Buy Now, Pay Later is emerging as a very popular payment method, especially among the young. What about it makes it so appealing? Let’s find out.
How do you feel about buying those chic shoes you’ve been desperately wanting for a long time, and paying for them later, when it’s convenient for you?
Can anything sound sweeter than this to hear?
After wearing those stylish shoes when you step out with smooth swag, you’ll be lured by the smell of soft, creamy, and warm waffles. When you realize that you can pay later for them too, will you be still on the ground?
Now don’t be lost in fantasy. This is not an absurd marketing gimmick. This phenomenon is true, practical and already functional.
It is the concept of Buy Now, Pay Later (BNPL), which has now become a rising trend worldwide. It is a strategic and well-thought-out thing.
BNPL is causing a silent revolution when it comes to credit payments. Consumers get easy access to instant credit to make quick purchases.
BNPL is not only restricted to food delivery and e-commerce, it has permeated into the world of travel, fashion, insurance, and even education.
Wherever digital payments can be made, BNPL can be used there. India is also a hot market for BNPL transactions. It is estimated to grow at a CAGR of 24.2%, from 2021 to 2028.
What Makes BNPL So Popular?
Many tangible and intangible factors contribute to making the BNPL phenomenon immensely alluring. Primarily BNPL has proliferated the online commerce domain.
It is slowly entering the retail stores too, but the changed customer behaviour coupled with the pandemic has made many shops online. Businesses have also jumped to leverage this payment method.
They see it as a powerful tool to attract customers. Let’s look at some factors that made BNPL popular.
Post-pandemic Online Commerce
BNPL received a huge boost when the pandemic hit its peak. Due to restricted movement, there was a significant acceleration in online purchases. A huge chunk of the consumers had limited purchasing power.
The conventional credit infrastructure could not cater to this demographic. There was an imbalance in supporting the demand and supply dynamics. This void was filled by BNPL.
It precisely emerged as an ace player in helping the consumers during the nationwide lockdown. They started relying on instant credit to purchase necessities.
Some also started using the service for online courses, insurance and other kinds of payments. BNPL acted as a major financial supporter for many.
This trend caught up, and people started buying things from only those businesses offering BNPL payment mode.
Millennial and Gen Z consumers have grown up with technology, they are considered most tech-savvy.
The features that appeal to them the most are convenience, affordability, and speed. BNPL transactions offer all these three and more. This payment method is rightly suited for these generations of a population.
Young people today have lower purchasing power, they have a volatile credit rating. They also possess a whim to purchase impulsively. BNPL gratifies them by easily providing instant credit.
Along with that, BNPL service providers allow the users to conveniently repay the amount. The soft credit checks carried out won’t impact individual credit scores.
Older consumers too are equally allured by Buy Now, Pay Later. When there is no interest rate and convenient repayment option, it attracts consumers from all demographics.
Easy and Affordable Repayment Plans
BNPL service providers offer multiple modes of repayment options. Some enable the consumers to repay the amount in one go within 15 days.
They also allow switching to EMIs. Auto-debit facilitation is made use of your bank account.
Some charge penalties for late payment. An app like ZeroPay not only charges Zero Interest on the credit they offer but also doesn’t charge any late fee.
It is always better to know the kind of repayment you will be doing before you indulge yourself in regularly using the app.
The Psychology Behind The Appeal Of Buy Now, Pay Later
Psychological elements have played a major role in accelerating the popularity of BNPL. It is also essential for businesses to help design their service better.
They consider the factors like customer behaviour, preference, customer experience, and conversion.
You may experience a pleasure wave and tranquillity during a spa massage, but it evaporates when you pay the bill with cash. This is called the pain of paying.
When your payments get different, you feel relieved, you allow yourself to enjoy the moment.
This Shop Now, Pay Later usage, also mimics this effect. You enjoy the moment with your purchase without worrying about making the payment upfront.
Like everything in life, BNPL works in your favor only when you use it responsibly. If you go on a spending spree without any accountability for your purchases, you might get yourself into financial and legal trouble.
Even though this short-term credit system presents only a few risk factors, it’s always better to use such services to our advantage.