Travel Now Pay Later: Should you subscribe to the new-age fad in this summer holiday?

Indian travels are now spoilt for choice nowadays when it comes to putting off paying for their travel plans. Travel Now, Pay later has a buzzing fad in the ongoing holiday season.

The scheme, which replicates 'buy now, pay later' for the travel industry is attracting a host of users, who avail the travel packages on immediate basis and make the payment afterwards, sometimes using the monthly installment facilities.

The popularity of travel now pay later offers has grown due to the desire for flexible payments and easier travel access. It is expected that this trend will continue to rise as more companies provide installment plans and people seek convenient ways to finance their trips.

It is a no brainer that 'travel now, pay later' (TNPL) continues to attract the interest of travelers, leading to a noticeable increase in its popularity among travel companies and aggregators. Multiple travel operators have witnessed a rising trend TNPL with a potential to add more users from GenZ getting added to the user base.

According to the data provided by Easy Trip Planners, which operates the online travel platform EasemyTrip, the average ticket cost of travel is 14,000-15,000 for domestic travel, which stretches up to Rs 65,000-70,000 in international travel.

Rikant Pittie, Co-Founder, EaseMyTrip said that users are more inclined towards opting for equated monthly installments (EMI) spread over a period of 12-18 months, with interest rates ranging from 1.25 per cent per month to 12-30 per cent annually. "

"It is important to note that failure to make timely payments may result in penalties that can negatively impact the traveler's credit score. It is advisable to consider availing the no-cost EMI plan and completing the repayment within a timeframe of 1-6 months. This approach would keep the individual at a benefit," he said.

A significant proportion of TNPL participants are GenZ who have a strong inclination towards discovering new destinations, said Pitti from EasyTrip Planners. "Those within the age range of 18 to 34 are enthusiastic about enhancing their travel experiences by considering upgrades and additional amenities," he said.

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However, the dynamics change when one goes to domestic travel or opt trains over flights. For 'travel now, pay later' products the average transaction size is in the range of Rs 4,000 - 6,000, said Mobikwik's data, which involves payments for train tickets, hotel bookings and flights, individually.

The repayment can be done in upto 30 days depending on the user classification and credit policy under which the customer is onboarded. However, if the customers choose to pay via EMIs, interest is may be applicable, ranging from 24-36 per cent per year, depending on the loan provider, said Upasana Taku, Co-founder and COO at MobiKwik.

Younger individuals, particularly millennials and Gen Z from Metros, Tier-I and Tier-II cities with a higher disposable income, show a greater inclination towards TNPL schemes, who wish to explore values experiences with adventure, making them more likely to take advantage of travel financing options, according to Taku.

MobiKwik's launched its 'buy now pay later' platform named ZIP on EaseMyTrip with discounts and ease of payment. The two companies have come together to enable users to book their travel today and pay at a later date with attractive discounts on their flights, hotels and holidays bookings on EaseMyTrip.

'Travel now, pay later' is a feature attracts the user, who usually does not have a credit card or have fairly a lesser-credit history.

Yashoraj Tyagi, COO & CTO, CASHe, which has provided such loans to more than 20,000 users, said that average ticket size range  between Rs 2,000-6,000 and such loans attract a rate of interest of around 2.5 per cent, when paid in monthly installments and may attract a penalty of 0.1 per cent per day in case of delay in payment.

According to Tyagi, the average age of their user is 31 years and six states- Uttar Pradesh, Maharashtra, Bihar, Andhra Pradesh, West Bengal and Delhi contribute to the majority of the applications. CASHe offers travel loans up to Rs 60,000 through TNPL with a tenure ranging from 3 to 6 months.

Consequences of TNPL

According to the experts, 'Travel Now, Pay Later' programmes are associated with elevated interest rates, non-refundable deposits, and a lack of consumer protection laws to safeguard the users. They caution users about the hidden charges for alterations in plans and other terms & conditions, while subscribing to these options.

When booking a trip, many companies require an upfront payment, usually a percentage of the total cost, which is non-refundable. If the traveler decides not to go on the trip or make changes to your plans, they won't get that deposit back. Additionally, they might be subject to additional fees or penalties for cancellations or alterations, said Pittie from EaseMyTrip.

The credit limit granted for TNPL varies based on factors such as the platform used, income level, credit score, and repayment capacity. Failure to dishonour the TNPL agreement can attract severe penalties, affecting the credit score.

However, experts said that the increasing reach of easy financing and startups is attracting smaller cities and towns as the next upcoming markets. They believe that rising middle class with higher aspiration and greater desire for discretionary consumptions is driving such schemes.

Consumption loans are subscribed by the users who have the intent and capacity to pay in future but their current cash flow is not enough to meet the consumption requirement which is travel in this case, said Taku from Mobikwik. "The new generation believes in spending first and saving later. Anybody who does not have visibility of future cash flows should not get these types of loan products," she cautioned.

According to the market experts, users of financial instability, low credit score, high debt or default history should avoid availing themselves from such loans. Lenders typically conduct credit checks during the application process, which sometimes turn out to be a strict process, they caution.

Availing 'travel now pay later' offers can be a suitable option for those with stable incomes, responsible borrowing habits, and carefully planned, affordable travel, said Tyagi for CASHe. "Having a reliable income ensures timely payments, while a history of responsible credit management minimizes risks," he said.

Conclusion

After almost two years of restricted travel, the Indian tourism sector witnessed a gush of revenge spending where the travel destinations were full of travellers and hotels had no more space to fulfil the rising demand of the young nation. There is a potential of robust growth opportunities in the space, for the travellers and the companies, but need to be handled with care.

Following pandemic related restrictions, the Indian traveller is hard at work to make up for the lost time. To effectively serve this surge in demand for travel and tourism, travel platforms have rapidly enabled 'travel now pay later' services, said Ashish Sidhra, co-founder of Alike.io- Travel tech startup.

Despite its relative novelty, the model has demonstrated resilience and potential to disrupt India's financial market. The growth trajectory indicates a promising future, yet the path is filled with challenges. As the market matures, there is a potential of exponential growth ahead, he said.