March 2, 2024

“Buy Now, Pay Later” is the new trending scheme that’s changing the landscape of payments to a whole other level. The BNPL system is especially taking Fintech by a storm, and the companies like Afterpay, Klarna, and Affirm are leading this field.

This field is being adopted by several other big tycoons like Amazon, Monzo, Walmart, and even PayPal. Even amazon business brokers are in the favour of BNPL. These companies are now offering the BNPL option at the checkout, and well, it really is working wonders for them.

As per statistics, the percentage of Gen Zers alone in the US using BNPL has grown from 6% to 36% in 2021. It goes without saying that the BNPL system is disrupting the credit card industry, and it’s helping those who aren’t able to get a credit card and access the benefits.

All You Need To Know About BNPL

BNPL arrangements are becoming more and more common with each passing day. It’s a payment system where the consumer can purchase a product and then decide on a future date where he or she will pay for that product with an interest fee. This system is more common in online shopping. BNPL companies like Affirm and Klarna are enabling such sales by integrating their apps on the checkout page.

What most people don’t know is that not all the BNPL companies follow the same process. Each company has its own terms and conditions, but when it comes to the general breakdown, here’s what you need to know;

  • You purchase an item from your retailer and then choose the “Buy Now, Pay Later” option.
  • When approved for BNPL, you then have to pay 25% of the total purchase.
  • You then have to pay the rest of the payment in series, with of course, an interest fee.
  • You have several options to make the payments. It can be anything, from bank transfers to using debit cards or using your bank accounts.

Benefits Of The BNPL System

The best part about the BNPL payment method is that it has benefits for both the consumer and the merchant. Especially for the merchants, it’s quite beneficial as they can attract more customers by providing them the convenience of paying in series. This is great for those who want to grow their consumer base. They can opt for a brand value accelerator and incorporate this payment method to increase their sales and revenue.

Now for the consumers, this payment system has its own benefits. Most importantly, if a consumer wants to buy a larger ticket item and can’t qualify for a credit card, then the BNPL system can work wonders for him/her. Moreover, the best thing about this payment method is that there are no hidden charges here, and everything is quite transparent. Consumers don’t have to worry about any hidden charges,  prepayments, or late advertisement fees.

The BNPL revolution is picking up steam with each passing day, and it’s not just limited to retail, but it’s also growing in the healthcare, travel, and automotive sector.

Any Downsides Of BNPL? 

It is a fact that no service relating to money comes without a fee, and the same is the case with BNPL. For consumers especially, this payment system can lead to credit hits that’ll, of course, impact their score and approval. Most importantly, adopting BNPL can lead to increased household debt, and this can have some bigger impacts down the road.

Another drawback for the consumers is that there are no set terms and conditions for BNPL. Each company has its own terms and conditions, and you have to be really careful and read those terms before committing to this payment method. Moreover, if you miss your BNPL payments, you won’t have access to this method in the future, and it can affect your credit too.

A lot of experts out there believe that the BNPL system will encourage consumers to buy products they can’t afford, and it can also encourage them to overbuy, that’ll ultimately lead to defaults with a poor credit. As far as the merchants are concerned, the one main drawback is that they’ll have to pay the BNPL companies a proper fee which is usually more than what credit cards charge.

Top BNPL Companies 

Here’s a list of some of the major BNPL companies operating right now;

Affirm (AFRM)

Affirm is the leader of the BNPL space. The company went public in 2021, and since then, it’s just growing and raising revenues. Some of the main merchants who have adopted their services are;

  • Amazon
  • Peloton
  • Walmart

The company founded in 2012 by Max Levchinhas financed more than 17 million transactions. The best part about Affirm is that it offers a credit limit of $17500, and consumers can pay it over time in series with an interest rate from 0% to 30%. Without charging any extra fee, Affirm offers loan terms of three, six, and 12 months.

Afterpay (Square)

Affirm is a US-based company, but when it comes to Afterpay, it operates globally. The company launched in 2015, and right now, it has more than 15 million customers all around the globe. The company works through its app, where people can buy products from more than 85000 different merchants. The best part about this BNPL company is that it charges no extra fee if you pay your dues on time, and it offers a credit limit worth $500 that increases if your credit improves.

These a1re some of the main BNPL companies right now. As far as the future of this payment method is concerned, well, it’s still too soon to say anything because BNPL is literally in its early innings. For these companies to survive, it’s important to create a different and unique shopping experience for the consumers. Moreover, there are quite a lot of downsides to this system right now, and these companies will have to address the issues to continue this payment system.