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Buy now, pay later (BNPL) purchasing options--like Klarna, Affirm, and Afterpay have made their mark on the world of online shopping. But, many store owners are still working to introduce these popular payment options.
If you need more clarification regarding BNPL, is here to help. We'll take a look at the most compelling advantages and disadvantages of buying nowand and pay later.
The Pros of Buy Now and pay later
Easy and Transparency
Additional Customer Buying Power
Buy nowand pay later options have become favored for a reason: customers enjoy access to a higher buying power with minimal hassle. If you offer BNPL options in your online shop, you will be able to help customers purchase more. BNPL benefits both sellers and buyers.
Customer Financial Control
In the event that customers need or want online purchases, they may encounter financial strain that holds their purchases from making purchases. Since BNPL alternatives divide a buyer's purchase across four easy payments, buyers can access much greater financial control. Since installments are scheduled every two weeks this requires just one small payment per standard bi-monthly paycheck instead of one big sum.
No Fees or Interest
Pay now and pay later can provide the payment flexibility that a credit card offers with no additional costs. If customers pay their regular payments in time, BNPL options will not cost interest or charges. But, they often make late charges on missed payment dates.
In addition there are many BNPL companies offer additional financing options beyond the standard "four quick installments." The financing options work more like credit cards, including additional installments, as well as interest charges.
However, the traditional BNPL loan period will be free of interest or other fees.
The Cons of Buy Now, Pay Later
It is easy for customers to get too near to the sun, if they're not mindful of buy nowand pay later, and buy now options. We'll take a take a look at the pros and disadvantages of BNPL.
Inexpensive and Buyer's Remorse
BNPL choices can to improve the financial condition of a client through the possibility of spreading a purchase's expense across several paychecks. But, some customers have complained that the buy now, pay later options allow them to purchase more than they can pay for. According to Bankrate 57% of customers regretted a buy now, pay later purchase because "it cost too much."
Late fees and financial distress
Budgets that are stretched too far can result in an additional burden on financial resources for buy now, paying later clients with the help of fees for late payments, interest, or credit score damage. The Consumer Financial Protection Bureau (CFPB) investigated these concerns. Their report states that BNPL consumers, on an average are "much higher-risk to have high levels of debt and rely on credit cards, experience delinquencies in traditional credit products, and use high-interest financial services."
But, the CFPB report notes that there was a financial crisis in these individuals prior to the introduction of BNPL. It is necessary to conduct more research to find out if buy-now, then pay over time "improves the financial condition of consumers in distress or even exacerbates these disparities ."
Subscriptions, Recurring, and Purchases
As customers are eager to sign up to BNPL options, they might be disappointed when they discover they're not compatible with some fees, such as subscriptions.
Buy nowand pay later services are short-term, interest-free installment loans. Like most loans, the buyer's eligibility, terms, and conditions must be approved prior to the date at which the sale is made. As such, they can make it difficult to set up recurring fees, such as those in memberships or subscriptions.