India's 'Buy Now, Pay Later' sector is expected to grow to $56 billion by FY26.
Also, India's BNPL is at an inflection point with rising e-commerce and digital P2M payments fuelling deferred payments, according to HDFC Securities.
BNPL GMV is poised to exhibit 74 percent CAGR and accounts for 5 percent of digital P2M payments by FY26E.
Experts believe the segment provides short-term financing to make immediate purchases and the credit can be paid back at a later date.
"The proliferation of BNPL as a mode of credit-based payment is gaining significant traction, particularly amongst the millennials and Gen-Z population within a short span of time," HDFC Securities stated.
According to the brokerage house, the growth of the BNPL segment is expected to be triggered on the back of rising e-commerce and digital payments penetration. "BNPL players are exploring multiple business models and are yet to establish economic viability with limited revenue drivers and high delinquencies."
READ MORE: Buy Now Pay Later: The New Financial Buzzword in Retail
Besides, the brokerage house's report cited that although 'FinTech BNPLs' enjoy favorable regulatory arbitrage, incumbents have an opportunity to expand their customer funnels either through in-house offerings or partnerships.
"We expect regulatory convergence on the back of the RBI's recent narrative for digital lenders although 'FinTech BNPLs' are likely to sustain their superior user experience," the company further added. "Within a bouquet of BNPL options, credit cards remain the most exhaustive and profitable and, in fact, offer an up-sell opportunity for credit-tested top-of-the-BNPL-pyramid customers."