The Increasing Popularity of Buy Now Pay Later Programs

Buy now pay later programs are becoming an increasingly popular method of payment. These programs allow customers to buy products for a small initial price, either online or in some select stores, and pay a specific number of installments (commonly monthly). However, shoppers should be very careful because BNPL programs can cause people to overspend, as it can become increasingly difficult to track every payment, and the exact date at which it’s due. This could result in negative consequences such as an overdraft in one’s account or late fees, possibly causing extreme stress if the shopper does not have enough money. Additionally, if an individual is scammed, they are not able to receive a refund for their purchase. Despite the risks, many have switched to the BNPL method because GenZ and Millennials do not trust credit card companies; in turn, they can still feel as though they’re “worth loaning money to,” without the potential risk that comes from financial industries (i.e. banks). To ensure they remain high in popularity, BNPL businesses, like Afterpay and Affirm, are taking action, and providing frequent reminders of when payments are due so buyers won’t face adverse consequences.  

The BNPL system offers many incentives, along with disincentives. Among the incentives are that people who do not wish to use a credit card or want to be able to purchase a product at a low price, initially, can do so; this allows buyers to develop trust within the company and within their spending abilities, which will attract users to the BNPL business and helps improve its reputation. As for disincentives, users may have to pay late fees or face greater interest, if unable to pay, therefore preventing them from making the same mistakes again. By making the prices and costs for goods seem lower, businesses are likely to receive more purchases and increase their own revenue since people won’t have to pay for items in full, and thus afford to buy more at a single time. Companies will continue to employ these methods at an increasing rate, for today’s generation is less likely to use credit cards in their purchases. This could be beneficial as it allows younger people to develop financial responsibility early, but it could also result in unmoderated spending, a harmful habit.