The rise of digital payments has led people to adopt the buy-now-pay-letter (BNPL) model to meet their daily needs. The growing adoption of the BNPL model has been due to a number of factors including easy access to credit lines, easy payment and payment options, rewards and more.
Even when the fiscal year ends March 31st and taxpayers make their last effort to take advantage of tax rebates and discounts, which usually involve investing and paying big tickets in the form of insurance, thus disrupting the monthly budget, the BNPL has arrived. To rescue them to help meet their daily family needs.
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The BNPL is emerging as a powerful tool for the middle or lower-middle class as it is seen as an alternative to savings, credit card payments. People with limited credit options are also embracing it, reflecting the growing trend of payments as Indians, especially young consumers, increasingly choose the solution for its convenience, accessibility and affordability.
The success of the BNPL has led to the introduction of new formats – such as cards. A BNPL card is a prepaid device attached to a credit line. It extends the line of credit available to customers beyond the online platform to include offline, point-of-sale touchpoints. Currently, BNPL players like LazyPay, Slice and others among others offer card facility to reduce payment complexity for their customers. LazyPay recently launched LazyCard, a prepaid payment instrument backed by a credit line and built with a robust reward structure, creating value for customers by offering cashback rewards on every transaction.
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“BNPL is an important financing tool for young customers who do not have access to a credit card or are looking for a better payment experience,” said Anup Agarwal, Business Head, Lazip, about using BNPL.
Credit Cards vs. BNPL: A Brief Comparison
Accessibility: Although the credit card is a widely used payment instrument, not everyone who applies for a credit card receives it because financial institutions approve customers based on strict eligibility criteria. On the other hand, BNPL may be a preferred option for customers with limited credit history as it gives them short-term credit access using data and technology for strong underwriting. It is suitable for middle-income people and young people who have trouble getting a traditional credit card but still want to save tax at the end of the financial year.
Advantages: The application process is different for both instruments, with some level of documentation and financial approval required to access a credit card. On the other hand, applying for a credit line through BNPL is a fast and hassle-free process with limited documentation.
Rewards: BNPL brings a strong reward structure. With each transaction, customers can receive exciting cashback rewards, which makes their transaction worthwhile. Credit cards also offer rewards; However, these are usually in the form of dots and are limited to merchants who have a tie-up with a credit card company.
Flexibility of interest charges and payments: BNPL usually allows purchases in installments at low or no interest charges. Free credit time can go from days to months. In the case of a credit card, a customer usually has to pay within a month. If the balance is not paid on time, the charge may increase rapidly.
Joining Fee: Owning a credit card is usually a source of prestige for many, and financial institutions usually charge a price to welcome customers into the credit card circle. These include, among other things, the joining fee and the annual fee. BNPL, on the other hand, is more inclusive and affordable, usually with no joining fees or annual fees or hidden charges.
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