In a strategic move to adapt to market dynamics, Zilla, the Buy-Now-Pay-Later (BNPL) company founded in 2019, has decided to temporarily halt its BNPL services. The company is now redirecting its efforts towards the development of a cross-border payment product, Zillawire, according to sources familiar with the matter as reported by TechCabal.
Challenges in convincing customers to embrace the BNPL model were cited as a significant factor behind the pause. An unnamed employee shared insights, noting that a common misconception about credit being associated with owing people posed a hurdle. Customers, in many instances, preferred to wait until they could pay the complete amount rather than opting for installment plans.
Zilla has officially confirmed the decision to pause its BNPL offering, stating that they have a few aspects to figure out. The company expressed intentions to resume the service, although specific timelines were not disclosed.
Zilla currently collaborates with around 100 merchants, providing a platform for customers to pay for various products and services in two to four installments. Despite encountering sluggish adoption, certain product categories, such as electronics and high-end beauty products, performed relatively well.
However, even within these successful categories, a challenge emerged as customers expressed a desire for more extended payment periods beyond the four months Zilla initially offered. The economic climate, according to retailers, necessitates more time for customers to fulfill payment obligations.
The decision to pause BNPL services aligns with a broader trend in the fintech industry, with several firms discontinuing such services following guidelines from the Reserve Bank of India (RBI). The RBI’s notification prohibits non-bank prepaid payment instruments (PPIs) from being loaded with credit lines, citing concerns about systemic risks and insufficient due diligence.
As a response to the regulatory landscape, various fintech firms, including LazyPay, Jupiter, EarlySalary, and KreditBee, have temporarily halted or modified their offerings. LazyPay, for instance, is transitioning its LazyCard from a prepaid card to a credit card to align with the RBI guidelines. This regulatory shift has prompted calls for clarification from the RBI, particularly from smaller players facing disruption in the industry.
