Growth of Buy Now Pay Later in Today’s Industry

 

For millions of shoppers, you do not need the money on hand to pay for something you want. There are many ways to buy now and pay for it later with the financing options currently available. Large companies are well aware of the trend, with Apple and Amazon partnering with Affirm, PayPal launching credit, and Square buying Afterpay.

 

Understanding BNPL

 

Buy now pay later, or BNPL, is a form of point-of-sale credit. Shoppers can pay for the product over several payments. For many years, this was called “layaway.” In this service, the item stayed at the store until paid for. With a BNPL, you get the product and then pay over installments that are usually interest-free. When checking out online, shoppers can select it with just a click of a button. The installment period can last a few months.

 

Why the Sudden Popularity?

 

The pandemic has made many brick-and-mortar shops shut down, with many customers shopping from home. This has created an online shopping boom. The rise is nearly 20 percent from 2019. About 2% of that was accounted for with BNPL, and that is expected to double by 2024.

 

Criticisms

 

The biggest criticism is that BNPL could encourage customers to spend more than they should. BNPL plans are popular with Gen Z and Millennials. There is fear about the debt that can be incurred, as there are no formal credit checks. Critics compare these to payday loans, which usually have high interest rates.

 

There are some things set into place to prevent overspending. Klarna is one program that helps with spending limits on an individual basis.

 

Merging Companies

 

Because of this trend, there are many companies looking to position themselves accordingly. Goldman Sachs purchased Greensky, a lender, to offer BNPL. With this purchase, shares of GreenSky have increased 44% before being halted. As mentioned above, Apple, Amazon, PayPal, and Square have all made moves to work with BNPL.

 

The Bottom Line

 

Buying something and making payments on it is an excellent way to get something you need now, such as a bed, a refrigerator, or another appliance. Using this option on the regular does not generally build credit and can lead to overspending if you are not careful.