Young adults in Generation Z are now able to purchase high-end items through easy monthly payments.
In recent times, quick-access credit solutions like Equated Monthly Installments (EMIs) and embedded finance have gained popularity among Indian consumers. A study suggests that 43% of borrowers prefer EMI cards for their speed and accessibility, while 64% show a strong preference for embedded finance, often available on e-commerce and travel platforms.
This shift towards EMIs is particularly prominent among GenZs and millennials, as stated by Madan Sabnavis, chief economist at Bank of Baroda. During Amazon's recent Prime Day, one out of four spends was on EMI, and nine out of 10 EMI purchases were driven by no-cost EMI for the purchase of smartphones, electronics, and large appliances.
Samsung, Apple, and OnePlus led the growth in the premium smartphone segment during Amazon's Prime Day, with the premium smartphone segment (priced above Rs 30,000) witnessing over 60% growth in value, thanks in part to the appeal of no-cost EMI options.
The convenience of EMIs extends beyond high-value goods, enabling consumers to make purchases without having to make the full payment upfront. This trend is supported by digital financial tools that make luxury more accessible. For instance, MakeMyTrip offers flexible payment solutions like 'book with zero payment' for hotels and a 'part payment' option for international flights.
The average transaction value for booking hotels using Buy Now Pay Later (BNPL) is Rs 3,873, while credit-card EMI is around Rs 16,500. LazyPay EMI, a feature launched by LazyPay, allows consumers to finance purchases up to Rs 1 lakh with flexible repayment options ranging from 3 to 12 months.
However, this rise in credit-driven consumption is creating a growing burden, with salaried individuals in India reportedly allocating more than 33% of their monthly income toward loan EMIs. The 'How India Borrows 2024' study reveals that 65% of lower-middle-class consumers, particularly millennials and Gen Z, use app-based banking.
The emphasis on experiential luxury and immediate gratification by Gen Z, combined with their confidence in improving financial situations, contrasts with the cautious approach of millennials. However, both face tight financial bandwidths. Lifestyle purchases account for over 62% of discretionary expenses, with people from high-income groups spending nearly three times as much on such items as entry-level earners.
This trend influences retail and real estate markets as well, with apparel, F&B, and experiential luxury categories expanding rapidly under the influence of these younger consumers.
In summary, the increased consumption of luxury goods via EMI and no-cost credit options among Gen Z and millennials in India is driving higher discretionary spending but also raising concerns about long-term financial health due to debt burdens and reduced savings capacity. It is crucial for these consumers to strike a balance between their aspirations and financial security.
- The convenience of EMIs and no-cost EMI options have made luxury more accessible, with digital financial tools supporting this trend.
- On Amazon's recent Prime Day, one out of four spends was on EMI, and most EMI purchases were for smartphones, electronics, and large appliances.
- Samsung, Apple, and OnePlus led the growth in the premium smartphone segment during Amazon's Prime Day, due in part to the popularity of no-cost EMI options.
- MakeMyTrip offers flexible payment solutions, such as 'book with zero payment' for hotels and a 'part payment' option for international flights, to enable consumers to make purchases without paying upfront.
- LazarPay EMI, a feature launched by LazyPay, allows consumers to finance purchases up to Rs 1 lakh with flexible repayment options ranging from 3 to 12 months.
- The 'How India Borrows 2024' study reveals that 65% of lower-middle-class consumers, particularly millennials and Gen Z, use app-based banking, and salaried individuals in India are allocating more than 33% of their monthly income toward loan EMIs.
