Would “Buy Now, Pay Later” affect your purchase decisions?
Do you too have a long shopping wish list but can’t afford them all? What if you can buy all those items now and pay for them later? Would that change your decisions?
“Buy Now, Pay Later” (BNPL) allows you to pay for items in instalments. It is gaining momentum as online shopping grows in popularity during the pandemic. More recently, some fintech companies have launched BNPL services in Hong Kong.
BNPL platforms offer fast and easy interest-free instalments to consumers. These platforms partner with different merchants to offer a wide range of goods, e.g. gadgets, household goods, electronic appliances. All these items allow consumers to “buy now and pay later”. When a consumer shops at a merchant’s store and pays via a BNPL platform, the purchase can be split into several instalments. If each instalment is paid on time, no interest or handling fees will be charged. The revenue from BNPL platforms mainly comes from the merchant commissions which are charged at a certain percentage of the transaction amount. Merchants are eager to work with BNPL platforms to drive sales.
BNPL vs. credit card instalment plan:
|Credit card instalment plan||BNPL|
|Service providers||Banks||BNPL platforms|
|Instalment fees or interest||Yes||Generally no|
|Late payment charges||Yes||Yes|
|Number of instalments||May be as many as 60 instalments||Fewer (for instance, three)|
|Transaction type||Retail||Merchants partnered with BNPL platforms|
Note: Some loan products or credit/debit card instalment plans may offer BNPL features, but these products may have different terms and conditions, interest and charges.
Enticement to spend more
BNPL does not only offer flexibility in bill payments, but also encourages consumers to make purchases and often enables them to spend more. With the option to pay in instalments, consumers can end up funding a lifestyle that they cannot afford and jeopardising their financial health. Some may even end up in debt due to BNPL.
BNPL and credit card instalment plans are no different from borrowing. When we shop and make purchases, we should look at how much we can afford and be very clear about “needs” and “wants”. Furthermore, BNPL platforms may not be regulated. If you decide to use these services, check whether there is sufficient consumer protection provided by the platforms.