Fintech companies are increasingly shifting from Buy Now, Pay Later (BNPL) offerings to Equated Monthly Installment (EMI) loans and traditional consumer credit products. This transition is driven by regulatory pressures, rising default rates, and the pursuit of more sustainable lending models.

• Regulatory Scrutiny: The Reserve Bank of India (RBI) has raised concerns about the rapid growth of unsecured personal loans, including BNPL products. In response, the RBI increased risk weights on such loans, prompting fintechs to reassess their lending strategies and explore secured lending options.
• Rising Default Rates: BNPL services have experienced increased delinquencies. For instance, Klarna reported a 17% rise in credit losses in Q1 2025, amounting to $136 million. Such trends have raised concerns about the sustainability of BNPL models.
• Sustainability and Profitability: EMI-based loans offer clearer repayment structures and credit assessments, making them more sustainable and profitable in the long term. These products also align better with regulatory expectations and risk management practices.

In India, fintech lenders have capitalized on the cautious stance of traditional banks. In the first half of FY25, fintechs accounted for approximately 76% of personal loan sanctions by volume, primarily offering small-ticket loans averaging around ₹9,200. This shift indicates a growing preference for structured credit products among consumers.

The move from BNPL to EMI loans reflects fintechs’ efforts to adapt to regulatory changes and address the challenges associated with unsecured lending. By focusing on more structured and sustainable credit offerings, fintechs aim to ensure long-term viability and better serve their customer base.

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