Buy Now Pay Later default rates in India reached 9.2% in Q4 2025—the highest since the segment emerged. But some players are holding defaults below 4%. We analyzed what separates the survivors from the struggling.
The Default Rate Spectrum
Industry average: 9.2% (90+ days past due)
Top quartile players: 3.2-4.8%
Bottom quartile: 14-22%
What Winners Do Differently
1. Merchant-Level Underwriting
Top performers don’t just underwrite customers—they underwrite merchants. High-return-rate merchants get stricter customer approval thresholds.
2. Dynamic Credit Limits
Rather than static limits, leaders adjust limits based on repayment behavior. On-time payments unlock higher limits; late payments trigger immediate reduction.
3. Category Restrictions
Winners avoid high-risk categories: crypto purchases, gambling-adjacent, high-return fashion. Some exclude electronics under ₹5,000 (high fraud).
4. Collection Velocity
Top players reach out within 24 hours of a missed payment. Laggards wait 7+ days. Early intervention improves recovery by 34%.
5. Revenue Diversification
Winners make 40%+ revenue from merchant fees rather than consumer interest. This aligns incentives with successful transactions, not debt accumulation.
The Regulatory Pressure
RBI is expected to cap BNPL interest rates at 24% APR (from current 36-48% range) and mandate comprehensive credit bureau reporting. Both changes favor disciplined players.
Outlook
Expect consolidation. 3-4 scaled BNPL players will survive; the rest will be acquired or shut down. If you’re building in this space, unit economics matter more than growth.