Credit cards offer convenience when you are cash-strapped or when you prefer making a consolidated payment rather than paying for each purchase. And in this regard, the ‘Buy Now Pay Later’ payment option has emerged as a quiet winner. Very similar to a credit card, this option has a lot more to offer than just credit.ย 

Buy Now Pay Later or BNPL is an evolved payment method that caters to the needs of both businesses and customers. Technically, a successor of the credit card system, it is a far more reliable, secure, swift, and convenient payment method with added affordability.

Here’s why BNPL sounds enticing

The concept of BNPL makes sense to consumers. It practically solves the major pain points that consumers face while making online transactions. But beyond this, it also addresses the issue of empowerment without putting the user at risk of a grave debt trap.

1. BNPL doesn’t require your card/bank details

BNPL doesn’t require users to share their card or bank details; it doesn’t mandate disclosure of any financial information. This solves two issues; first, it reduces your exposure to card and payment frauds. Second, it reduces checkout friction. Without the need for authentication or bank details, the payment experience becomes seamless. Thus, you get security and also save time.

2. Transactions are transparent

One other feature of BNPL that makes it the preferred option for payments is the transparency it offers. There are no hidden fee or charges that can take the user by surprise. Unlike in the case of credit cards, the user knows exactly how much credit limit they are allowed and what is due and by when. There is a minimal penalty levied for late payments but beyond that, the service comes free of cost.

3. Empowers consumers

But one of the most important aspects of BNPL has to do with consumer empowerment. It has enabled consumers to buy what they need when they need it. It has played a crucial role in making essentials accessible to consumers in the most convenient manner, especially during the lockdown. With this, it has helped foster trust and loyalty between consumers and merchants offering BNPL. This is evident in the numbers Simpl shares. The pay-later startup witnessed up to 35% surge in online transactions for essentials during the lockdown, said Nitya Sharma, Co-founder & CEO of Simpl.

But are these reasons enough to switch to BNPL?ย 

While this payment option does solve some of the important payment pain points, as a consumer there are a few things you should be aware of.

1. BNPL is made available to select customers only

The BNPL service is not available to all. The credit decision is taken by machine intelligence with no human involvement at all. Users are carefully selected by means of complex algorithms processing 100s of features including the behaviour of the consumer on merchant platforms, etc. You as a consumer don’t get to choose BNPL, the system selects you.

2. It is after all, a form of credit

BNPL at the end of the day is a branch of the credit system. You are allowed a certain credit limit based on your spending behaviour and you have to clear the dues at the end of the billing cycle. Failing to do which you face a penalty; minuscule, as it may be, it is still a fee, and failing to clear that can get your account blocked.ย 

3. Not all merchants offer BNPL

Since BNPL is a relatively recent development in the payment space, the service is not available across all merchants. But it is noted that more and more merchants are starting to offer BNPL to their customers.ย 

The question of whether you should opt for it depends entirely on your prerogative. BNPL has taken the best aspects of the credit system and made it better. But it doesn’t change the fact that it is still credit. BNPL also offers a clean solution to keeping track of your expenses while giving you access to short-term credit.

Source: The Financial Express,
Dated Sept 17, 2020

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