Buy Now Pay Later (BNPL)

How does BNPL work?

BNPL service providers share the same operational model with terms and conditions being the only differentiator. Here's how it usually works:

1. Make a purchase at a participating retailer.
2. Opt for the 'Buy now, pay later' option.
3. Make a small down payment of the overall purchase amount.
4. The remaining amount shall be deducted in a series of interest-free EMIs.

Note: The payment of EMIs can be made via bank transfer, cheques, credit card, debit card or directly from the bank account.

Advantages of BNPL

Some of the benefits of BNPL are listed below:

1. Increases affordability
2. Instant access to credit
3. Safe and secure transaction
4. Can choose repayment tenure
5. No cost EMI
6. Simple and transparent process

Eligibility criteria for Buy Now Pay Later

The eligibility criteria you will have to fulfil to avail Buy Now Pay Later facility are:

1. You must be a resident of India.
2. You must reside in a major tier 1 or tier 2 city.
3. You must be aged above 18 years. The maximum age of eligibility in some cases can be up to 55 years.
4. You must be a salaried individual.
5. You must have a bank account and all the KYC documents in place.

Difference between Buy Now Pay Later and Personal Loan

Some of the main differences between BNPL and personal loans are mentioned below:

Difference between Credit Card and BNPL

There are certain differences between credit cards and the 'Buy Now, Pay Later'. Let us take a look at them:

Interest Rate Comparison: Credit Card vs BNPL

The rise of BNPL service providers can be accounted for the pandemic. With the increased demand for e-commerce services due to lockdowns and consumers preferring to break down large expenses into smaller interest-free EMIs, BNPL has become a go-to option for many. 'Buy Now, Pay Later' has a lot to offer, however, it is still a loan and you need to be careful while looking to avail it. While you can get BNPL approvals easily, failure to make payments on time can hurt your credit score. Hence, just like other loans, you need to ensure that timely repayments are done to maintain a healthy credit score.

BNPL Players in the Indian Market

Some of the BNPL players available in the Indian Market are given below:

• ZestMoney
• LazyPay
• Simpl
• Amazon Pay Later
• Ola Money Postpaid
• Paytm Postpaid
• Flexmoney
• EPayLater
• Capital Float

The Future of Buy Now Pay Later

The future of BNPL can be very bright as the concept will attract more customers to purchase an item of their choice instantly. Most of the lenders who provide this facility offer repayment at no cost EMIs which in future is likely to become the preferred payment option especially among the youth.

However, within its core it is a still a type of loan which in the end the customer has to repay. The lenders offering this service will have to be careful in offering this facility as not everyone will be capable of repaying the amount within the stipulated time period. The customers will have to understand the failure to repay the amount on time to avoid interest and drop in credit score. The future of BNPL looks good provided the customers are able to use the facility properly and clear the amount on time.

A good credit score can help you secure lower interest rates on loans and credit cards.

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