What does Buy Now, Pay Later (BNPL) Mean?

In this write-up, we have for you all the details you should know about Buy Now Pay Later (BNPL).

Starting right from its meaning and moving to further details, we have all the required information for you here.

Buy Now Pay Later (BNPL)

If you are an online shopping fan or have recently resorted to online shopping in the festive season, you must have come across the Buy Now, Pay Later (BNPL) option that many of the e-commerce platforms are offering to their customers.

What do you think it is? Does it sound like a great deal to you? How much do you know about the Buy Now Pay Later concept?

Buy Now Pay Later has been getting mixed opinions and reactions from the users.

Where a significant share of the audience might consider it as a worthy option, a vast majority consider it as a marketing gimmick to lure more and more customers.

Therefore, owing to the multitudes of reactions, you need to understand this yourself before you choose to use Buy Now Pay Later, or not.

Before you delve into the fascinating Buy Now Pay Later concept, explore the details.

What is Buy Now, Pay Later (BNPL)?

BNPL or Buy Now Pay Later is a payment option in form of small ticket loans allowing online and offline purchases. It is often known as Shop Now Pay later also.

With Buy Now Pay Later as a payment option, you can make a purchase without paying from your own pocket instantly.

Usually, you have to sign up with a Buy Now Pay Later service provider for the facility to make payment once you make a purchase.

Once the lender company pays on your behalf, you will be required to pay off the amount within a stipulated time.

The repayment can either be done in a lump sum amount or monthly installments.

In any case, you fail to repay the amount within the stipulated time, then the lender can charge you interest on the amount provided by them.

How Buy Now, Pay Later works?

We have always been familiar with the Khaata system of payments where a shopkeeper keeps a record of all the payments made by a customer in a time, usually a month.

The customer then pays the entire amount of the bill for the month in one go instead of making payments at the time of every purchase.

Buy Now Pay Later is a fresh spin to the Khaata system and works as a digital and modern form of this system.

It enables the customers to enjoy a seamless buying experience by allowing them to make purchases instantly but pay for them later.

Also, the customers do not have to disclose their banking details or go through several authentications, verification, or registration steps.

Using the Buy Now Pay Later facility, customers can make purchases instantly and make the payments later.

Usually, the repayments are to be made of the original amount of purchase.

Moreover, the customers can make the complete payment in one go or choose the EMI method of paying off their amount due.

However, if a customer fails to pay the amount within the stipulated time, he/she has to pay the amount along with an additional interest charge.

Is Buy Now, Pay Later Interest free?

The majority of the Buy Now Pay Later products are free for the customers, those who make their payments on time.

It serves as an exceptional feature that the well-intended users look for a great user experience when they shop or make purchases online.

While it helps the customers in managing their budget by providing affordability, it is not meant to be a financing product to burden the consumers with high-interest rates.

Therefore, the customers who fail to make timely repayments have to pay additional interest charges on their amount due.

According to some leading global “Pay Later” service providers, the BNPL facility has helped the merchants move their key metrics significantly such as cart conversion, purchase frequency, and basket size.

Therefore, BNPL extends further beyond the payments and becomes a great tool for merchants to grow their businesses.

The Pay Later companies earn the fair share of the revenue for the value they deliver to the merchants by serving as a cheaper alternative to the traditional credit card.

Usually, the fee structure is different for various countries and merchant categories but lies in the range of 2-7%.

What is the credit period of Buy Now, Pay Later?

With Buy Now Pay Later, customers usually get a repayment window of 15 to 30 days. This is because the credit limit under Buy Now Pay Later is much lower generally than what the credit cards offer.

Pros and Cons of Buy Now, Pay Later

When we talk about Buy Now Pay Later, it comes along with several benefits not only for the customers but the retailers as well. Here are the benefits of Buy Now Pay Later:

Advantages of Buy Now Pay Later

• Customers get the option to make purchases of items without making instant payments and flexible terms of repayment ranging from a few months to multiple years.

• The range depends on the service providers.

• This improves customer experience and makes the shopping experience a seamless and convenient one.

• The users receive their items before making a complete payment for the items they have purchased.

• Above that, the payments are interest-free if the repayment is made within the stipulated time.

• Also, the signup and approval process is much faster as compared to those of credit cards.

Disadvantages of Buy Now Pay Later

• The Buy Now Pay Later service providers always perform a soft credit check on the customers at the time of purchase which doesn’t affect the credit score.

• However, if you make late payments or fail to repay, it will significantly affect your credit score as well make your future use Buy Now Pay Later facility expensive.

• Continuous late repayments or failure might also block you from using the facility.

• Also, late repayment comes along with an additional interest charge over the amount of the purchase due.

Buy Now, Pay Later services with no credit check

Almost all of the Buy Now Pay Later service providers will check your credit score or purchasing pattern.

This is dome to assess your reliability and authenticity before you avail of the Buy Now Pay Later facility.

However, if you are new to credit, BNPL providers will look for other metrics to check your credibility.

Buy Now, Pay Later (BNPL) Companies in India

Several Buy Now Pay Later service providers operating the BNPL space offer the facility to the users.

Companies such as Simpl, ZestMoney, LazyPay, and more have changed the way how credit works in India.

With Paytm’s postpaid, users can shop online instantly and clear the balance in the next month.

With different service providers, customers can get a credit of approximately ₹100000 with which they can access over 5 lakh online and offline shops and stores.

Users can avail of the interest-free credit and repay in full within the stipulated time in full or installments.

In India, many Buy Now Pay Later service providers are there who offer the facility to the users.

With these BNPL facilities, users can make hassle-free purchases across several platforms and shops. Some of the BNPL players present in the Indian market are as follows:

• Flipkart Pay Later

• Amazon Pay Later

• Zest Money

• Simpl

• Spicejet

• Ola Money Postpaid

• Flexmoney

• EPayLater

• CapitalFloat

Why Buy Now, Pay Later (BNPL) is growing in popularity?

Buy Now Pay Later has become a widely popular alternative for payments to make purchases online or on eCommerce platforms.

Moreover, it can be seen that mostly millennials and GenZ are highly inclined to use the BNPL option while making purchases.

However, the BNPL industry has fetched users from all age and income groups.

What makes buy now pay later so popular among the masses?

It is the flexibility and convenience that BNPL offers that make it a popular alternative.

With Buy Now Pay Later, customers can make instant purchases without having to pay any amount at the time of purchase.

This allows the individuals who do not have a budget at the moment to make purchases.

Also, the easy repayment and EMI options available make it even more convenient for the customers to make purchases and repay the amount.

Consequently, the zero additional interest draws the attention of a lot of masses.

All these factors have made Buy Now Pay Later a popular alternative among the customers and/ or users.

Buy Now, Pay Later (BNPL) vs Credit Card | Which is better option for you?

Saving enough money to pay for your purchases upfront is ideally a good financial practice.

However, it might not always happen that you save up for paying for your purchases beforehand.

If you are willing to boost your purchasing power while earning reward points, discount offers, and other value-added benefits, a credit card is the best choice for you.

Also, with credit cards, you will build your credit history and credit score all along.

Having one or two credit cards will enable you to use them with the Buy Now Pay Later schemes that are not available or do not apply.

On the contrary, you can use Buy Now Pay Later occasionally depending on its availability and offers.

However, before you choose BNPL as an option, make sure that you understand all the terms and conditions to make timely repayment and avoid any additional interest charges and other penalties.

What happens if you do not pay Buy Now, Pay Later (BNPL) amount?

Buy Now Pay Later is a form of credit that you get from lenders. Once you use the facility, you have to repay the number of transactions you have made.

Users might often think that being a small amount, failure in repayment will not affect much. However, you are highly mistaken.

If you miss your repayment or fail to pay the amount, it will be recorded in your credit history.

This will highly affect your credit score. Also, it will lead to preventing you from availing of Buy Now Pay Later facility further in the future or it will become more expensive for you.

Moreover, you will have to pay the interest amount too if you decide to pay it after the due date.

Therefore, it is always recommended to make your Buy Now Pay Later repayments on time to avoid paying additional interest amounts on your transactions.

Also, timely repayment will ensure that you have a good credit history and score.

Accordingly, timely repayments will add to your credit record making it a positive sign for the lenders for the future.

So, always look out for your transactions and payments to be done when using BNPL for purchases.

Can you get Buy Now, Pay Later on Amazon?

Yes, we can shop at Amazon using its Buy Now, Pay Later service. We had provided details on the same below.

What is Amazon Pay Later?

With Amazon Pay Later, you get a hassle-free way of getting an instant credit facility to make purchases using the EMI option on Amazon.

A completely digital one-time setup process, it requires not more than 2 minutes. Users are also not required to provide any credit card details.

Once the setup is done, the users can use the facility of Amazon Pay Later payment option during their checkout on the Amazon shopping app.

Further, the users can make the payment of their purchases in the next month or over EMIs that range from 3 to 12 months.

The users can easily track their purchases, repayments, and limits history from a single dashboard for this payment method.

What are the Key benefits of Amazon Pay Later Credit?

• Get instant credit limit decision by the lender

• No cancellation or processing fee required

• Credit card details are not required

• No need for pre-closure charges

• A seamless and simplified checkout on the Amazon shopping app

• Simplified dashboard to track expenses and repayment

Amazon Pay Later Eligibility

• You should have an Amazon. account with

• A verified mobile number

• Valid permanent account number (PAN)

• Bank account with one of the selected banks

• Valid address proof – A voter ID card, driving license, Aadhaar, utility bills or Passport

• You must be over 23 years of age

Why am I not getting the option to register for Amazon Pay Later?

Amazon Pay Later is available to a limited set of customers as of now. Amazon is working towards enabling the facility for a larger set of customers.

What is Flipkart Pay Later?

Know the details on how to avail Flipkart Pay Later services.

Flipkart Pay Later serves as an easy alternative to avoid any trouble that happens during the checkout process.

With Flipkart pay later, you can purchase products and pay later. Usually, the payment is to be done before the 5^th of next month having zero additional charges.

You can pay for all the products you want in one go. You will receive a single bill for all the purchases you made which makes it easy for you to track your expenses.

What does Flipkart Pay Later offer?

Flipkart Pay Later has come along with a great range of exclusive features.

You get a credit line where you can purchase and receive your products and pay for them in the next month.

You can settle your bill by the 5^th of the next month without any additional charges.

The checkout process is also made simple with just one click. You can bunch up your payments of the purchases made and pay for all the transactions all in one go.

How to apply for Flipkart Pay Later?

You can apply for Flipkart Pay Later in just about 30 seconds. All you have to do is – enter your PAN and Aadhaar details.

Next, you will have to verify the details with an OTP.

Once it is activated, you will get the option of Flipkart Pay Later at the checkout page.

Does Buy Now, Pay Later (BNPL) affect credit score?

Buy Now Pay Later has been gaining immense significance among online shopping enthusiasts, especially the young consumers during the Covid pandemic.

To cater to this demand, plenty of eCommerce platforms, banks, and other financial institutions have launched the Buy Now Pay Later facility.

Moreover, with Buy Now Pay Later, a large share of the users can enjoy the facility without a credit history. But how does it affect your credit score?

Why is a credit score important for new and young borrowers?

Credit score serves as an indication of how disciplined a borrower has been when it comes to repayment of loans.

The majority of traditional lenders and loan providers rely a lot on credit scores before approving a loan or credit line to a borrower.

However, new to credit are those potential borrowers who have never taken a credit line or loan.

Therefore, they do not have any credit history for the lenders to assess their reliability.

So, for these borrowers, the propensity to avail a loan or credit line like Buy Now Pay Later is always higher.

This reason makes these borrowers a focus segment for BNPL lenders.

With Buy Now Pay Later, you get a short-term credit through a credit-free period which is usually 15 to 45 days. After this duration, the borrower has to pay the complete due amount.

In this, if you think that it is a small credit and any default will not affect your credit score, then you are mistaken.

For example, the terms and conditions of ICICI Bank’s Pay later state that “In the event, the Total Amount Due is not paid within the Payment Due Date, it shall be construed as a default by the Pay Later Customer and he/she shall become liable to pay the amount together with default interest and late payment charges as specified in the next month’s account statement.”

Like any formal credit facility available, the track record of repayment of the users using Buy Now Pay Later is reported to the credit bureaus.

Therefore, any default in credit repayment will stick to your credit record.

This will not only bring down your credit score but can also raise the cost of future credit or prevent you from accessing any credit facility in the future.

Accordingly, it is advisable to use Buy Now Pay Later carefully and make timely repayments to prevent any negative effect on your credit score.

Why was I not eligible for Buy Now, Pay Later (BNPL)?

Buy Now Pay Later providers are lending credit to new-to-credit borrowers who do not rely much on their credit score.

However, they perform credit assessments through other tools.

One of the primary information that BNPL providers rely on is the past purchase record and behavior of the customer with the merchants if any.

BNPL providers have been partnering with large eCommerce players to access the key information required about the customer.

They use this data not only to approve credit but also to decide the amount of credit to lend to the borrowers.

Due to the working mechanism of Buy Now Pay Later – it being a form of credit – you are being lent a sum of the price of the item you are purchasing.

This indicates that Buy Now Pay Later providers might assess your credit score before they decide to approve your application for availing of the BNPL facility.

If you tend to have a bad credit score, the chances of you being refused to get Buy Now Pay Later credit are high.

However, your non-eligibility for availing of the BNPL credit facility can be due to other reasons as well such as:

Specific requirements of the lenders – Apart from your good credit score, credit lenders can have a specific set of requirements that you need to fulfill to avail credit facility. You will not get any universal “pass mark”, so, you will have to ask the lender for the reason of refusal.

Your identity and address – It can happen sometimes that any changes in your address or personal information have been changed but the lender is not aware. In such circumstances, credit facilities can be refused.

Credit history – Lenders always tend to look for evidence that you have been a responsible borrower before. If you are new to credit, the lenders might refuse BNPL, as they do not have enough information to approve your request.

You have made multiple credit requests recently or there is some mistake in your application

You are not the target customer for the BNPL service providers. They might want to target a specific audience or set of customers.

What are the alternatives to Buy Now, Pay Later (BNPL)?

If you avail the Buy Now Pay Later facility correctly and responsibly, it can be a convenient way to purchase items without having to make instant payments. However, there are alternatives to this.

For instance, you can make an application for a credit card having an interest-free deal on making purchases while spreading the cost of payment of your purchased items over time without paying anything as interest.

Using a credit card is advantageous over Buy Now Pay Later as you can use it at more places compared to spreading your cost of several items instead of just one.

What is the Buy Now, Pay Later (BNPL) market in India?

A major factor for driving the growth of the sector is the high purchasing power that Buy Now Pay Later offers in times of the pandemic.

However, the informal nature of accessing credit has been serving as the primary driving force behind the increase in the Buy Now Pay Later segment in India.

According to the Q2 2021 BNPL Survey, Buy Now Pay Later payment in the country expects growth by 72.7 % annually to reach the figures of 6327.2 million US Dollars in 2021.

The digital payment industry is one of those segments that have experienced immense growth amidst the pandemic.

India has been on track to experience significant growth in the digital payment sector even before the pandemic hit but the pandemic has dramatically accelerated the speed.

Alongside, the strong growth of the E-commerce industry has helped startups and Fintech giants to set themselves in the BNPL industry in India.

For example, the pay later services that Amazon offers have a user base of more than 2 million in India and it has already been used over 10 million times since it was launched in April 2020.

Among the consumers in India, the growing popularity of credit has even made the traditional banking players venture into the BNPL sector.

Talking about the medium to the long-term growth story of the Buy Now Pay Later industry in India, it is expected to remain strong.

The adoption of this payment method is expected to grow over the forecast time with a CAGR of 28.9% from 2021 to 2028.

What is the future of Buy Now, Pay Later (BNPL)?

Buy Now Pay Later has been a popular alternative for a variety of reasons – flexibility, convenience, and transparency.

Moreover, the users have the convenience of using Buy Now Pay Later on their phones as well as desktops.

They can also do shopping in retail stores with the apps. Moreover, Buy Now Pay Later apps to download experienced a 115% increase in September 2020 as compared to the numbers in September 2019.

According to a survey conducted by Ascent with 1800 consumers of BNPL, the top reasons for using the services were:-

• Making purchases that didn’t fit the budget

• To avoid credit card interest payment

• To borrow money without using a credit card check

• Users didn’t like to use credit cards

Another research report from Shopify listed the top 3 reasons for the consumers using Buy Now Pay Later were:

• Better on the budget as it allows payment in EMIs

• To take advantage of the good deal available

• BNPL is better than credit card as it is interest-free

Similar to many other behavioral shifts that happened during the pandemic, the momentum towards a flexible payment option is expected to continue to grow.

Moreover, Buy Now Pay Later is one of the fastest-growing methods in the E-Commerce industry. In the United States in 2020, Buy Now Pay Later accounted for spending of 24 billion dollars.

This share of total retail sales is expected to have a continuous double-digit growth through the year 2024.

According to a report by the Bank of America from December 2020, it is predicted that by now pay later market has the potential to grow by 10 to 15 times by 2025 along with the processes value between 650 billion to 1 trillion dollars transaction on an annual basis. This estimate is expected to grow with time.

To leverage the advantage of this trend, the majority of the retailers are partnering with Buy Now Pay Later service providers to offer flexible payment options to the shoppers.

This shift can be justified by the fact that since the beginning of the pandemic, the number of e-commerce businesses on the Shopify platform has increased by 60% of those who added the BNPL option.

Buy Now Pay Later has provided a relatively easy to integrate payment technology into E-Commerce businesses. 

This paves way for a low barrier for integration with E-Commerce and a huge positive side for the potential of sales volumes.

It indicates that Buy Now Pay Later has huge potential for growth in the future along with serving multiple benefits to the customers as well as the retailers.

Buy Now Pay Later has emerged as a widely used alternative for shopping in the e-commerce sector. The use of BNPL can be seen in other sectors as well.

You get plenty of Buy Now Pay Later service providers and options to choose from. It is a great alternative for a seamless and hassle-free shopping experience.

Users have been admiring as well as rejecting the option depending upon several factors.

Therefore, now that you have a good share of knowledge about Buy Now Pay Later, you can make your decision. So, go on and explore the world of Buy Now Pay Later.

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