What Is Buy Now Pay Later & Is It A Good Idea?
- April 28, 2022
- Shubham Sachdeva
- Posted in Finance
Due to digitalization, buyers’ interactions with commodities have been affected, forcing businesses to reconsider their business strategies, particularly in the conventional finance industry. Also, with the emergence of e-services, established banks are building more robust and more client cost-effective solutions to provide an advanced new experience.
The term Buy now, pay later, or BNPL, refers to a client who takes their item home but pays for it after a period.
Many young buyers have been impressed by the Buy Now Pay Later option. Using the BNPL plan outweighs those of obtaining a personal loan or a credit card. To please their clients and attract additional purchasers, even house shops and high-end merchants in India opt for this strategy.
Consequently, retailers can now offer their consumers the option of shopping now and paying later via enticing bank and brand EMI offers available on their point-of-sale equipment. However, there’s more to it; check the entire blog to find out!
A brief on Buy Now, Pay Later.
It is a state of financing that allows customers to purchase a product or use a service without paying for it right away. It’s a short-term loan in which the BNPL lender pays the merchant or service provider at the point of sale and lets clients repay the loan later with little or no interest. The repayment might be in the form of a flat amount or equivalent monthly installments or EMIs.
How does Pay later work?
BNPL fintech companies have a very successful online marketing approach and tailor the whole customer relations, including features like bucket lists, notifications, and offers.
When purchasing online, a buyer opts to put off a purchase due to a lack of funds. Merchants use BNPL to provide the same goods at the same price, allowing customers to buy them without paying right away.
After collecting a nominal transaction charge, the BNPL business makes the payment to the merchant on behalf of the consumer. The consumer then pays the BNPL firm within the agreed-upon time frame.
It has given merchants the ability to provide a flexible option for their consumers, with no fee and no paperwork requirements. Furthermore, POs terminal devices have enabled business owners to offer their consumers a convenient payment option by scanning their Bharat QR code, enhancing their shopping experience according to their preferred plan.
Is BNPL a good option?
The method has been established for nearly 15 years across the globe, but it has taken off since Covid restrictions were imposed. It’s swift, easy, and appealing, and it makes obvious commercial sense. In contrast to credit cards, the store bears the processing fees rather than the consumer, it is benefial to businesses as its a sales boosters. Below are a few pros and cons of the Buy Now, Pay Later facility and determining if it’s worth it:
PROS for the Merchants.
- Reducing and eliminating shopper purchase hesitancy
- Increasing the average order value (AOV) and persuading customers to purchase more oversized items.
- Increasing sales in general
- Creating a new source of revenue through loan interest
- Providing a branded client buying experience that is both comprehensive and pleasurable
- Financing customers without the necessity for a second piece of plastic, such as a branded credit card.
PROS for the Customers.
- If payments are made on schedule, or the total amount is paid off before the loan period finishes, there is the possibility of paying no interest.
- This is a fantastic alternative for last-minute or emergency purchases.
CONS for the Customers.
- After the interest-free period, if there is one, interest is paid on the total amount and the initial amount.
- The loan is not a revolving credit that can be utilized repeatedly.
- This can result in a rigorous check on your credit appropriateness, which might harm your credit score.
The BNPL has the potential to lead to impulsive purchasing. Buyers are frequently enticed to purchase more than they can afford, resulting in a debt trap and the potential inability to pay later. Sometimes. BNPL applications provide fantastic bargains in most situations — as long as the debt is paid off on time. Overall, it’s an established, flexible and easy method of financing purchases.