Jan 4, 2023

Buy now pay later



Buy now pay later (BNPL) is a creation or arrangement for people who are willing to spend but do not wish to pay at the time of buying. However, there is a time period to clear debts. Therefore, it is rapidly emerging as a short-term debt option. The name itself reveals the purpose and nature of this facility. 

As the business model is changing, so are the various ways to process payments. Instead of the traditional ways to make any transactions, there are new systems in place that make the payment process feasible and efficient. A widely used BNPL service is a credit card. People tend to choose payment systems that are easy to understand and make transactions easier. This makes it obvious that this service is largely used for shopping on e-commerce websites and making online bookings. BNPL practice is more popular among young consumers. 

What is BNPL? And how does it work

  • Define bnpl platforms and when and how they originated
  • Any history of bnpl 
  • Can spread their payments over a few months with no extra charges
  • Meant for smaller ticket items
  • Its benefits for the merchants
  • And how it works

A purchase can be made using the BNPL payment option, sometimes referred to as "Buy Now, Pay Later," without you needing to use your own money. In most cases, you join up with a business that offers this service and receives cash when you make a purchase.

Once the lender makes a payment on your behalf, you will need to make the required repayments within the allotted time. As compared to a personal loan, the BNPL program has no interest charges. You have two options for payment: flat cash or free Equated Monthly Installments (EMIs). The lender charges you interest on your amount if you don't pay the amount within the specified payback period.

BNPL benefits merchants 

Increased sales

Customers are enticed to buy more goods by high sales merchants that provide a variety of payment choices, like BNPL. Customers often buy things after they feel comfortable with the payment procedure. Customers choose to buy more than one thing, even if it is a bit pricier, when they get the opportunity of splitting the cost according to their convenience.

Maximize the customer lifetime value

It is said that a business has met customers' demands when they frequently make purchases from an online platform that accepts BNPL payments. Furthermore, by providing flexible payback options, a merchant has also been able to win the confidence and loyalty of customers, as seen by the fact that they frequently return to a platform for purchases. As a result, customers may easily enhance Customer Lifetime Value when they continue to buy on the same platform.

How BNPL works 

Terms and conditions serve as the single point of distinction among BNPL service providers, who all operate under the same framework. Here's how it typically operates:

Purchase anything from one of the partnering stores.

Select the "Buy now, pay later" choice.

Put a little portion of the total cost of the transaction down.

In a series of interest-free EMIs, the remaining amount will be paid off.

The rise of BNPL (300 words)

An alternative to other payment methods

Saving merchants and creating more business with incremental sales

Increases retail conversion rates - shopper's desire to buy something results in an actual purchase by 20 to 30 per cent

Having a bnpl option allows the seller to finish the purchase 

It was used in Australia, the UK, Europe and the US during the pandemic, but in Latin America and the middle east, Buy Now Pay Later has been associated with credit cards

- Ottu has given way to introducing BNPLs to consumers at the checkout

For millennials and gen Z, whose distrust of credit cards have been growing.

During the pandemic, bnpl allowed the ability to split up small tickets and pay back in affordable instalments allowing for more purchase

With its guiding principles of customer-centricity, cost-effectiveness, and credit transparency, Buy Now Pay Later (BNPL) has drawn an increasing number of clients in the youthful demographic.

The ability to postpone payments for goods purchases until the conclusion of the billing cycle is one of the fast-expanding shopping options offered to customers. In the case of payments made throughout the credit period, the short-term funding option divides the repayments into flexible, interest-free instalments. Depending on the service providers' policies, customers can pay with varied credit durations, including one month or even over a year.

The credit limitations for BNPL, however, differ according to whether the offering is interest-free or not. Zero-interest BNPL offerings are normally between Rs 1,500 and Rs 25,000 and are primarily intended for small-value transactions, mainly for regular and necessary purchases.

Future projections indicate that the worldwide BNPL market would generate more than USD 1 trillion in yearly gross merchandise volume (GMV) by 2025 and USD 20.4 billion by 2028. With a current value of Rs 22,500 crore, the Indian BNPL market is well established.

BNPL and pandemic 

The objective of buy now, pay later programs (BNPL) has been reversed, as has the course of many other things in the COVID-19 period. As a result, customers like Win could wind themselves paying for a product before they ever get it—if they get it at all—because of pandemic-related product delays.

Moreover, requesting a refund or even speaking with customer support may be challenging. Utilizing these services, which might be riskier than using a credit card, presents customers with yet another issue.

Buy now, pay later has gained a lot of popularity despite its disadvantages. Salesforce.com data shows that compared to the previous year, digital sales utilizing this sort of financing increased by 40% in 2021.

Ottu's BNPL services 

Every time you use your Ottu Card to pay a bill or subscription, the merchant pays Ottu a modest charge, just like any other credit or debit card business. Interaction is what allows us to provide you with this amazing experience absolutely free of charge.

Ottu was created to assist you in smoothing out your monthly expenditures and arranging them according to a plan that works for your budget and is within your control. Otto will pay your payment when it's due after you place money away on your most convenient schedule. Additionally, if you need a fee-free cash advance and are short on funds, we'll cover your bill payments to provide you peace of mind. Finally, repay us on your following payday with 0% interest and no additional costs.

You never have to worry about going into debt when you use Ottu to pay your payments on time and on to a plan that suits you. Instead, consider Ottu as your personal assistant who manages your bills and subscription services to ensure that you are only charged on the days that are convenient for YOU, not the provider.

How long will it last

  • It is here to stay
  • A great way to increase sales
  • An easy payment option for all
  • Though they are making high volumes on small margins, so no high profits but the consumer acquisition rate is high and more profitable for a bank or fintech company to use for the business.

Customers turned to internet shopping as a result of the economic upheavals brought on by the epidemic. For the purpose of ordering food, clothing, and other necessities, people turned to the internet. By providing free EMIs, Buy Now Pay Later (BNPL) evolved into more than just a straightforward payment method. This helped borrowers feel less stressed about their finances.

The symbiotic relationship between e-commerce and BNPL also has a promising future. By 2024, consumer demand is expected to propel the Indian e-commerce sector to a $99 billion market, according to Goldman Sachs. BNPL will also have the strongest rate of growth among online payment methods, going from 3% in 2020 to 9% in 2024.

In India, the BNPL market is expected to increase from its current $3–3.5 billion value to $45–50 billion by 2026. The research firm estimates that by then, there may be 80–100 million BNPL users nationwide, up from the current 10-15 million.

As a result, more businesses are now participating in the Buy Now Pay Later (BNPL) sector.

There are roughly a dozen BNPL players in India. By working with modern Fintech's, traditional banks are also hopping on the BNPL trend.

Written by : Farooq J. Khalil

Account Manager, Ottu