Needing to replace a refrigerator, a washing machine or a piece of furniture may be easy for some, but unfortunately it is not the case for others. The same goes for wanting to buy gifts in time for friends and families during the festive seasons.
When these conditions arise, it is common that consumers spend ahead of their allocated budget, hold off their spending until a later date or worse; settle for cheaper but inferior alternatives.
Meanwhile, opting for credit cards in the expenditure will result in them paying more if they could not afford to pay the full amount of the bill at the end of the month.
Emergence of modern BNPL
In recent years, “buy now, pay later” (BNPL) services are brought back to light as a payment solution to consumers. Since its first origination and success in the 19th century, BNPL has returned to market stronger as ever; acquiring over 10 million of users in the UK, over 8 million in the US and more than a million users in Singapore.
The recent rise and prominence of BNPL services have been reflected by their ease of credit and effectiveness as an alternative to existing payment options.
Ease of credit
When it comes to purchasing a product, consumers often consider their available budget before they make a spending decision; especially when it is a high-value product such as a washing machine. Lack of available credit causes consumers to shy away from getting what they need, creating an eventual effect on their quality of life.
BNPL provides credit in advance to consumers, making the product affordable and accessible to them in time of need. BNPL often provides credits instantly after completing registration on its platforms. The registration process usually takes an average of 5 minutes to complete, which is quick and seamless to consumers.
One portion at a time
BNPL allows consumers to split their invoice periodically, usually into months. BNPL service providers often offer payment plans for several months. myIOU for instance, offers up to 6 months installment plan. The way payment plans work is that the total bill amount on their invoice will be split among the chosen tenure period equally.
Splitting payment into separate months makes it more manageable, as consumers only have to pay a small sum for a few months. Giving them the time to pay off in form of installments makes things obtainable and affordable. There are times when consumers are not able to afford a full price of a product due to insufficient funds in hand; at the same time, it is undesirable for them to settle for substandard goods or break their bank to pay for credit card bills. In view of this, BNPL offers a solution and a win-win situation to consumers in need; breaking down their payments one month at a time.
Get first and settle afterwards
BNPL enables consumers to obtain products first; usually with a small sum of initial payment and pay the rest at a later date, usually in the following months. This comes in handy when consumers are in urgent need of using the product; such as in situations where their home or electrical appliances broke down.
Usually, consumers just have to pay a small percentage of their total transaction value upfront during their initial purchase. After the initial payment, consumers can start using the products they purchased. The rest of the remaining payments will be settled in the upcoming months. This unique characteristic of BNPL empowers consumers to purchase items they need by making them affordable and manageable.