The Future of Buy Now Pay Later in this Global Pandemic

The pandemic concept of ‘Buy now pay later is very new. This idea is appealing to people as this way they can purchase something expensive and pay for it in installments over a while.

We know, novel coronavirus has led to an economic crisis in all countries across the world. Due to which there has been quite a shift in market dynamics.

Any country’s economy goes up and running when consumers buy goods from the market. But due to the pandemic, a huge part of the population lost their jobs, leading to conversion in consumer behaviour. People started consuming only as per their requirements. However, if this continues it would be difficult to sustain the various segments of the market.

Concept of Buy Now Pay Later

The idea of buying now and paying later has come forth as a new and beneficial credit option, without the criteria of possessing a credit card. A buyer needs to get in touch with a lender who will pay for the product on behalf of him/her instantly. The buyer commits to pay the lender later on.

There are companies like Affirm, Klarna, PayPal, AfterPay which lend credibility to consumers.

It has proved beneficial for young adults between the ages of 20-25 years.

Youngsters usually don’t have to want to enter into traditional financing, i.e. availing loans from a bank. Nor do they possess a large amount of money when you desire to buy something expensive.  Hence, BNPL is very appealing and helpful to them.

Here’s an example.

It is summer and our consumer Ron wants to buy an air conditioner. He wants to buy a 1.5 ton, 4 star A/C so he starts looking for it online. The one that fits all the criteria costs 32,000/- rupees. Ron is in his mid-twenties and recently got a job. He can spend 20,000/- at most to buy that air conditioner.

After looking for quite some time, Ron discovers the option of paying over a period of time. Below the product, he notices an option that says the whole amount can be paid in four installments of 8000/- every month and it is interest-free. This seems manageable than paying the lump sum at once.

There is an additional option of buy now pay later where he can apply to find out if he is eligible.

Ron avails that option and finds out he is eligible and a company called BillPay (fictitious) will provide their service. He places an order for the air conditioner. While checking out the notes down all the necessary details, like his payment schedule, transaction details, and so on.  

The A/C company receives full payment for the air conditioner.

Ron pays BillPay every month on the due date.

While taking up the buy now pay later option, make sure you have a vivid idea of the deal you enter in. You should be fully aware of the interest you have to pay or whether it is an interest-free loan, the amount you have to pay every month, and much much necessary detail.

How consumers benefit from BNPL

The process of BNPL does not involve paying large amounts of interest for taking credit/loans. With the help of it, anyone can have immediate access to credit.

BNPL is a safe method for making transactions, consumer-friendly, and many a time interest-free.

This method is transparent, quick, and flexible for all consumers.

With the help of BNPL consumers can afford to buy products within their budget by paying them in chunks.

Buy now pay later is available for both online and offline modes of transactions.

There are mobile apps that help buyers to opt for a buy now and pay later. Some retail stores have their own particular apps. Buyers can shop using those too.

It can also be useful to create our own credit profile as that will help us get other credits later in the future. We only need to make sure that we are true to our end of the deal and pay all the installments on time.

Future of BNPL

 Demographics show consumers availing BNPL mostly belong to generation X and millennials.

Considering their spending power these consumers have the potential to become powerful assets to the concept of buy now pay later.

Statistics show that 45% of people who buy now pay later often, at least once in a month and sometimes more.

E-commerce was a rising business. The pandemic gave a sudden spike to it. During COVID-19 people have made maximum purchases online. Clothing and electronic items are the key types of purchases people have made online. However, everything is a part of the online world, starting from jewelry, cosmetics, furniture to food and groceries.

We can get everything delivered to our doorstep.

All the markets are interrelated.

Although markets, ‘bazaars’, shopping malls are fundamental to Indian society; making online purchases means offline businesses go down, eventually becoming extinct. There is time before that happens.

The pandemic forced us to stay indoors in the beginning. But currently, people have adapted to staying indoors. People want the best function from home. A way to do this is doing half the work online.

Hence, the future lies in e-commerce and online businesses. The idea of ‘buy now pay later‘ is core to making businesses flexible. Without this option, companies will lose consumers.

Consumers are always open to new payment options if they are more convenient. With constantly evolving consumer behaviour, a major number of companies are adapting to the option of buy now and pay later, since it is helpful in catching customers.

It is hassle-free and beneficial to everyone.

It is important that consumers also make their payments on time. In case they fail to do so there will be consequences.

As this is still a growing factor, beware of frauds. Before borrowing from or lending to someone make sure you do a thorough background check.

Keeping a close eye on borrowings and budget is necessary, to regulate your finances well.