Buy Now Pay Later has been around for a while but has seemed to have entered the crosshairs of consumers, gaining ground during the air of uncertainty during the heights of Covid-19 and lockdowns. More and more retailers are offering the option to spread the cost of your purchase over time. BNPL services are without doubt playing a pivotal role in transforming the consumer experience and approach to credit.
What is Buy Now Pay Later?
Buy Now Pay Later is also known as deferred payment, delayed payment, or interest-free financing. It’s a type of financing that allows customers to purchase items now and pay for them later. This financing option is often used on big-ticket items like appliances, furniture, cars, and vacations. It’s also used for smaller purchases like clothing and accessories.
How Does Buy Now Pay Later Work?
The terms of each program vary, but most Buy Now Pay Later programs involve a financing company providing a line of credit to the retailer who then offers that credit to the customer. If a customer chooses a deferred payment plan, they’ll make no down payment and will instead make monthly payments to the financing company. If a customer doesn’t pay their balance off in the allotted time, the financing company will charge interest on the remaining balance. The interest rate varies widely from company to company and is based on the customer’s credit score.
Why Is Buy Now Pay Later So Popular?
People are increasingly choosing to defer payments as a way to make larger purchases. The rise of Buy Now Pay Later has been spurred by a few different trends. First, consumers want to spend their money on experiences rather than things. Second, more people are interested in living a minimalist lifestyle. Third, more people are living paycheque to paycheque. These trends have left a gap in the market that Buy Now Pay Later is more than happy to fill. In fact, this type of financing has become so popular that customers often don’t even realise they’re getting it. When you make a purchase with a credit card, you’re often given the option to defer payment. Credit card companies make money off of these fees, which is why many of them make it easy for customers to choose this option.
Room for growth
- Over a third of shoppers use BNPL for its ease of use and convenience
- BNPL purchases growing at a rate of 39% market share
- Market share expected to double by next calendar year
- Nearly 10 million consumers in the UK have admitted to avoiding retailers that do not incorporate BNPL options within their checkout system.
Benefits Small Businesses
BNPL schemes can be a great solution not only for consumers but for small businesses too. It is a great way for small businesses to increase sales, as they offer customers the ability to spread the cost of their purchase over a period of time. There are a number of benefits for businesses when offering Pay Later schemes besides just increased sales. Adopting BNPL schemes can improve cash flow and increase customer loyalty, being very beneficial in the long term.