After a two-year figurative drought, the tourist and hospitality industries are beginning to see signs of life as travel restrictions caused by the coronavirus epidemic are being relaxed throughout the world. People are congregating outside and scurrying for their preferred locations. Travel both domestically and abroad has increased, but whether you’re travelling alone or on a budget, there are no cheap meals everywhere. Travel expenses have grown as a result of inflation and rising plane fares. As a result, travel agencies and their payment partners provide “Buy Now, Pay Later” travel packages so that visitors may take advantage of travel while making simple EMI payments. These “loans” for travel make travelling more affordable and allow travellers the chance to enjoy even expensive places.
They may spread out payments over a certain length of time using the “Buy Now, Pay Later” travel financing options, sometimes even without paying significant interest.
Only 1%–2% of the gross merchandise value (GMV) of travel agencies is contributed by travel loans. However, it is anticipated that the share of these loans in total GMV would increase to roughly 5% in the upcoming year. Leading tour operators now report that up to 40% of their clients are considering paying for their vacation on EMI. For instance, Thomas Cook has noticed a more than 25% rise in customers looking for workable vacation financing solutions. The “travel now and pay on return” campaign has a partnership with a fintech, however Rajeev Kale, president & national head, vacations, Additionally, we provide loan facilities through a number of bank partners with 3–13 monthly instalments for repayment.
The average transaction size for an international travel loan is Rs 1. 5 lakh, said Daniel D’Souza, president & country head holidays, SOTC Travel, Thomas Cook’s subsidiary.
Chennai-based travel company, Madura Travel Service, too has recorded a 30% rise between January and June this year, compared to a year ago, in the number of honeymooners and small families opting for external fund sources such as credit card with EMI option, personal and travel loans from banks, NBFCs and fintechs for their travel purposes. In the past, people used to save and pay for their trips. But post-COVID, it is easier for them to avail of loans and repay it later because they have become used to EMIs in recent times. From 10% in 2019, the number of people exploring EMI options through credit cards and loans for their foreign tours has increased to 40% in 2022.
Travel Fintech, SanKash, which has processed international travel loans of around Rs 70 crore between January and June, has recorded a seven-fold increase in queries post-Covid, when compared with the pre-pandemic year.
Travel “Buy Now, Pay Later” Schemes
The “Buy Now, Pay Later” travel programmes provide customers the choice of signing up to pay off a trip via a travel website or directly with the lending company. They are able to make payments until the full amount, plus interest, if any, has been paid. By entering your bank or debit card information, these payments can be automatically taken out of your account. Interest rates vary depending on the plan or offer made by the travel agencies or the company offering the travel loan.
The travel business is seeing rapid expansion as consumer demand for trips to their preferred destinations is high. This is where BNPL (BuyNowPayLater) has become a new trend, growing by more than 25% from the previous year. All of the major airlines, OTAs, and banks have announced their ambitious ambitions in that direction. Newlyweds, small families, and international travel are the main drivers of the BNPL phenomena. Additionally, this BNPL will keep expanding since over the next two years, outbound traffic from India will reach $42 billion.
How well do “Buy Now, Pay Later” Travel deals perform in India?
Traveling Indians are adopting the “Buy Now, Pay Later” trend as a way to overcome their financial limitations and visit opulent overseas destinations. Indian visitors are choosing “Buy Now, Pay Later” travel packages offered by loan providers, travel agencies, and even banks in order to book a flight to their selected location and pay later in convenient EMIs. Buy Now, Pay Later travel programmes are becoming more popular in the nation as they offer a practical choice to tourists who want to visit their favourite location without experiencing any financial hardship. Since it provides a cost-effective and accessible choice for everyone, we have so far been getting excellent feedback from users.
In comparison to the prior quarter, Yatra.com saw a 25–27% increase in enquiries for holiday loans for air travel. In contrast to the typical transaction amount of the loan for domestic travel, which is INR 14,000–15,000, travellers can also get a loan of INR 65,000–70,000 for travel to foreign locations. As users may repay the money in three to six equal, interest-free payments, the BNPL option’s flexibility encourages consumers to act on their long-repressed urge to travel. In addition to inspiring consumers to cross items off their trip wish lists, we are hopeful that this new trend of travel loans will provide the sector a major boost.
As more Indians choose the practical and cheap payment option to book their vacation, we are seeing an increase in the use of Buy Now Pay Later (BNPL) for travel on our platform. For August compared to July, there is an increase of 13% in the daily volume of transactions made through travel businesses. The growth in demand for Pay Later travel solutions reflects a changing customer preference for a quick, easy way to pay that complements and improves their whole travel experience. Today, BNPL has also developed into a crucial financial tool, especially for young customers who might not have access to credit cards and would like to cover their travel costs, especially for last-minute arrangements on occasions like long weekends.
Over the past few years, the “Buy Now, Pay Later” travel option has emerged as the one with the fastest increasing customer base. In the previous two years, this market has grown by 4X, according to TripMoney, MakeMyTrip’s fintech division that also underpins our BNPL product. Travelers now actively examine and choose this payment option when booking flights, trains, and hotels, as well as for all other travel-related reasons, including vacation and pilgrimage. Our BNPL facility has a minimum loan amount of Rs. 500 , and 75% of users choose free short-term credit with a three-month duration or less, with the remaining users favouring a longer term. We partner with top banks and NBFCs, like Kissht, IDFC, Capital Float, and HDFC, to power our BNPL service.
In many aspects of life, including travel and shopping, Indians want the most value for their money. They have the choice to travel the world without placing an undue strain on their funds thanks to “Buy Now, Pay Later” programmes.