Buy Now Pay Later (BNPL) is an easy way to buy goods and services now and pay them later in installments.
Types of Buy Now Pay Later (BNPL)
There are several types of BNPL services available:
- Point-of-Sale (POS) BNPL
- Installment Loans
- Credit Builder BNPL
- Buy Now Pay Later Cards
- Embedded BNPL
- Buy Now Pay Later for Subscriptions
How does Buy Now Pay Later work?
- Choose a Buy Now Pay Later (BNPL) provider
- Add items to the cart
- Choose Buy Now Pay Later (BNPL)
- Provide information
- Get approval
- Make purchase
- Pay later
Buy Now Pay Later Stats
- In 2019 the BNPL at POS was estimated to be $8–$10 billion and now is exponentially growing at 40% to 50%
- Worldwide, by 2026 it is estimated that nearly $995 billion will be spent through BNPL offerings
- BNPL is estimated to grow by 1200% over the next two years in the US, rising from $3B in 2019 to $124 B in volume.
- Today, there are more than 150 BNPL providers globally
- The BNPL sector also witnessed some high-profile mergers and acquisitions (M&As) with larger players buying up startups to leverage economies of scale in a competitive market
- BNPL is gaining popularity as an embedded finance option for e-commerce, with 2.8% of the world’s e-commerce payments expected to be in the BNPL format by 2023, growing approximately 2X since 2019
- North America 3% of the market by BNPL in 20233.2x growth since 2019
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Benefits/Pros of Buy Now Pay Later
- Flexible payments
- Interest-free financing
- Improved credit score
- Immediate access to goods
- No down payment
- Easy application process
- No physical credit card
- Budgeting assistance
- Purchase protection
- Increased purchasing power
Cons of Buy Now Pay Later
- Late fees and interest
- Overspending
- Credit damage
- Hidden fees
- Limited consumer protection
- Debt cycle
- Hard inquiry
- Limited purchase amounts
- Lack of transparency
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Comparison of Buy Now Pay Later (BNPL) and Credit Cards
| Feature | Buy Now Pay Later (BNPL) | Credit Card |
| Payment Structure | Fixed installments | Revolving credit line |
| Interest | Often interest-free for a limited time | Interest charged on unpaid balances |
| Credit Check | May or may not require a credit check | Typically requires a credit check |
| Purchase Flexibility | Limited to specific retailers or purchases | Can be used almost anywhere |
| Consumer Protection | Generally less consumer protection | More consumer protection |
| Debt Accumulation | This can lead to debt if payments are missed | Can lead to debt if not used responsibly |
| Credit Score Impact | Can impact credit scores if payments are missed | Can positively or negatively impact credit score based on usage |
| Fees | May have late fees or other charges | May have annual fees, interest, and other charges |
| Purchase Limits | Often have purchase limits | Higher purchase limits |
| Rewards and Benefits | Limited or no rewards | May offer rewards like cash back, points, or miles |
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Risks in Buy Now Pay Later (BNPL)
- Overspending
- Debt Accumulation
- Credit Damage
- Data Privacy
- Regulatory Uncertainty
- Financial Exclusion
- Market Competition
- Integration Challenges
- Consumer Misunderstanding
- Economic Downturn
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Challenges in Buy Now Pay Later (BNPL)
| Challenge | Details |
| Overspending | Consumers may be tempted to spend more than they can afford. |
| Debt Accumulation | Missed payments can lead to debt and interest charges. |
| Credit Score Impact | Late payments or defaults can negatively impact credit scores. |
| Consumer Protection | BNPL may offer less consumer protection than credit cards. |
| Regulatory Oversight | Lack of consistent regulations can create challenges for consumers and businesses. |
| Data Privacy | Concerns about data privacy and security when using BNPL services. |
| Financial Inclusion | BNPL may not be accessible to all consumers, especially those with limited credit history. |
| Competition | The BNPL market is highly competitive, which can lead to rapid changes and potential risks. |
| Integration with Existing Payment Systems | Integrating BNPL with existing payment systems can be complex. |
| Consumer Education | Many consumers may not fully understand the terms and conditions of BNPL. |
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Reasons for the Growth of BNPL in India
- The rise of digital payments: The pandemic also led to an increase in digital payment methods such as BNPL.
- Financial flexibility: A consumer can divide the payment into an installment which reduces their liquidity and cash, which is appealing in uncertain times.
- Higher accessibility: As a result of the penetration ease in smartphones and internet, BNPL services reach Tier 2 &3 cities.
- Young shoppers are also more likely to use BNPL instead of credit cards; some see high interest rates and hidden fees as disturbing when using a card.
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Alternatives to Buy Now Pay Later (BNPL)
- Credit Cards
- Personal loans
- Store Financing Deals
- Delayed purchases
Comparison of Buy Now Pay Later (BNPL) and Personal Loans
| Buy Now Pay Later (BNPL) | Personal Loans |
| The maximum loan offered is Rs. 1 lakh | The maximum loan offered is or more than Rs. 25 lakh |
| Only secured loans are offered | Secured and unsecured loans are offered |
| No interest is levied on the principal amount | Interest is levied on the principal amount |
| Typically, BNPL tenure is up to 90 days | Tenure up to 60 months may be provided |
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Buy Now Pay Later (BNPL) Players in Indian Markey
- Bajaj Finance
- Amazon Pay Later
- Paytm Postpaid
- Flipkart Pay Later
- Ola Money Postpaid
- ZestMoney
- LazyPay
- ePayLater
- Flexmoney
- MobiKwik ZIP
Buy Now, Pay Later (BNPL) for Students
BNPL offers consumers an alternative way to pay for things, including students. They can make payments over time, many times interest-free, instead of upfront. This way, it can assist with bigger expenses like textbooks, electronics, or rent. However, it is essential to use BNPL responsibly and not spend more than you should.
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Buy Now, Pay Later (BNPL) Good or Bad
| Goods | Bads |
| Offers flexible payment options | Chances of overspending |
| No interest charge in various BNPL | Charge Late fees |
| Improve Credit history if pay EMIs on time | Negative impact on credit score if EMIs missed |
| Enables you to purchase more expensive items without the full upfront cost. | Can increase your debt burden if not managed carefully. |
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How many Indians use BNPL?
According to statista.com In 2021, the buy now pay later (BNPL) customer base for online and offline retail was five and two million, respectively. This is expected to surge to 30 million for online retail and 22 million for offline retail in the year 2026.
How many customers does BNPL have in India?
There are 22-25 million BNPL customers in India, and the number is set to reach 90-100 million by 2026.
Who is the target audience of BNPL in India?
The target audience of BNPL in India is 25-35 age group.
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Comparison of Buy Now Pay Later (BNPL) and Financing
| BNPL (Buy Now, Pay Later) | Financing |
| A small amount, quick buy | Huge amounts of purchases, with a longer repayment period |
| Short terms, No interest | Long terms, with interest |
| Soft credit check | Hard credit check |
| No interest, late fees may apply | Interest rates vary based on lender and borrower’s creditworthiness |
| Quick and easy | More rigorous, especially for larger amounts |
| Minimal or no impact on credit score | Direct impact on credit score based on EMI history |
| Amazon Pay later, MobiKwik ZIP, lazypay | Personal loans, credit cards, home loans |
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Comparison of Buy Now Pay Later (BNPL) and Installments
| Buy Now Pay Later (BNPL) | Installments |
| Interest-free installments for short term (e.g., 4-6 week | Fixed payments over a long term (e.g., 6-12 months or more) |
| No interest, Late fees may apply only | Interest charged on unpaid balance |
| Soft credit check | Hard credit check |
| Quick and easy approval process | Require more time for approval |
| Flexibility | Fixed payments and deadlines |
| Best for small purchases and short-term financing | Best for large purchases and longer-term financing |
| Overspending | High-interest charges over the long term |
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