An online shopping trend known as BNPL, which is based on point-of-sale installment loans, has exploded. Customers can make purchases online and pay them off later in EMIs. Often, these EMIs are free of interest. Approximately 46% of people made at least one purchase via buy now pay later by April 2021, according to reports.
In contrast, credit cards have been around for decades. They have naturally integrated into online eCommerce ecosystems over the years. However, credit cards still mean paperwork, credit scores, authentication, and other hassles.
Some of the key takeaways of BNPL and credit cards are –
- Shop-now-pay-later allows customers to make online purchases and pay in installments over time.
- With credit cards, customers can also pay over time, but the minimum payment is required each month.
- A customer’s financial situation completely determines the pros and cons of the pay-later program.
- In contrast to credit cards, BNPL does not charge interest until customers finish their payments on time.
- BNPL usually does not offer cashback or rewards on purchases, unlike credit cards.
The article discusses some of the advantages of this new credit payment system over credit cards.
A Less Strict Eligibility Criteria
In order to apply for a credit card, you must meet certain requirements, such as having a substantial income, a good credit score, and a credit history.
It is, however, easier to apply for BNPL since no hefty paperwork is required. The new credit payment system relies on artificial intelligence and machine learning to determine whether an individual is eligible for credit. As a result, millennials and first-time borrowers are more likely to choose this system than credit cards.
No Usage Costs
There are often usage costs associated with credit cards, such as joining fees or annual fees. However, BNPL doesn’t have such fees. You can register for a pay-later program for free. If you fail to pay the outstanding bill amount by the predetermined due date, you will be charged a late fee. Your only obligation is to pay the outstanding bill amount within the predetermined due dates.
The Convenience of Usage
The BNPL program allows registered customers to complete hassle-free, smooth, and secure transactions without sharing their bank or card details.
Shop-now-pay-later is a cheaper alternative to credit cards
- Provides convenience by eliminating the need for OTPs when making a purchase.
- Processes refunds faster than other payment methods.
- Assuring a close-to-zero failure rate for transactions
Safe and Secure System
According to industry experts, BNPL keeps bank details secure because of the elimination of OTPs. Furthermore, most third-party service providers have top-of-the-line encryption, making the payment system safe from cyber-attacks.
It has been found that people prefer the buy now pay later financing method in most countries around the world. Especially after the pandemic, the rate of people choosing this payment method increased massively.