Buy Now Pay Later 2024 – Pros and Cons

Buy Now Pay Later
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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

FeatureBuy Now Pay Later (BNPL)Credit Card
Payment StructureFixed installmentsRevolving credit line
InterestOften interest-free for a limited timeInterest charged on unpaid balances
Credit CheckMay or may not require a credit checkTypically requires a credit check
Purchase FlexibilityLimited to specific retailers or purchasesCan be used almost anywhere
Consumer ProtectionGenerally less consumer protectionMore consumer protection
Debt AccumulationThis can lead to debt if payments are missedCan lead to debt if not used responsibly
Credit Score ImpactCan impact credit scores if payments are missedCan positively or negatively impact credit score based on usage
FeesMay have late fees or other chargesMay have annual fees, interest, and other charges
Purchase LimitsOften have purchase limitsHigher purchase limits
Rewards and BenefitsLimited or no rewardsMay 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

Also Read: Pros and Cons of E-Commerce for Businesses

Challenges in Buy Now Pay Later (BNPL)

ChallengeDetails
OverspendingConsumers may be tempted to spend more than they can afford.
Debt AccumulationMissed payments can lead to debt and interest charges.
Credit Score ImpactLate payments or defaults can negatively impact credit scores.
Consumer ProtectionBNPL may offer less consumer protection than credit cards.
Regulatory OversightLack of consistent regulations can create challenges for consumers and businesses.
Data PrivacyConcerns about data privacy and security when using BNPL services.
Financial InclusionBNPL may not be accessible to all consumers, especially those with limited credit history.
CompetitionThe BNPL market is highly competitive, which can lead to rapid changes and potential risks.
Integration with Existing Payment SystemsIntegrating BNPL with existing payment systems can be complex.
Consumer EducationMany 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 lakhThe maximum loan offered is or more than Rs. 25 lakh
Only secured loans are offeredSecured and unsecured loans are offered
No interest is levied on the principal amountInterest is levied on the principal amount
Typically, BNPL tenure is up to 90 daysTenure 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

GoodsBads
Offers flexible payment optionsChances of overspending
No interest charge in various BNPLCharge Late fees 
Improve Credit history if pay EMIs on timeNegative 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 buyHuge amounts of purchases, with a longer repayment period
Short terms, No interestLong terms, with interest
Soft credit checkHard credit check
No interest, late fees may applyInterest rates vary based on lender and borrower’s creditworthiness
Quick and easyMore 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, lazypayPersonal 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 weekFixed payments over a long term (e.g., 6-12 months or more)
No interest, Late fees may apply onlyInterest charged on unpaid balance
Soft credit checkHard credit check
Quick and easy approval processRequire more time for approval
FlexibilityFixed payments and deadlines
Best for small purchases and short-term financingBest for large purchases and longer-term financing
OverspendingHigh-interest charges over the long term

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