Buy Now Pay Later or BNPL is new form of payments where a user can immediately buy a product buy pay for it over a time. Normally this sort of payment terms require a loan application and is reserved for large purchases like a car or home. However, in modern times people are able to use this feature even for relatively smaller purchases like shoes or flight tickets.

There are few major BNPL providers in the world. Affirm, Klarna, Zip and Afterpay are some of the major brands in this space.

Moreover, BNPL has shown to be a driving force in increasing conversion rates in the online shopping world. By providing flexible payment choices, e-commerce stores experience a rise in successful transactions. This has transformed how consumers behave, boosted conversion rates, broadened customer bases, given online retailers a competitive edge, and shaken up traditional consumer credit systems.

Source: https://www.fortunebusinessinsights.com/buy-now-pay-later-market-106408

Advantages over credit cards

Credit cards lend you money to buy things for 30 days. If you do not pay your credit card bill at the end of the month you end up paying pretty high interest rate.

BNPL is lot cheaper as a lot of purchases are often interest free. The BNPL provider earns a profit by having merchant fees on the transaction. In normal credit card operations you might get it as cashback on your card but in BNPL, the company underwriting the money keeps it as their fees.

BNPL companies might impose a much higher fees if you miss your monthly payments which is another way they make money.

Disadvantages of BNPL

BNPL might be seen as an extension of credit cards where consumers spend money they do not have. While for those who spend wisely this is a great tool, for those who may not have self control, this might be another debt trap they walk into.

Future growth

BNPL is here to say and we will increasingly see it everywhere including possibly at point of sale machines. There is a good chance that credit card companies would wisen up to simply allow users to convert any of their large transactions into BNPL transactions where the user can chose to pay for them over time instead of monthly. A lot of credit cards have this feature but they are not surfaced to the user properly.