A Guide to the Buy Now, Pay Later Trend

December 1, 2023Financial Tips

Buy Now, Pay Later has emerged as a widespread and disruptive consumer purchasing and finance trend in recent years. This payment mode allows consumers to make purchases immediately and defer the payment in installments.

While BNPL has gained immense popularity, it brings with it advantages and potential pitfalls for consumers and businesses. This comprehensive guide defines BNPL, the latest trends, and how consumers and businesses can use this payment revolution to their advantage.

As the name suggests, Buy Now, Pay Later is a payment model that allows consumers to make purchases at the point of sale and choose to pay for them later in scheduled installments. These installments can range from a few weeks to several months, depending on the terms offered by the provider. Unlike traditional credit cards, BNPL services typically do not charge interest on the payments, making it an attractive option for many consumers.

How Popular is it?

According to GlobalData, The Buy Now Pay Later (BNPL) market is expected to grow at an annual growth rate of 25.5% through 2026. Experts say that much of this growth will come from younger generations, with 59% of Gen Z and 53% of millennials making a BNPL payment in 2026, compared to 41% of Gen X and 24% of Baby Boomers.

Pros of BNPL for Consumers

Financial Flexibility. Allows consumers to spread out the cost of their purchases, making expensive items more affordable over time.
Interest-Free. Most services don't charge interest, making it more cost-effective than credit cards for those who can manage their payments responsibly.
No Credit Check. Many providers don't perform credit checks, which can be appealing to consumers with limited or poor credit history.
Convenience. The application process is often quick and straightforward. The approval usually happens at the point of purchase.

Pros of BNPL for Businesses

Overspending. The convenience can lead to overspending and accumulating debt if consumers are not disciplined.

Late Fees. Failing to make payments on time can result in late fees, which can add to the overall cost of the purchase.

Impact on Credit. While buy now pay later might not negatively affect credit scores directly, late payments could have an indirect impact.