The concept of “Buy Now, Pay Later” (BNPL) has been increasingly popular in recent years. Customers can buy everything from a Peloton to a pair of jeans utilizing services like Affirm, AfterPay, Klarna, and PayPal Credit. And customers are responding favorably.
Analysts and business executives agree that buy now pay later card will be around for a long time. So, how might more traditional financial institutions incorporate BNPL’s lessons into their long-term plans?
We’ve been keeping a close eye on this payment option and how it affects our financial services clients. We expect BNPL to acquire even more traction as we approach the holiday season in 2021. We wanted to provide our viewpoint on BNPL through a series of posts and articles to help organizations prepare.
Why is BNPL gaining traction in the market?
It gets around credit problems
For customers with “worse than perfect” credit, BNPL offers a range of benefits. Users can make payments over a set length of time without incurring interest. As a result, people are able to make more expensive purchases without being frightened by a lump sum payment or the risk of accruing interest or debt. Even consumers who merely wish to minimize their monthly expenditure will find this benefit appealing, as it allows customers who can pay for things in full to flatten their monthly spending.
It’s quick, simple, and convenient.
Many retailers now include BNPL platforms in their check-out process. Customers may easily choose that alternative, and research suggests that if a platform is available, customers are more likely to use it. You don’t need to look for your wallet or check your credit card balances before making a purchase. Simply select the option, and it will work in the same way as a credit card but without the interest. Not only is it available at the touch of a button, but the financial benefit makes it worthwhile as well.
Advertisements for these payment options are becoming increasingly common on social media platforms such as Instagram, Twitter, and TikTok. Seven Millennial and Gen-Z BNPL users were interviewed by CNBC, and all said they were motivated to utilize the strategy by peers or social media. Furthermore, younger generations are witnessing peers and influencers buy previously unattainable products. BNPL provides these people with a legitimate way to buy expensive items without going into debt.
The Bottom Line
The BNPL industry is expanding and moving at a breakneck pace. However, you must use extreme caution while employing BNPL’s strategies. If you don’t categorize your expenses, you may fall into a debt trap because the desire to buy new devices and stuff never ends. Make a list of what you need, don’t need, and want, and then decide on a shopping timetable. You will learn to manage your costs in this manner and will be able to prevent getting into an unneeded debt trap.
Maintain your CIBIL score in order to qualify for the finest BNPL cards. Although lenders offer BNPL cards to new credit users as well, it is usually preferable to have a good repayment history. This will allow you to receive a greater credit limit and more repayment flexibility. On top of that, you can enjoy discounts and other incentives on transactions.