As of 2020, BNPL is one of the fastest-growing digital payment methods. More than 5% of all eCommerce transactions are conducted through BNPL. Over 5 million people have used the service since the pandemic hit global markets in 2020.
BNPL stands for buy now pay later and is a short-term financing solution, like a credit card. Customers can purchase items online and then pay the amount later. BNPL, also known as the ‘point of sale installment loan,’ has already become an extremely popular payment option when buying something online.
It is important to remember the following points about BNPL:
- A customer can purchase today and pay later through BNPL.
- Customers are usually required to make a small down payment, with the remaining amount being paid in installments.
- There is no interest charged by most companies providing BNPL services.
- A person’s credit score will be affected by late payments or failure to pay within the installment dates.
Buy Now, Pay Later – Explained
Schemes and programs for BNPL vary from place to place. Each third-party service provider company has its own terms and conditions.
Generally, these programs are based on point-of-sale installment loans. Therefore, they are largely similar.
- Customers purchase from an online retailer that supports BNPL. When checking out, they must select the definite option.
- There will be a small eligibility requirement, but it will not be as detailed and demanding as with credit cards.
- Pay-later customers need to make a small down payment, say 25% of the purchase price, to qualify.
- The remaining balance may be paid over several days, weeks, or months at zero interest.
- Payment options include checks, bank transfers, and direct debits from a debit card, credit card, or bank account.
How is BNPL different from Credit Cards?
In both of these payment methods, the payment mode is delayed. In comparison to using a credit card, how does making a purchase under the BNPL program differ? Well, with a credit card, you only pay the minimum payment due every month. If you don’t pay the full amount, you’ll also have to pay interest rates on the remaining balance.
BNPLs, on the other hand, are typically free of charges or interest rates. They have a fixed repayment schedule, which is usually determined in days, weeks, or months.
Wrapping Up
Today, buy now pay later is one of the most common payment methods among retail customers. However, not all online shops offer pay-later financing on all purchases.
The amount that can be paid in the BNPL process might also be limited, and that entirely depends on the rules and regulations of the service provider company. BNPL Companies like cashew encourage responsible spending among customers.
