BNPL (Purchase Now Pay Later) and installment companies are in excessive demand globally, with the worldwide quantity of transactions on this section forecast to develop by virtually
$450 billion between 2021 and 2026. Intense growth of this section has additionally been seen in Uzbekistan, the place the fintech market is rising quickly and cashless funds are gaining in reputation.
In his column, co-founder of UPay Bekhzod Botirov appears to be like on the key benefits of BNPL companies, present traits on this section, and what the business in Uzbekistan wants to make sure sustainable growth.
BNPL companies are an efficient software for small enterprise growth and a handy financing resolution for customers. Prospects should buy merchandise and pay in equal installments over a pre-agreed time frame (usually as much as a 12 months). Furthermore, many corporations
supply installment plans with out a further markup. This mannequin permits prospects to not solely keep away from massive one-time bills that may overload their funds but in addition to accumulate costlier and high-quality items immediately, with out resorting to traditional
loans with excessive rates of interest.
However, BNPL will help companies improve each their turnover and common order worth (AOV). Prospects typically make purchases understanding that they’ll pay in installments, and subsequently select a wider vary of merchandise. This permits enterprise house owners
to expedite gross sales, broaden their product line, and improve gross sales volumes. As well as, providing BNPL companies helps enterprise house owners attain new demographics, similar to college students, current graduates, and enormous households. Lastly, prospects are extra loyal to sellers
who supply this feature.
Traits of the BNPL section in Uzbekistan
Retail chains in Uzbekistan have lengthy provided prospects the choice to buy merchandise on an installment plan. Monetary establishments adopted swimsuit in 2019-2020 after creating their very own instruments for providing BNPL companies. Consequently, the BNPL and POS financing
market — loans issued immediately at factors of sale — reached $450–500 million in 2023 when it comes to gross merchandise worth (GMV).
Two-thirds of the BNPL market in Uzbekistan is made up of Alif Nasiya and Uzum Nasiya companies. For the latter, the amount of installments issued within the first 9 months of 2024 greater than
doubled in comparison with the identical interval in 2023. That is amid the rising reputation of on-line purchasing and digital banking companies. It’s also noteworthy that each corporations just lately secured funding: Alif Uzbekistan obtained $5 million from
British funding platform Cur8 Capital and $20 million from American funding firm Accial Capital to develop Alif Nasiya installment companies. In the meantime, Uzum attracted greater than $100
million, which can be invested in unsecured mortgage merchandise for people and installment funding.
Electronics and family home equipment proceed to be the most well-liked merchandise bought underneath installment plans. These product classes are often extremely priced, however BNPL permits prospects
to buy the most recent merchandise, similar to the most recent iPhone, with out straining the household funds. Curiously, 77% of the BNPL market in Uzbekistan is at present made up of offline purchases, which had been round lengthy earlier than on-line companies grew to become accessible.
Ishonch, a significant participant on this section, operates completely offline, whereas ZOOD is a totally digital platform.
Today, it’s comparatively straightforward for companies to start out providing BNPL companies in Uzbekistan since they don’t must open branches or coordinate operations with central banks, as is required for microfinance establishments. Any commerce group can supply
these companies by getting into into contracts with customers with out having to contain banks or MFIs. The mechanism is often easy: BNPL suppliers purchase merchandise at full value or at a reduction in each offline and on-line shops, together with marketplaces, and promote
them in installments.
Defaults and information: market challenges
The event of the BNPL business in Uzbekistan comes with sure challenges, one in all which is defaults on funds. Although this has not but turn out to be a mass phenomenon, there are cases of this. One of the standard merchandise bought in installments
is cellphones, however sellers typically face issues with late funds. The shopper could make the primary cost on time, the second cost late, and after that cease making funds altogether. One other complication arises from the truth that some gadgets imported
into Uzbekistan are gray-market merchandise, and subsequently don’t endure obligatory registration within the UZIMEI system to register the IMEI codes.
One resolution could also be to use the “smartphone contract” mannequin. Underneath this contract, concluded between the cell community operator and the client, the client pays again a part of the price of the system along with a month-to-month charge for his or her cellphone plan. This
strategy has already been broadly adopted in a number of different nations. Within the UK, for instance, the cell community operator O2 provides long-term contracts for 12, 24 or 36 months, the place the price of the smartphone
is break up into equal month-to-month funds included within the month-to-month charge. If the client stops making funds, the operator can block the cellphone utilizing the IMEI code, stopping it from getting used with different community operators. Sooner or later, this mechanism may very well be
prolonged to different gadgets similar to tablets and notebooks, which might not solely cut back dangers for suppliers, but in addition legitimize the market general.
Integrating BNPL companies with authorities data methods, digital authorized proceedings, and regulation enforcement companies may considerably decrease the danger of defaults. Because the microfinance market develops, the debt burden on residents is predicted to develop.
In August, it was introduced that the utmost microloan quantity could be elevated to 300 million sum. Whereas this expands alternatives for enterprise house owners, it will probably additionally result in an increase in indebtedness
and a rise within the quantity of downside loans.
Defaulters could proceed to utilize BNPL companies, which poses extra dangers for the system. Corporations typically must resort to excessive measures to get the funds again, together with taking authorized motion. An efficient resolution may very well be to make sure information change
between authorities and personal methods. On the one hand, this is able to assist to enhance the credit score scoring course of when issuing installment plans, and alternatively, velocity up authorized proceedings. Furthermore, information integration makes it attainable to combination data
on dishonest consumers. It will limit their entry not solely to BNPL companies but in addition to loans supplied by microfinance establishments and banks.
Foremost traits: BNPL for companies and installment playing cards
A key development seen within the Uzbek market is the operation of BNPL companies via microfinance establishments, or via issuing MFI licenses. Each Uzum Nasiya and ZOOD have already obtained the required authorization to function this MFI-based mannequin, which
will enable them to supply a wider vary of economic companies. Specifically, they’ll have the ability to challenge loans.
As well as, these licenses will make BNPL accessible not just for bodily merchandise but in addition for companies, which, at current, is one thing solely specialised corporations similar to journey companies can supply. This path is very promising, provided that the
Uzbekistan-2030 technique predicts the variety of home vacationers to develop to 25 million by 2030.
An attention-grabbing space of progress for BNPL companies may very well be providing installment plans for organising occasions like weddings or birthdays. One other potential path may very well be trending companies similar to automotive window tinting. And, in fact, BNPL companies are related
in schooling, a area that has been creating quickly in Uzbekistan. During the last 7 years, the variety of universities has elevated from 77
to 210, and on-line programs are additionally gaining reputation. In 2023, IT Park, along with Coursera, launched the nationwide coaching platform Uzbekcoders.uz. Installment plans for additional
schooling will enable professionals to enhance their abilities and even swap careers with out having to avoid wasting your entire quantity prematurely.
One other promising space for growth is installment playing cards, that are already being provided by Solfy and AnorBank. In the meantime, ZOOD just lately
launched its personal resolution in partnership with Mastercard, and Uzum Nasiya is about to launch an analogous product quickly. These playing cards enable prospects to buy items in installments from accomplice shops, whereas cell purposes enable customers to maintain observe of
their cost plans and accessible limits.
The success of this product is set by the variety of B2B companions whose items may be bought utilizing these playing cards. With this in thoughts, Uzum Nasiya’s resolution appears to be like promising as a result of it permits prospects to buy merchandise from the Uzum ecosystem, which
already
options round 12,000 entrepreneurs from everywhere in the nation. Sooner or later, the cardboard can be utilized to pay for companies, and the cost data can be included within the person’s basic credit score historical past.
Transparency with out limitations
The BNPL market in Uzbekistan isn’t at present regulated. Whereas it’s essential to make modifications on this regard, it’s vital that the regulation isn’t too restrictive, as this might disrupt the event of this business. For my part, there is no such thing as a want for
BNPL gamers to have separate licenses. That stated, new corporations ought to notify the central financial institution once they begin working and arrange data change processes with tax and credit score registers.
Specifically, they want integration with CRIF and the Credit score-Data Analytical Middle. On the one hand, this is able to enable them to acquire data on the borrower’s credit standing, conduct KYC and AML checks, and make selections on whether or not to supply
an installment plan. Market leaders already use as much as 250 parameters for credit score scoring. Utilizing machine studying applied sciences, they analyze data from credit score bureaus, authorities establishments, bank card transactions, in addition to purchaser habits on e-commerce
platforms. Nevertheless, such a complete test isn’t but normal follow for many BNPL companies.
However, integration will enable credit score bureaus to replace their databases in order that different BNPL companies and MFIs have as a lot data as attainable on prospects’ creditworthiness. This implies they will chorus from issuing loans to any prospects who
are usually not paying off their installment plan, which, in flip, will assist to cut back dangers for all market gamers. Within the meantime, the amount of downside loans in MFIs is growing step by step, with the overall
exceeding 200 billion sum as of 1 October.
Private identification options may contribute to growing business transparency and lowering circumstances of fraud. In keeping with the Central Financial institution, fraudsters are more and more utilizing social
engineering strategies to challenge on-line loans on behalf of residents via cell banking purposes. Consequently, customers are actually required to endure biometric identification when making use of for a mortgage via a banking app. Comparable devices can also be
helpful for BNPL companies, and, together with scoring fashions, will help reduce dangers for mortgage suppliers.
Conclusion
The event of BNPL companies in Uzbekistan is rising quickly, with large potential for growth in each the products and companies segments. In keeping with KPMG, the GMV for BNPL and POS financing could develop 4.1 instances between 2023 and 2027, and the share
of BNPL transactions in e-commerce will attain 22%, in comparison with the present 19%. The important thing success components for this business can be implementing correct threat administration, guaranteeing integration with authorities methods, and, in fact, creating merchandise that meet
buyer wants.
