If you’ve paid for anything online recently, there’s a good chance that you’ve seen a new option “Buy Now Pay Later” on the checkout page. But what’s BNPL? You’ll find out everything about this new trend just about now.
What is buy now, pay later?
As the name suggests, Buy Now Pay Later is a payment service that allows customers to delay the final bill or make purchases and then pay for them over time. In other words, instead of paying for items in cash and in bulk, the customer can easily choose the BNPL option instead. This option will allow him to make several equally spaced installments which are taken directly from their payment card.BNPL has no extra fees or interest to pay if the customer pays on time.
The history of BNPL
BNPL has been around for a long time and was popular in the United States during the 1950s and 1960s. Back then, credit cards weren’t common, and BNPL was an easy way for retailers to boost sales and expand their customer base. The popularity of BNPL began to decline in the 1970s when credit cards became more common, but it remained an important source of financing for many years. Recently, BNPL has seen a resurgence in popularity and is now offered by major fintech companies. Fintech companies provide BNPL and other types of financing by working with banks and other lenders.
The rise of BNPL in fintech
As e-commerce sales have grown over the past decade, there’s been a significant rise in online shopping. Online shopping has become a common way for consumers to purchase goods and services, including high-ticket items like appliances and furniture. The rise of online shopping has put more pressure on retailers to provide convenient financing options for their customers. Another reason BNPL has gained popularity in the fintech industry is that it’s a way for companies to diversify their products and services. Retailers make money when they sell products, but they also make money when customers use their financing products. Fintech companies make money from the financing products they sell.
The benefits of BNPL
One of the benefits of BNPL is that it allows consumers to purchase expensive items when cash is tight. Another benefit is saving time in the sense of consumers can get what they need now rather than wait for the next paycheck. Some other benefits include ease of use and convenience as BNPL not only allows payments to be made in installments in a very easy way but also is often interest-free. BNPL also has an advantage over other types of payment methods because it doesn’t affect your credit score. So, if you have bad credit, BNPL can be a good way to improve your credit score.
The risks of BNPL
BNPL is appealing to consumers because it’s a flexible way to finance purchases, but it also comes with some significant risks. This kind of financing significantly increases debt, leading to severe issues in the coming months. It’s important to pay attention to the contract and make sure you can meet the required payments. If you miss payments and go into default, the retailer might repossess your items.
The future of BNPL
The rise of BNPL in fintech has been rapid and dramatic, but it’s still too early to know the full impact it will have on the future of financing. BNPL will likely continue to grow in popularity and remain a popular financing option for consumers. Like other types of financing, BNPL will have both benefits and risks. Consumers should be aware that financing comes at a cost and decide if it’s worth it.