Buy Now, Pay Later: What is BNPL? Popular E-commerce Payment Option Explained

Buy now, pay later (BNPL) is a fast-growing financial model most prominently visible on e-commerce and quick commerce websites. Under this model, customers are extended interest-free short-term loans so that they can make purchases and pay for them later. In other words, BNPL arrangements are point-of-sale (POS) instalment loans. Apart from deferred payment, several BNPL service providers also allow for payment in equated monthly instalments (EMIs) once the interest-free deferred repayment tenure ends. BNPL plans are usually easier to get approved than credit cards or other lines of credit and are more beneficial than loans since they don’t accrue interest.

The major BNPL brands in India include LazyPay, Simpl, Amazon Pay Later, Flipkart Pay Later, and ZestMoney. Most of these brands have the same operational model. Customers can pick the option of “buy now, pay later” when purchasing via the platform of a participating retailer. Once they have opted for the BNPL option, individuals need to make a small down payment of the total amount. The remaining is deducted through interest-free EMIs within a stipulated tenure. The differentiating factor amongst different brands is the terms and conditions they have.

To be eligible for BNPL loans in India, an individual must be a resident of a major tier 1 or tier 2 city in India, must be at least 18 years old, and must be a salaried individual. Additionally, they must also have a bank account and other KYC documents in place.

Using the BNPL option offers people instant access to credit, boosting their ability to afford things. The process is simple, transparent, and secure and provides the benefit of no-cost EMIs. However, it has its risks. According to the Economic Times, the prospect of paying in small amounts can lead people down a rabbit hole of spending more than they should. In case a person fails to pay the amount within the repayment tenure, the lender will charge interest on the unpaid amount and could impose hefty late payment fees. This could snowball into a debt trap. Like most other loans, non-payment or payment delays can adversely impact the customer’s credit score.

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