Why is the Buy Now Pay Later (BNPL) payment feature exponentially increasing?

What is Buy Now Pay Later

‘Buy Now Pay Later’ service is a type of short-term financing micro-credit instrument allowing the consumers to make the purchase and pay for them later and is usually interest-free. The abbreviation ‘BNPL’ is widely used for the same. It is also referred to as a ‘point of sale installment loan’. It is becoming a very popular payment option if you are shopping online. This payment service has literally rewired using digital technology and is an integrated service that’s here to stay.

Evolution of Buy Now Pay Later 

We all are aware of how the e-commerce industry is exponentially booming. Vendors, retail index, and marketplaces draw the customers with a shopping experience with this new and exciting payment feature. This extra feature makes it super convenient for the shoppers to make a payment for their full shopping carts. You can quickly sign up to opt for this feature. They offer a credit limit ranging from Rs. 5,000 to Rs. 60,000 (sometimes, even higher), with their repayment cycle ranging from 14 to 30 days.

Having gained astronomical popularity in India, ‘Buy Now Pay Later’ field has nearly 40 players. These players include e-commerce giants, start-ups, NBFCs, and leading private banks. They have attracted hundreds of merchants, millions of customers and investments in their network.

It has been reported that ‘Buy Now Pay Later’ is the fastest growing e-commerce payment method in India. It has grown from 3% in 2020 and is expected to go up to 9% of the entire market share of e-commerce by 2024. The critical differentiator of this revolutionary credit facility is the neglect of rates of interest by maximum service providers for the repayments that are deferred within the cycle of repayment. However, you need to note that payments that get late often attract a penalty that is fixed, thereby hurting your credit score.

EMI Cards Vs BNPL Vs Credit Card

• Interest-free Period

Credit Cards offer an interest-free period of up to 45 days, BNPL offers that within the range of 15 and 60 days while EMI Cards offer that up to 30 days on monthly basis mostly.

• Interest Rates 

Credit Cards offer an interest rate of 30-40% per annum, Buy Now Pay Later interest rates fall between 20 and 30% while EMI Cards offer 0 interest EMI options.

• Major Players

Banks are the major players in the Credit Card industry, ZestMoney, LezyPay, Sezzle, etc. in the BNPL industry, while NBFCs are those in the EMI Cards industry.

Benefits of Buy Now Pay Later for Customers and Retailers 

Wondering how the BNPL Services benefit the customers? Well, you can avail the option of purchasing items and paying it later within a span ranging from 3 months to even multiple years. It really depends on the provider. It enhances the consumer’s experience by making it frictionless. Not only this, even the retailers benefit a lot from this payment feature. They get increased sales value and added loyal customers.

Future of Buy Now Pay Later Services

The Buy Now Pay Later feature has a very bright future because of the contactless and frictionless experiences that it has to offer. In fact, the customers are being offered this service even outside e-commerce in order to pay for the services that they avail. The day when this feature will become ubiquitous like a credit card payment feature is not very far from today! We all know how inclined India is becoming towards digital payment, how fintech industries are on the rise, readily disrupting traditional credit card accessing methods.

Buy Now Pay Later Services Offered by Credit Cards

It will be exciting to know that some credit cards offer BNPL options to their cardholders. These Buy Now Pay Later plans are implemented after the sale, as opposed to at the time of the transaction, but they nonetheless provide customers with the advantages of an installment plan inside the confines of a credit card.

There are certain credit card options that let you combine approximately 10 of your purchases of $100 or even more with a fixed monthly payment into an installment plan. Some allow you to convert the purchases of $100 that you make into equivalent payments that you pay on a monthly basis with a monthly fee that is fixed and charges 0% rate of interest.

Buy Now Pay Later Services and EMI Cards

If you wish to use them at their network merchant stores or linked brands, EMI cards and BNPL are beneficial. You can compare EMI cards and Buy Now Pay Later to find the ideal fit if you’re looking for a spending tool only for the purpose of obtaining credit or if you’re ineligible for the credit card you want. In addition, they might be obtained faster than non-pre-approved credit cards. Credit cards, however, can be more advantageous than EMI cards and BNPL if you desire additional benefits, so long as you pay your bills in full and on time.

The bottom-line is that Buy Now Pay Later is a booming industry and being aware of the payment feature will only make your choice regarding the payment options you opt for better.