The “Buy Now Pay Later” is a unique concept rapidly transforming the Indian lending landscape. It is an excellent alternative to credit cards and “pay now” methods with debit cards and net banking besides UPI. No wonder digital wallets now offer the payment method for a shopping experience far different from the past practices that offer short-term credit payable in installments and many online merchants partner with well-known fintech to roll out the facility. So, let us start learning about the system in greater detail.
Understanding the Buy Now Pay Later concept or Digital Credit:
Unlike the “pay now” regime in the digital payment ecosystem, Buy Now Pay Later (BNPL) or Digital Credit is an option where you shop without paying upfront from your pocket. Instead, you sign up with a service provider that delivers the purchase price on your behalf. But, you repay the borrowed money in stipulated no-cost Equated Monthly Installments (EMI) or in a lump sum according to your convenience. In the case of default, the lender levies interest at agreed rates. Further delay in repayment impacts your credit score adversely.
MobiKwik, India’s one of the largest online payment platforms, also has a pay later option called MobiKwik ZIP. Through this, you can easily opt for BNPL and make your online payments more convenient and smoother.
How does BNPL work?
The BNPL model is fast becoming the preferred choice among shoppers, especially on eCommerce platforms, with many lenders providing generous terms. It is pertinent to point out that the BNPL lenders follow the same model, with the terms acting as the only differentiator. But the prerequisite to using the novel option is signing up with the lender online.
The finance company or fintech processes your request using your PAN card and bank account details to set the monthly credit limit depending on the average monthly balance. In addition, it forms the basis for the recovery of the EMIs. Now, the following steps complete your shopping experience using BNPL or Digital Credit.
Complete your shopping at the retailer
Select the BNPL option as the payment method
Make a small down payment for the purchase value
You repay the balance through the automated recovery in a series of interest-free EMIs per the agreement. You have an eclectic choice for paying the EMIs through cards, bank transfers, or cheques, But lenders prefer recovery directly from your account.
Advantages of BNPL:
A BNPL payment method is a win-win option for your shopping experience. You can shop to your heart’s content without bothering the billing, as you pay only a fraction of the total value to seal the short-term credit. So, let us consolidate the several benefits awaiting you on the BNPL platform.
Enhances your shopping affordability
You have instant access to credit without indulging in lengthy processes
The transaction is fast, secure, and efficient
Choose your repayment term in no-cost EMIs matching your convenience
The process is straightforward and transparent
Difference between Credit cards and BNPL:
Both the systems follow a similar model providing the user credit to fund their purchases. Yet, there are glaring differences between the two. So, let us check them out:
Parameters | Credit Card | Buy Now Pay Later |
Interest rate | Usually high between 30 and 40% per annum | Usually low between 10 and 20% applied upon default |
Usage | Not restricted to specific retailers | Tied to particular partner retailers |
Credit limit | Linked to the gross monthly salary | Related to average monthly account balance |
Minimum Payment | You can pay a minimum amount every month | No such facility for the minimum amount of payment |
Future portends for BNPL:
The concept benefits all the stakeholders and can generate more conversions. The purchaser gets an affordable payment option, the merchant has higher traffic, and the lender has the scope of increased lending, which ultimately translates into higher revenue. Thus, the BNPL system offering no-cost EMIs is likely to be a one-stop for all your needs shopping mode for future customers. MobiKwik’s Buy Now Pay Later option ZIP lets users pay their dues timely even if they are short of money, so that they can enjoy uninterrupted services without any inconvenience.
But, the concept is attractive if you stick to the rules and do not default. So, it is tempting the youth for the additional benefit of BNPL to trigger shopping sprees without the hassle of looking at the billing value.
Final Words:
Digital payments are the current favorite among shoppers and customers using the various available platforms for recharge and bill payments. The BNPL is a novel, innovative payment method by the online payment platforms like MobiKwik, luring customers to seek the benefit. But on the flip side, BNPL is still a short-term loan you must repay. So, use the facility prudently to reap the maximum benefits with timely repayment allowing you to save money.
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