17th September 2021
BNPL or Buy Now Pay Later offers people 'small credit' for short term. It is the traditional Indian Khata kind of payment instrument. Remember how some Kirana stores keep a Khata for every household and then collect the final amount at the end of every month?
Sounds similar to what credit card does? What's the difference?
- Unlike credit cards, BNPL companies targets small ticket purchases typically, things that we spend mostly on like food, clothes, utility, commute, etc. The repayment cycle is also shorter than that of credit cards (2-3 weeks).
- Medium-large ticket purchases are broken down to instalments (both, zero and non-zero interests). Examples of such Indian companies are Ola Money post paid, Simpl, Flipkart Pay Later, etc.
- A very small percentage of Indians have credit cards because it is too much work. They offer credit line based on credit score/ prior financial records, hence not everyone might get it. BNPL companies can have their own metric to provide credit line, making it accessible to all groups of people.
Working of Pay Later products
Easier illustrated than written, view in landscape mode 👇🏾
Working of Pay Later products/ User flow
Why would people use it?
- Accessible to credit-less audience
- Ease of repayment (auto debit/ UPI)
- Better record of spendings
- Zero percent interest rate in most cases
Although, BNPL heavily promotes instant gratification and you might end up making unnecessary purchases at times!
How do BNPL companies make money?