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The idea of buy now, pay later (BNPL) is a simple one, but one that is having a huge impact across economic sectors, including app and software development. Initially developed as a method to boost retail sales with large chains allowing customers to effectively buy products and pay for them later, often with no additional interest charged.
You can now buy food on BNPL plans as well as pay for your wedding at a later date. Given the broad scope of services that have now been supplemented with BNPL, it is wise to briefly go into how a BNPL could work.
If the retailer offers the service, a customer will apply with software and the underlying infrastructure potentially approving the application in seconds. Once approved the customer needs to pay a deposit, which is traditionally around 25% of the total purchase amount but this is up to the retailer or the underwriter. If approved and the deposit is paid, the customer will pay off the rest of the amount over the agreed period but importantly the instalments paid are interest-free. Often how the customer pays the subsequent instalments is made as easy as possible with various payment methods being available, including automatic deductions from your debit card, bank account, or credit card.
While major retailers were quick to adopt BNPL and poured massive amounts of capital to develop the IT infrastructure to power the new payment method. That being said, when the cons mentioned above are looked at, they have their root in the app or software. This means that there is room for smaller retailers to assist in buy now pay later app development for a better shopping experience to be enjoyed by customers.
The BNPL innovation sounds great, and it can be but like with anything there are certain pros and cons that need to be considered. Regarding the cons, late payments can exacerbate consumer credit scores impacting future use of BNPL schemes. Software or app teething issues can result in difficulty to track payments or payments being deducted from customers despite the product being returned.
However, if these cons can be overcome, retailers can potentially unlock the following pros: a convenient way to pay for purchases over a given time period; offering consumers an option with no interest, or much lower interest rates when compared to credit cards; and lightning-fast approvals that often don’t require exceptionally high credit scores.
In the future, we might see more tailored apps for specific economic sectors offering custom BNPL solutions to customers. This will be driven by retailers and developers working together to overcome current problems and is a process that is well underway.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.