Shop now, pay later, or buy now, pay later – also commonly known as BNPL has tremendously grown over the last couple of years, especially during the Covid 19 pandemic. During the lockdown period, the shopping frequency of people grew extensively, and everyone started relying heavily on online payment methods. This paved the way for a new payment scheme- Buy now, pay later. It has been observed that the customers are now moving to this service at an alarming rate, and there has been an increase of 30% from 2019 to 2021.
BNPL sites are unique in terms of their EMI schedules. Some of them include interest-free payments in 30 days or 3/ 4 months and payment by installments up to 36 monthly installments, including interest charges.
How is BNPL different from other payment methods?
- Interest cost- Most payment websites that provide payment in installments do charge interest cost on the remaining amount. The longer the installment period, the higher the interest charges. But shop now pay later sites claims no interest charges, and most of the websites genuinely do not cost any interest. This builds confidence in generating more customers as it tends to create savings for them, and they would want to pay later for most of the items to buy. This creates impulse buying, which benefits the company.
Some websites of BNPL do provide interest costs, but if opted for a high-term installment option- generally greater than 40 months.
- Hassle-free acceptance: When a credit card is considered, the companies need a great credit score along with a credit history when the customers apply for the card. The customers are asked to fill in numerous applications and made to do a lot of KYC. Of course, the application can now be made online, but that doesn’t lower the burden of the onboarding process. In the buy now, pay later application process, the providers do not give importance to a credit check, nor are there far too many complex applications or KYC to be completed.
- Credit score: Use of Other payment options such as credit cards enhance or lower the credit score depending upon the usage. However, with buy now, pay later schemes, your credit scores are not at all impacted. Some websites do mention that the credit scores get hampered when there is a delay in payment of installments or no payment at all of all installments.
- Low cost involved: Buy now pay later schemes do not involve hidden charges and follow a low-cost pricing model. Other payment options involve quite high initial costs, or there are always interest costs. Credit cards generally have a lot of charges involved.
- Easy payment process: Unlike traditional cash systems or debit/credit cards, customers using Buy Now Pay Later service do not have to carry additional things as the service can be easily availed from smartphones using the internet. The payment can be completed using just one click, which makes it quite easy for both parties – business and customer. The transaction rate is quite fast, and the customer need not wait for an acknowledgment as it is reflected in their account, and an e-mail is triggered as well.
- Data Privacy: The transactions are encrypted and secure while using the Buy Now Pay Later service. This makes it hard for the eavesdropper to get information about the customer or the business. The customer’s data is safe and is not shared with any third-party vendors.
- Offers: Payment methods such as Online wallets or credit cards generally provide a lot of cashback offers or rewards. But such is not the case with Buy now, pay later sites. They do provide a personalized Instalments period, but the same is not true for all the providers.
There was a time when online payment options dominated the market, and it is now time for Buy now, pay later options to dominate the market. There are various advantages to it than disadvantages. Hence, the option can be used with due care. The main target market for such companies is the youth, which has mostly captured that segment. Buy now, pay later options are estimated to grow more with their interest-free installments schemes, and the customer base is increasing faster.