The rise in digital payments has led people to resort to the buy-now-pay-later (BNPL) model to meet their daily needs. The growing adoption of the BNPL model is due to many factors which include easy access to a credit line, easy payment and repayment options, rewards and much more.
Even as the financial year comes to an end on March 31 and taxpayers make their last attempt to take advantage of tax rebates and exemptions, which usually involves large ticket payments in form of investments and insurance, thus disrupting the monthly budget, the BNPL has come to their rescue in helping them to meet their daily family needs.
The BNPL is emerging as a powerful instrument for the middle class or lower-middle class as it is seen as an alternative to paying from savings, credit cards. Individuals having limited credit options are also adopting it, reflecting a growing payment trend as Indians, especially young consumers, are increasingly opting for the solution for its convenience, accessibility and affordability.
The success of BNPL has led to its introduction in newer formats – such as cards. BNPL cards are prepaid instruments with a credit line attached. It expands the available credit line to consumers beyond online platforms to include offline, point-of-sale touchpoints as well. Currently, BNPL players such as LazyPay, Slice and Uni amongst others offer the card facility to ease payment complexities for their consumers. LazyPay recently introduced LazyCard, a prepaid payment instrument backed by a credit line and built with a strong rewards structure, creating value for customers in every transaction by offering cashback rewards.
“BNPL is an important financing instrument for young consumers who may not have access to credit cards or are looking for a better payment experience,” Anup Agrawal, Business Head, LazyPay, said on the use of BNPL.
Credit Card Vs BNPL: Brief Comparison
Accessibility: While credit card is a widely used payment instrument, not everyone applying for a credit card gets one as financial institutions approve consumers based on strict eligibility criteria. On the other hand, BNPL can be a preferable option for consumers with limited credit history as it grants them access to short term credit by leveraging data and technology for robust underwriting. It is appropriate for people with mid-income and the youth who face trouble getting traditional credit cards but would still want to save taxes during financial year-end.
Convenience: The application process for both instruments is distinct, where there are some levels of documentation and financial approvals required in accessing a credit card. On the other hand, application for a credit line via BNPL is a faster and hassle-free process with limited documentation required.
Rewards: BNPL comes with a stronger reward structure. With every transaction, consumers can get exciting cashback rewards, making their transactions valuable. Credit cards also provide rewards; however, these are usually in point form and are limited to the merchants that the credit card company has a tie-up with.
Interest charges and repayment flexibility: BNPL allows purchases in instalments with usually low or no interest charges. The free credit period can go from days to months. In the case of credit cards, a customer has to usually repay in a month’s time. The charges can add up quickly if one doesn’t pay the balance in time.
Joining fee: Owning a credit card is usually a prestige factor for many, and financial institutes generally charge a price to welcome consumers in the credit card circle. This includes the joining fee and annual fee, amongst others. BNPL on the other hand is more inclusive and affordable, typically with no joining fee or annual fee or hidden charges levied.