Buy now, pay later is the new craze when it comes to the present trends of the payment industry. The BNPL market has grown exponentially in the Asia-Pacific region recently. These services allow customers to split a more significant payment into smaller ones that they can pay over some time.
Businesses faced a very polarizing effect when the pandemic struck the world back in 2020. Some business models faced immense depressions and went bankrupt, while others flourished. The e-commerce and digital payment sectors were amongst the sectors that benefited.
Despite the tremendous success of cashless and online business models, FinTech saw a decline in revenue. Now, companies are resorting to new business tactics to gain traction as the economy stabilizes and expands. BNPL services are amongst the recent trends that are becoming popular as the world recovers from the pandemic.
Even PayPal intends to cash in on this burgeoning trend. Paypal wants to acquire a Japanese BNPL service known as Paidy. This decision came as a result of their rival, Square acquiring AfterPay, another buy now, pay later firm from Japan. The excessive growth has gotten its share of criticism too. Regulators are pressing these firms to ensure that the customers don’t take on more loans they can afford to pay.
A recent survey of around 2200 people showed that customers prefer the convenience that BNPL provides them with. Customers are getting BNPL on lesser-priced items, too, not just on big-ticket ones. Consumers state that using BNPL services is much easier than getting a loan for the same purchase.
In the past year, 29 million consumers from the U.S. have used the buy now, pay later services, and 59% of them even agree to accept these services from a third-party provider. It is a desirable option for people living a paycheck to paycheck lifestyle. Through BNPL, they can afford vacations and other expensive purchases that they usually cannot pay for up front.
A personal finance company called Credit Karma recently showed that U.S. consumers have already started to fall short on their BNPL payments. Around 72% of those consumers had a decreased in their credit score too. The most prone to miss their payments were younger consumers, especially Gen Z and the millennials.
The problem with these payments is that they do not have the same impact that a regular purchase does. People quickly buy stuff that they would never purchase when paying in full. The consequences seem less dire, but that also the cause of trouble.
Most consumers that use BNPL payments purchased an item of $500 and less. Gen Z is the most likely to make low-cost BNPL purchases. Half of the purchases by Gen Z are even less than $100.
Regardless, BNPL payments still seem to grow in popularity every day. For a considerable forecast period, they seem to show no signs of slowing down!