Buy Now Pay Later (BNPL)

As fintech continues to revolutionize banking and payment methods, there are a myriad of services and products are offered to users ranging from simple e-payments to international transfer involving cryptocurrencies. With fintech picking up steam, the world is gradually becoming smaller and faster. Countries like USA, UK, Singapore, Japan, and China lead the way for fintech builders and consumers, while countries like Indonesia, India, Thailand, and more gradually make their way up on the fintech ladder.

One of the fintech technologies that has captured everyone’s attention recently is BNPL- Buy Now, Pay Later.

Breaking Down the Concept of BNPL

BNPL, short for Buy Now Pay Later, is a credit arrangement offered by companies which allows users to make purchases without paying for them upfront. This process involves instant approval of credits at the point-of-sale without the hassles of KYC and verifications, making the purchasing system much simpler and more efficient. 

Facts & Figures

–         The total valuation of the BNPL market stands at $100 billion USD.

–         BNPL started gaining ground sometime in 2020, after which it gained immense popularity, propelling its adoption rates to increase manifold by 2021. With its rapidly growing traction on the world, the BNPL market is expected to cross the $700 billion USD mark by 2026. 

–         Sweden has the largest market share in BNPL, followed by the USA. India is progressing towards becoming the largest market for BNPL in the near future.

–         Affirm, AfterPay, Klarna, Sezzle, and Square are the key players in the BNPL industry.

Benefits of BNPL

There are a number of reasons why BNPL has become a popular payment option offered by companies. Not only companies, BNPL has several uses for customers that involves a customer-centric solution focusing on simplifying purchases.

Easy Purchases

BNPL allows the consumer to make the payment for their purchase at a later stage or in installments, which makes the overall journey of purchase much easier and more enjoyable.

No Need for a High Credit Score

Unlike credit cards, a user looking to exploit the benefits of BNPL does not require a high credit score. As the user gets instant approval on their request for BNPL, the verification carried out is majorly superficial, that does not include analyzing the credit history of the user.

Simple Procedure

Opting for BNPL involves an easy process, where the user selects the BNPL option on the vendor’s website and provides a few personal details, enabling an instant approval for BNPL services. The user can then make the required payment as per a pre-decided calendar. 

Helpful in Times of Need

Having a backup in times of need is a big reason behind BNPL’s growing popularity. BNPL helps resolve issues where the customer is unable to make payment upfront for various reasons, giving the customer a boost by enabling them to purchase without needing to pay instantly.

Promote Purchase

Not only for customers, BNPL has proven to be a boon for companies as well. With more companies and vendors offering BNPL, customers are getting more accustomed to the idea of not having to pay instantly, which has promoted purchases substantially. 

BNPL is Not the Same as Credit Cards

Though built on similar concepts, BNPL and credit cards are quite unlike each other right from the basics. BNPL is like the simpler version of credit cards, where all the processes involved are not as complicated or exhaustive as the ones in credit cards.

Verification

The verification process for credit cards is quite intensive, where the customer’s income statements, credit history, behavior and expenditure trends are closely analyzed to ascertain the potential profitability of the consumer. It is not the same in the case of BNPL, where the verification process is minimal, and the approval is instant.

Purchase

The purchase made using credit cards involve making payments using the consumer’s allowed credit limit, where the credit card server charges interest on the amount used.

In BNPL, the credit is allowed only for that particular transaction, mostly involving no interest or fee.

Payment Process

The payment process in credit cards, is mostly determined by the consumer, where they make payments to their credit card servers, as per their suitability. In BNPL, the payment procedure is well-defined, and the user is intimated about the time and amount of payment, failing which the user is penalized.

Credit Scores

The approval of credit cards requires the user to have a high credit score. And the user’s credit card usage also affects their credit score. This is not the case in BNPL, where the user’s credit score is mostly not taken into account during the approval of BNPL.

Bottom Line

BNPL is a concept that has revolutionized the way people are making purchases, including cross-border payments. With easy options offered by vendors and companies to grant instant purchases without paying, the level of consumer satisfaction has reached a significant high. Because of its simplicity and usability, it is easy for users to opt for this option. But the consumer should be weary of getting consumed in debt because BNPL only helps delay payments, not evade them.

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