FinTech Focus: Buy Now, Pay Later (BNPL)
The financial impact from COVID-19 resembles what happened after the Financial Crisis of 2008–2009. Concerned about fees, interest rates, and high levels of debt from loans and credit cards, consumers looked for alternative payment methods in debit cards. For millennials and younger generations, credit is not an option that they qualify for due to low or poor credit profiles. For these spending conscious and debt averse consumers, Buy Now Pay Later point-of-sale (POS) microloan offers have become a popular alternative for payment, by spreading out online and mobile purchase amounts into interest-free installments over time. BNPL has become the “layaway plan” of today’s generation, while credit cards are now considered “old school.”
POS lending is one of the fastest growing segments in the lending sector of FinTech, increasing at 40% volume (YoY) and expected to reach 150% annual growth in 2020, due to an influx of online shopping and government benefits programs. Retailers are also active in this area as they focus on bridging the drop in revenue during COVID-19, by allowing BNPL as a checkout option for their shoppers. The budget-savvy consumer is able to get the product they want now and flexibly pay in full later, at no additional cost — balancing monthly costs and purchasing power.
