BNPL, based on point-of-sale installment loans, has become a budding payment trend among online shoppers. The Buy Now, Pay Later approach allows customers to make purchases online but complete the full payment afterward in EMIs. Often, these EMIs are free from interests. Reports say that as of April 2021, around 46% of people made at least one purchase via the buy now pay later option.
Coming to the other side, credit cards have been here for decades. It has naturally assimilated into the online eCommerce ecosystem over the years. But, regardless of that, credit cards bring a lot of hassles related to paperwork, credit scores, authentication, and so on.
Some of the key takeaways of BNPL and credit cards are –
- The shop-now-pay-later scheme allows customers to make online purchases and pay the amount in multiple installments.
- Credit cards also let customers pay over time. However, the required payment is the monthly minimum due.
- The pros and cons of the pay-later program entirely depend on a customer’s financial condition.
- Credit cards have interest rates, but BNPL does not have them until customers complete their payment within due time.
- Credit cards often offer cashback or rewards on purchasing items, which BNPL does not (mostly).
Nevertheless, there are some points that make this new credit payment system better than credit cards. Read the article to learn about them.
A Less Strict Eligibility Criteria
Getting hands-on with a credit card means fulfilling some strict eligibility requirements. That includes having a substantial income, good credit score, credit history, etc. Without these, most banks and financial institutions do not provide credit cards to customers.
However, on the other hand, one can easily apply for BNPL because it does not demand hefty paperwork. It relies on AI and Machine Learning processes to assess how any individual is fit for credit eligibility. Therefore, millennials and first-time borrowers mostly choose this new credit payment system instead of credit cards.
No Usage Costs
Most credit card companies involve usage costs like a joining or annual fees. But, unlike credit cards, BNPL has no such charges or usage costs. It is completely free to register for a pay-later program. The only amount that one needs to pay is the outstanding bill amount within the prefixed due dates. You will be charged a late fee if you fail to pay the amounts within the stipulated time.
The Convenience of Usage
Customers who have registered for the BNPL program do not require sharing bank or card details. This makes BNPL one of the top choices when your priority is about completing hassle-free, smooth and safe transactions.
Compared to credit cards, the shop-now-pay-later program –
- Eliminates the need for OTPs while making a purchase, thus leading to convenience.
- Accelerates refund processing time than other payment methods.
- Makes way for a close-to-zero chance of transaction failure
Safe and Secure System
Industry experts suggest that the elimination of OTPs is one of the reasons BNPL keeps bank details secure. Moreover, most third-party service providers have top-notch security encryptions. It makes the payment system safe from cyberattacks.
The buy now pay later financing system has garnered appreciation in most countries globally. Especially during and after the pandemic, the rate of people preferring this payment method has increased massively.