Buy Now Pay Later - Scheme or a Scam?

17 January 2022
Buy Now Pay Later - Scheme or a Scam?

“Buy Now Pay Later” is a new trend that has churned the retail and E-commerce business on its fingers. It allows customers to buy items without paying all of them at once. Instead, you have to pay a portion of the price in front, while proliferating out the remaining expense over a pre-defined number of installments. The biggest advantage to this is that these payments are often interest-free, with a very quick approval process.

Let us understand how does this business model actually work:

Earlier it was really impossible to have this kind of Buy Now Pay Later (BNPL) option without having a credit card. And credit cards were also given to that population, who catered to have a certain level of income proof submitted to the credit card company.

But with the rise of Buy Now Pay Later Start-ups like LazyPay, Simpl, Slice Card, UNI Cards, ZestMoney & Postpe, the credit card companies have a lot to panic on!

Instead of charging cumbersome interest from the customers, these BNPL start-ups make a commission of 5-10% from the partner merchant every time a customer makes a purchase.

Sounds Confusing?

Let’s break it into small parts

Part 1

For a customer who gets to buy a product on installment with a 0% interest rate without a credit card, this seems to be a huge win. But what about the seller (merchant) or the BNPL company?

Part 2

So, the catch here is that sellers are willing to pay a small commission to the BNPL companies each time the company has directed a customer to the merchant’s website and initiated payment.

In this way, not only does the merchant makes new paying customers for their product, but also the BNPL companies make money.

So, this model is a win-win model among the customers, the merchants & the BNPL companies.

With the rise in the D2C or direct to consumer businesses and the boom in the E-Commerce industry, Buy Now Pay Later schemes by Startups caters to a huge need and demand of Indian customers.