Advantages and disadvantages of the BNPL market
The BNPL approach became popular during the pandemic when a huge number of shoppers moved to the Internet. The idea behind this model is the slogan “buy now, pay later,” which sounds extremely appealing to buyers. However, regulators are quite wary of BNPL-sector representatives.
Paying BNPL implies that the customer gets a small amount of credit to pay for goods. That is, in effect, the person is spending money they don’t have. This is what often lends itself to criticism that works against BNPL services. A prime example is the UK retailer Iceland, which planned to launch its own tool based on such technology. However, many politicians have spoken out against such a service. According to representatives of one of the parties in Parliament, by allowing customers to pay for food on credit, the store chain brings consumers into an even greater crisis and forces them to spend even more money in the face of rising prices.
At the same time, according to analysts, the BNPL-segment growth rate is about 20% per year. In 2021, the market is estimated at $4.1 billion, which indicates the popularity of such a service. For example, last year residents of Canada made 36% more microloans through the BNPL model than in the previous period. The number of users of such services in the U.S. increased by almost 67%. In this case, the debt of Americans on loans is 14 million dollars, which is considered a record figure for the entire world history.
Expert Chaslau Koniukh notes the main advantages of BNPL services are their simplicity for both users and service providers. In this case, there is no need to conclude complex loan agreements, and consumers are not checked for creditworthiness. Thanks to this, people can buy the goods they need without the hassle and almost instantly. According to a survey by Equifax, consumers would like to spend twice as much on purchases, but BNPL options are not available to them in a number of sectors.
Despite the criticism, representatives of the microcredit market believe that their model, on the contrary, allows customers to better manage their funds. Thanks to the services, customers can buy the goods they need when they need them most, rather than waiting for the end of the month or for the money to arrive in their account. It also allows people to react better to inflation and price increases.
However, representatives of the BNPL sector are deceiving, because they earn part of their income by charging fees for overdue payments.
Anyway, the BNPL model has both positive and negative features, which require clearly defined regulations.