The New Way of Purchasing: Buy Now, Pay Later
Over the past few years Buy Now, Pay Later, has become more and more popular. In fact, the Buy Now, Pay Later industry is now worth $100 Billion. Let’s have a look at what Buy Now Pay Later is, and how it is changing the way goods and services are purchased in today’s world.
What is Buy Now, Pay Later?
Buy Now, Pay Later, or BNPL for short is a short-term loan that allows buyers to pay for products over a period of time in installments, instead of paying the total all at once. This can make products a lot easier to purchase even if they have a large price tag because consumers can split up the cost. This is especially useful for younger generations and people who don’t have a lot of disposable income to buy what they want. BNPL is also known as layaway and lay-by in other countries. In the recent past, a lot of fintech companies that offer BNPL have popped up, such as Affirm and Klarna. '
Benefits of BNPL:
BNPL comes with a lot of benefits, for example, most BNPL services charge no interest on shorter-term installment plans. This means that in the end, you don’t have to pay more to buy an item over installments. Another benefit of BNPL is that you don’t necessarily have to have a great credit score to get approved. Thus, BNPL services allow more people to buy what they want by lowering the barrier for entry.
Negatives of BNPL:
One negative that always comes while discussing BNPL is the fact that it can lead to people spending more than they normally would and potentially overspending to the point where they can’t afford it. This overspending can quickly snowball, and before people know it, they can end up in heavy debt. Another negative is that while your credit score isn’t affected when you first apply for a BNPL purchase, if you make a late payment, then your credit score can be damaged.
What Does This Mean For The Future?
The BNPL industry is poised to grow further as more and more people learn about this service and find its low monthly payment structure appealing. Experts already believe that BNPL will make up 4.2% of global e-commerce transactions. However, there are also concerns that governments might add more restrictions on BNPL companies to avoid situations where consumers are buying things they cannot afford.