Buy Now, Pay Later: How will it reshape payment ecosystem

Online shopping has altered the way people explore, select and purchase. Buyers are less reluctant to purchase big-ticket items today. It is especially true for the tech-savvy Gen Z and millennials who want to purchase the best of brands, but it all depends on their paychecks. With a limited income each month, spending on high-priced products gets difficult. However, the scenario is gradually shifting with the introduction of the Buy Now, Pay Later (BNPL) option. With an increasing number of brands and products in the market, BNPL allows consumers to buy at their convenience and pay later. It reduces the dependence of purchasing decisions on disposable income that a buyer has in hand. It offers the customer flexibility to pay within 30 days or pay through EMIs over a longer tenure thereby reducing the pressure of instant down payment of the full amount. Deferred payments and checkout financing with EMIs are two emerging trends that are gaining popularity. It has made BNPL a popular payment method even in the offline space, and the ecosystem is continuously evolving.

Ease and convenience of payments to consumers

  Alternative for credit cards Rather than using credit cards that levy high-interest rates and stringent eligibility checks, consumers are gradually shifting to using BNPL payment methods. BNPL has certainly added a lot more flexibility with bank subvented, brand subvented and NBFC players bringing in all kinds of pay later options at the time of checkout. From buying products to paying for concerts and even hotel rooms, it has increased accessibility. BNPL thus serves as a strong alternative to traditional personal financing options. Increase in the purchasing capacity This new-age payment method has also drastically increased consumers’ purchasing capacity, especially at the point-of-sale. While it is still at its early adoption stage in the market, we will witness its wide-scale use, especially for big-ticket purchases across all types of industries including electronics, apparel, furniture, interiors, and experience-based industries. Since BNPL rules out the need to pay for everything upfront, booking vacations, and other luxe experiences will be more attainable. Looking at its increasing popularity, we potentially see more options for installment-based payments across service and consumer sectors by next year.

Increasing growth opportunities for retailers

  Leverage in marketing strategies Digital payments have given a boost to BNPL payment options. In 2021, transaction volumes with BNPL rose by 637%, and its usage is continuously increasing. This will alter how companies plan and execute marketing campaigns. Since many customers are still warming up to BNPL, many retailers are expected to include this in their future marketing campaigns. Usually, retailers don’t advertise payment methods like credit or debit cards, but BNPL is an exclusive customer benefit that will improve the consumer base and sales. It can very well be seen as a competitive advantage for retailers from a marketing perspective. Increase in active and repeat customer base Undoubtedly, BNPL makes payments flexible, allowing customers to buy products that they couldn’t buy because of budget constraints. Consumers who use it once are likely to use it again since it improves purchasing power and affordability. Hence, it creates an ecosystem of loyal and active repeat clients. Moreover, the BNPL provider’s marketplace allows customers to discover new brands and shops, increasing brand accessibility. This will thus help retailers boost their active and repeat customer base. Introduction in offline stores Initially, the BNPL system was introduced for online shopping. However, with in-store shopping getting back to its pace in the new normal, more offline stores have started adopting it. For instance, many stores in India have started using ZestMoney to provide in-store BNPL installment payment options via a quick QR code scanner. In the offline market segment, the BNPL industry is projected to grow by 5X in the next five years. Rise of in-house BNPL options Both online and offline stores have also started exploring BNPL for faster checkouts. Paying later or in installments gives customers more purchasing options and convenience while managing budgets. Retail giants like Amazon have introduced in-house BNPL options through Amazon’s Pay Later feature. Even in India, a leading ridesharing provider has recently introduced Ola postpaid to provide the convenience of paying later. In the near future, we are set to witness more online and offline retailers offering in-house BNPL options. Enhanced ecosystem for BNPL Providers Greater flexibility with a wide range of pay later options. The rapid adoption of BNPL solutions is paving the way for enhanced consumer-centric options. On the back of continued innovation, payment solution providers (PSPs) will be able to offer more flexibility in terms of location, tenure, and payment types to retailers and consumers. It will prove to be an added advantage that allows end-users to pay from anywhere and through their preferred payment method. While providing flexibility to end-users, this will ensure assured payments while increasing sales volumes for retailers. More strategic partnerships With increased pay later options, high-value retailers and payment providers are forging partnerships with BNPL providers. For instance, collaborations between Affirm and Amazon, Klarna and Global-e help retailers expand sales. By gaining access to thousands of active sellers, BNPL will be able to integrate products at checkout and expand product distribution. Moreover, it indicates that the provider with the highest quality merchants will hold a competitive advantage over others. While these strategic partnerships are still in the nascent stage, they will continue to grow. Revision in rules for enhanced credit experience As of now, BNPL providers are providing both customers and retailers with multi-pronged benefits. Often, individuals can use this medium interest-free. In times ahead, we will potentially witness revisions in rules and regulations to protect the interests of all end-users.

Flourishing future

Enabling users to buy larger ticket products and pay for them later, BNPL has become a $100 billion industry and is gradually getting traction in tier-2 and tier-3 cities. As we move ahead, BNPL will be an enabler for digital transactions. The increasing adoption of deferred payments and checkout financing by offline and online platforms will take the global BNPL industry to reach $3.98 trillion by 2030. The author is VP of Project Management, Ezetap. Views expressed are personal.   Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .