Every festive season, India lights up with discounts, cashback alerts, and “no-cost EMI” banners. From smartphones to SUVs, everything seems affordable — not because incomes have surged, but because credit has never been more frictionless. “Buy Now, Pay Later” (BNPL), zero-interest instalments, and instant personal loans have made indulgence feel virtuous.
In the 1970s, psychologist Walter Mischel’s Marshmallow Experiment tested children’s ability to delay gratification — eat one marshmallow now or wait 15 minutes for two. Decades later, those who waited tended to show greater academic and financial success. Half a century on, the same drama plays out daily on our phones.
Each “Pay Later” button is a digital marshmallow. Behavioural economists Drazen Prelec and George Loewenstein describe the pain of paying — the discomfort we feel when spending money. By separating purchase from payment, BNPL anaesthetises this pain. The instant joy of consumption outweighs the distant discomfort of repayment.
For millions of consumers, especially younger ones, this is not about greed but about present bias — our innate tendency to overvalue the present and underestimate the future. As economist Richard Thaler’s mental-accounting theory shows, people treat “future payments” as another pocket altogether. When every purchase feels smaller because it’s sliced into instalments, the brain mistakes borrowing for affordability!
WHEN CREDIT CULTURE BECOMES A HABIT
Between FY 2021 and 2024, unsecured retail credit — personal loans, credit cards, BNPL — grew by over 25% annually, far outpacing income growth. During the 2024 festive quarter, banks and fintechs together pushed over Rs 60,000 crore in consumer loans.
A CRED–Razorpay survey found that 70% of Gen Z users view BNPL as “budget management,” not borrowing. Yet nearly half admitted missing at least one payment in the past year. Defaults, once rare, are rising fastest in the Rs 10,000– Rs 50,000 ticket segment — precisely where digital lenders compete most aggressively.
Globally, the warning lights are already flashing. In the UK, the Financial Conduct Authority (2023) found one in four BNPL users missed a payment. In the US, the Consumer Financial Protection Bureau reported delinquency rates higher than those on credit cards. In China, Ant Group’s “Huabei” and “Jiebei” lines faced regulatory clampdowns after youth indebtedness surged. The pattern is identical: frictionless credit fuels consumption until reality — and repayments — catch up.
Behavioral finance scholars describe a predictable three-step spiral in consumer credit:
Present Bias: Limited-time festive offers trigger impulsive buying.
Overconfidence: Buyers assume future income will easily cover small instalments.
Debt Illusion: Fragmented EMIs across apps and cards conceal total exposure until stress mounts.
Harvard economist David Laibson calls this debt anchoring — the cognitive blind spot that makes multiple small liabilities feel lighter than one large debt. Digital interfaces amplify it: swiping for credit feels like browsing, not borrowing.
Sweden, where BNPL pioneer Klarna was born, now warns consumers: “Pay now so you can afford to live later.” Afterpay’s rise in Australia showed similar distortions — surveys revealed one in five young adults skipped essentials like rent or groceries to meet instalments. In the US, inflation magnified defaults, forcing fintechs to pivot from growth to recovery.
India risks repeating these cycles, but with a crucial difference: our credit expansion is happening among first-generation borrowers who lack long credit histories. When defaults rise here, they don’t just dent credit scores — they destabilise household resilience.
Nobel laureates Thaler and Sunstein argued that policy should nudge people toward better choices. BNPL platforms often do the opposite — they create sludge, removing every friction to spend but adding hurdles to repay or track obligations. Ethical fintech design could reverse this asymmetry.
Apps can display a consolidated “total monthly outflow” before checkout, insert a mandatory cooling-off period for big-ticket items, or send “marshmallow reminders” — visual cues showing cumulative future payments. Such small frictions can restore mindfulness without dampening innovation.
INDIA’S CULTURAL LENS: MODERATION AS FREEDOM
Our own philosophical tradition offers an elegant parallel. The Bhagavad Gita (6.17) advises: “Yuktaaharaviharasya — moderation in intake and enjoyment.” True freedom is not abstinence but restraint — using resources consciously rather than compulsively.
Applied to finance, this means credit is not the villain; unexamined convenience is. A well-timed loan for education or enterprise enhances capability. A casual loan for instant gratification mortgages tomorrow’s peace.
THE FINAL LESSON
Festivals will always celebrate abundance. Marketers will continue to tempt. The question is whether consumers, and the institutions that serve them, can evolve toward conscious credit. Regulators must hasten to define BNPL within formal credit norms — enforcing transparent pricing, capping penalties, and linking all providers to credit bureaus to prevent debt stacking.
But equally, business schools must cultivate a generation of managers who ask: Should we design products that exploit human bias, or ones that educate against it?
In Mischel’s lab, the children who resisted the marshmallow were rewarded with two.
In today’s marketplace, adults who can wait — who can pause before clicking Buy Now — are rewarded with something rarer: financial serenity. This festive season, the real luxury may not be what you buy, but what you can afford not to!!!
