Buy Now and Pay Later Option: Buy now and pay later, is a form of short-term financing that enables customers to make purchases and pay for them later. Consumers, lenders, and business owners are all involved in the main framework of BNPL, which is modelled after an instalment plan for money lending.
When consumers buy products or services from merchants, financiers make the payment on their behalf. Consumers later repay these fees in equal monthly instalments. Depending on the BNPL financiers, the number of payments and the length of the payback period vary.
Gen X and millennial consumers are the two groups highly attracted to the BNPL segment and these groups are being targeted as a target segment by the e-commerce giants. Many other consumers are also shifting towards BNPL by seeing it as a credit card option and a tool to control their cash flow as soon as it becomes available to them.
Due to the emergence of e-commerce and digital payments, as well as a sharp rise in the number of Fintechs, the buy now pay later (BNPL) lending technology sector is a new option in India. In India, young millennials and first-time borrowers prefer a convenient way of paying for goods without any market resistance.
BNPL is in its nascent stage and has picked up the pace on the millennial shoppers after recovering from the covid- Pandemic The downturn’s hardships made a lasting impression on members of that generation—they saw family members struggle with job losses, mortgage defaults, and credit card debt. On top of that, many of these young consumers were burdened with their loans. BNPL provided the sought relief to the consumers.
Credit cards have been used for many years and have slowly but surely filtered into the online retail environment. On the other hand, time and effort due to the challenges of verification, credit score requirements, multiple rounds of identification, etc. makes BNPL a convenient option over credit cards. Moreover, credit cards generally come up with joining fees and annual charges.
BNPL is giving consumers a new lease of life, where they can conveniently buy their desired items and pay as per their convenience. Buy Now, Pay Later (BNPL) deals appear to be a more feasible and practical way of buying any product during festive offers without a credit card, as Many consumers can now take advantage of the short-term credit being given by BNPL even if they have no credit history.
Fintech companies, E-commerce giants and even banks are shifting towards the changing flavours of the consumers. The Marketing planning of the e-commerce industry is based on resisting the market inertia to meet growing customer concerns, change in the market place and economic change.
Though the BPNL seems too lucrative, this is not always the case. There is a catch. One needs to be extremely cautious using the BPNL option for avoiding getting trapped in the debt trap. Consumers frequently use the “buy now, pay later” strategy to make unaffordable purchases and misuse the option. Small sums can deceive people into spending more money than they ought to. Make sure you comprehend the fine print before rushing to use BNPL loans to finance every part of your life. Avoid choosing this option if you are already heavily leveraged. Younger borrowers need to be aware that this is building their credit history. Your past repayment history determines how creditworthy you will be in the future
BNPL has come under fire for giving customers a false sense of financial stability, which has been linked to impulsive spending and the possibility of running out of money. Influencer marketing of BNPL platforms on social media increases the appeal of using BNPL credit to make purchases, however, influencers have come under fire for normalising debt by portraying it as “fun” and so promoting excessive spending.
Using BNPL, it’s common for compulsive shoppers to make impulsive purchases of products they don’t need. Impulsive buying is the tendency of a customer to buy goods and services without planning. When a customer takes such buying decisions at the spur of the moment, it is usually triggered by emotions and feelings causing decisions which might cause severe financial repercussions in future. That is how the e-commerce industry is targeting a bulk of the customer who succumbs to marketing the tactic of the sellers of the product.
It is impossible to categorise impulsive purchasing for a single product category. Products like chocolates, clothing, mobile phones, and expensive stuff like jewellery and cars can all be purchased impulsively. Making an impulsive purchase without any rational buying is too dangerous and causes a financial burden. To increase sales, marketers attempt to capitalise on this customer behaviour. There is a considerable likelihood that buyers wind up making a purchase of products after visiting the hypermarket without any actual aim of doing so. By producing products that can be add-on accessory for their mobiles, laptops, fitness bands, digital watches, etc., many mobile phone manufacturers seek to take advantage of this feature in their clients.