During the pandemic, Buy Now, Pay Later services (BNPL) experienced a significant surge in popularity, as consumers increasingly sought out more flexible payment options. These services allow consumers to purchase items and pay for them in instalments over a designated period, ranging from several weeks to months.
A 2021 study by Credit Karma found that 44% of respondents had used BNPL in the last year to purchase goods. However, it was also noted that 34% of BNPL users fell behind on one or more payments, which can negatively impact the consumer’s credit score. As a powerful financial tool with both advantages and drawbacks, it is imperative for individuals and businesses to adequately assess whether this tool is the best option for their needs.
BNPL Overview and Function
BNPL services are financial products that have gained popularity in recent years, particularly among the younger generation, who are seeking greater payment flexibility and increased accessibility of goods.
BNPL services operate by collaborating with retailers or e-commerce platforms to make their services available at the point of purchase. Instead of paying for the item upfront, consumers may opt to utilize the BNPL service, which covers the cost of the purchase on their behalf. The consumer then pays back the cost of the purchase over an agreed-upon timeframe, which may include added fees or interest charges.
Benefits of BNPL
Drawbacks of BNPL