The NEW “Buy now pay later”.
Buy now pay later (BNPL) accounted for $24 billion in US spending. Which is beneficial for sellers, consumers and BNPL companies.
BNPL started in 2019, now
The use grown from 6% to 36%, from 2019 to 2021 among GenZ.
Among Millennials, who are between 25 to 40 years old, it has grown to 41% in 2021 from 2019.
BNPL Providers like Afterpay, Klarna, affirm, apple pay, PayPal, zippay, lazypay have emerged recently as a fintech digital short term lending company.
So, what is “Buy now pay later”?
BNPL is like credit card, but unlike credit card:
You can instantly register through any BNPL app, any start buying.
Compound interest wont be charged.
You can use BNPL after a credit check which is based on algorithms, some companies don’t even ask for credit check. In such a case, Someone with low credit score can also use BNPL.
Once the purchase is made, You can chose to pay in any number of installments, typically between 2 to 6 installments. The payment will be automatically withdrawn from your debit card or credit card.
How BNPL companies make money?
They make money from merchants. They get a certain percentage of sales from the merchants, when the customer buys their product.
In some cases, Merchants let the BNPL firm to charge interest for their products brought by the customers.
If the user could not pay on time then, they have to owe interest or fee for that.
Problems
It can damage your credit score, If installment cannot be made on time.
If you use BNPL, banks who lend in huge amount could be reluctant to provide loan as, Scheduled BNPL payments are ongoing commitments.
This is a newly emerged way to finance credit.
To end: If want to buy a cloth from amazon or order a food from Zomato. And don’t have money now. You can instantly buy from BNPL platforms. This is another method to tempt people to buy more