and digital platforms facilitate EMI financing in e-commerce?
Snapmint has used technology to further strengthen its partner brands. It is integrated with multiple technology platforms such as Shopify, WooComece, Juspay, Salesforce Commerce, (apart from API integration methods), and all these significantly reduce time to market for merchants. Our technology helps brands integrate with us in less than 48 hours. This translates to a hassle-free experience for the brands. Our customer journeys are faster and more efficient due to our access to online archives (since we are RBI licensed, as pointed out above). We also are able to seamlessly integrate digital upgrades in payment and KYC driven by RBI/NPCI. This reduces onboarding friction for customers and spikes sales for our merchants.