The trend of buying now and paying later is sweeping the globe. It is becoming the most popular choice for payments, especially among the young. This trend got a thrusting boost in the wake of the Covid-19 pandemic. Many fintech players have jumped into the arena with sleek apps to shower consumers with short-term credits, and with easy online payment gateways.
Buy now pay later (BNPL) is financially empowering users, it is offering a consumer-friendly solution for making digital payments. Customers get to buy what they want and then pay in multiple instalments, often with no interest. This is helping the younger generation to become financially responsible.
Why did BNPL become so popular?
With the post-digital revolution and the entering of smart tech, the global payment environment was witnessing a rapid change. The new companies emphasized innovation and implementation of the latest technology for simple and quick solutions.
In recent years we have witnessed an explosion of innovations related to financial services. In this landscape, alternative e-commerce payment platforms have emerged and have shaken up the online payment industry. They are now playing an assertive role in the sector. BNPL payments are turning out to be the best payment gateways.
This led to the rise of alternative payments. There was also a lack of accessibility to the traditional credit cards for millions. BNPL was proving to be beneficial for those millions of budget-conscious shoppers.
This payment model was particularly appealing to the next-gen shoppers. The millennials and gen-z were looking for an alternative option that steers them away from the mess that can be caused by credit cards. BNPL gave them that along with instant purchase gratification.
For a few years now credit has become a contentious issue, especially for the ones below the age of 35. Extreme lack of financial literacy has also played a part in this whole thing. BNPL is filling a void in the market, it is financially assisting a generation that is accustomed to instantly getting their desired products and services, but lacking in financial power.
How is an alternative payment defined?
Alternative payments can be looked at as payment disruptors. Because their usage and adoption disrupts the existing business and introduce a new experience of payment.
Payment platforms are now more than just a functional requirement at the end of the checkout process. They are now being designed for an immersive experience for users. They form a connection beyond the transaction, between retailers and consumers.
Because they are a tech-savvy generation, they prefer the payment process to be an immersive experience, rather than the cold transactions that happen with credit cards. Alternative payments have made a distinct mark when it comes to social connection, financial knowledge, emotional attachment, and a seamless user experience. They are now slowly becoming the nucleus of retail space.
How is BNPL beneficial?
BNPLs mainly help to avoid an accumulation of the credit card interest, they also help you make purchases that normally fit in your budget. It is estimated that up to 30% of the millennials don’t own a credit card, and gen-z have barely entered adulthood yet.
These next-gen consumers are looking for tools and apps that help them in budgeting responsibly. They want to stray from the fear of debt and the interest a credit card can bring.
Buy now pay later is emerging as an ideal solution for shoppers looking to split their payments in easy instalments, along with having to pay no additional cost.
Why does BNPL have a generational appeal?
Buying now to pay later is a solution for the financial problems faced by the younger generation, it allows them to bridge the gap between the desire to stretch payments, as well as avoiding the debt trap.
Among all the generations, millennials and gen-z have the lowest average credit card balance.
In addition to this, many millennials and gen-z don’t have sufficient credit scores to obtain a credit card in the first place. These financial set-ups have made way for BNPL to enter the scene and address the concerns. It is offering effective alternative ways of payment that are convenient and fast.
How do multiple payment options benefit consumers?
Consumers prefer instalments for obvious reasons. Apart from buying power, what influences their purchasing decisions is budgeting and control over finances. They always lean towards payment options that help them pay early and have no impact on their credit score.
There is also a shift in the evolution of payments. As the consumers are evolving, the way to target them also needs to evolve. Such approaches are widely adopted by millennials and gen-z. The financial services have to be flexible and simple to accommodate the young. Retailers too need good options to catch up with the changes.
Millennials and gen-z are now choosing merchants whose values align with their own. They are identified to make payments keeping in mind social responsibility and positive change. They are likely to buy now and pay later for a brand that openly embraces environmental and social causes.