Want to flaunt a voguish dress in your farewell, but cutting on a budget? Looking to buy the next greatest mobile set available in the market but the last days of the month are not letting you do so? Then, this article may be a help for you!
We all suffer from the last days of the month cash crunch or in fact, many are barely meeting ends, waiting for the next month to begin, so that the dark clouds fade. The list of buying a piece of furniture, washing machine, refrigerator, AC, vacuum cleaner and so on… still remain pending in the monthly to-buy list but just because we lack some cash, we delay the buy or wait for Sale.
Sale! Sale! Sale! In this booming world of E-commerce, these words are set in stone. And, who does not want to hop onto the offers, letting you buy 10k stuff in just 8k or maybe less than that. But, such offers come in the festivity times and delaying the demand is not always an option. So, what can be the next- buying the things on credit? Surprisingly not all Indians own Credit card facilities.
As per Statista Research Department, in India, as of August 2020, credit cards were nearly 58 million in use, and the first wave of covid-19 played a huge role in this. Credit card payment default may cost you late payment fees and interests which are levied on the outstanding amount.
Many a time, people are not even aware of how to use credit card facilities properly, thus they don’t opt for credit cards. So to ease the credit system,“ Buy Now Pay Later” Apps are the new lenders. With the advent of Buy Now Pay Later, which are famously known by their acronym, BNPL apps, getting a short-term microloan from purchasing clothes to food on an E-commerce site on credit has become easy and fast.
An Overview On Buy Now Pay Later Segment:
As per India Buy Now Pay Later Business and Investment Opportunities (2019-2028) Databook, released in February this year, Providers of Buy Now Pay Later (BNPL) services are tapping into a large group of Gen Z and millennials who are hesitant to use credit cards in India. The lockdown due to coronavirus, job losses, salary cuts, and uncertain incomes have also contributed to the popularity of BNPL in India.
For example, LazyPay, a major player in the BNPL payment method in India, has experienced a significant increase in its entire client base and now serves over 30 million people in the country. Following the coronavirus epidemic, Simpl, a BNPL payment provider in the nation, saw a 40% rise in daily necessities transactions from hyper-local shops. The growing popularity of the BNPL payment method is also tempting big players like Paytm to enter the market; they have tied up with HDFC bank to facilitate BNPL services.
The report says, when it comes to BNPL and digital payment, India will see a rise mainly because of its demographics and high youth population percentage. The usage of BNPL payments is anticipated to increase gradually throughout the projection period, with a CAGR of 23.5 per cent between 2021 and 2028.
In another research report by Medici research, India’s digital loan market may surpass $100 billion by 2023, posting a CAGR of 36%. In India, there are 330 startups in the digital lending industry. Because of the social and economic effects of the COVID-19 epidemic, digital payments have increased dramatically, with UPI reaching 1.34 billion transactions in June 2020.
How Do Buy Now Pay Later Apps Work?
Buy Now Pay Later is not a novel idea, rather it works on the already prevailing systems that we have been using with our nearby Kirana stores or grocery marts.
How?
Remember, in many families, it is a system where we buy milk from milk-man every day, but we don’t pay him on a regular basis. We wait till the end of the month, sum up the number of litres of milk we purchased, and at the beginning of the new month, we pay him the due of the last month. Basically, here the purchase was on credit. And, as soon as the dues are cleared, a new cycle goes on. Here’s a thing to note, we don’t pay him any late fees or interest for any late payment. Everything working here is on a trust basis.
In easy words, if we say, then most of us have read outside Kirana stores “Aaj Nakad Kal Udhaar” ( Pay cash today, take debt tomorrow). But, BNPL is the reverse of it. Take Debt today and pay later.
Let us understand it with the help of an example.
You want to buy a pair of jeans that costs around 5 thousand, and you do not have any surplus left for the month. Now, with the Buy Now Pay Later option, you can buy that pair of jeans and pay later to the credit facilitator later.
Suppose, you visit an e-commerce site, select the pair of jeans you want to buy, add it to the cart. When you are going to proceed with the payment– you get three to four options. Cash on delivery ( COD), Debit Card Payment, UPI, Credit Card payment and BNPL option. BNPL option is linked to a loan facilitator company already.
Now, when you choose the Buy Now Pay Later Option, you are directed to an app where you are supposed to have an account. With filling up some credentials, you are good to go!
Now, the purchase is done. The product will be delivered to you. Your transaction with the e-commerce site is finished, what’s pending is to deal with the BNPL app; you are yet to clear the dues!
How will you repay the loan?
It’s easy! Many BNPL apps give you features of a hassle-free 15-day repayment period, at ZERO added interest. If you bought a pair of jeans on the 20th of July, then within the period of 15 days you need to repay the amount to the app. Even, you can repay your microcredit in EMIs in 3, 6,9,12 months period. There are several discounts, offers are going on on these platforms, the customer must read the terms and conditions diligently. Not only this, some apps provide short-term loans for other purposes, so the customer needs to check from his/her side.
Not only this, the interest rates, the repayment cycle period, late fee charges, all vary on different platforms, thus, it becomes the duty of the customer to check. The unsaid rule of caveat emptor applies, but if you shop carefully with all eyes open, you can make a killing.
Is it as easy as it sounds? What’s the catch?
BNPL apps are synonyms to credit cards, but they are the digital, non-physical mode of it. Just like credit cards, they also levy extra charges based on the amount outstanding on EMIs or on defaulting repayment. From here, the company gets a big chunk of revenues. And, with this facility of BNPL services, a potential customer turns into a sale.
So, if you are someone who loves shopping and can’t really differentiate between the need and the want, then beware! you may get addicted to such platforms. Who knew, you may also end up selling your piled stocks as Rebecca Bloomwood did in Confessions of A shopaholic!