The Emergence of Buy Now, Pay Later (BNPL)

Buy Now, Pay Later (BNPL) is a way of financing arrangement to meet the immediate need of the consumer, it is also called a point-of-sale installment loan. The BNPL financing arrangement is a quick way for people to fulfill their demands, whilst making payments over the period. BNPL enhances the purchasing power of the individual, as they have the means to make the purchase at that moment instead of saving and then purchasing any item. Some people might ask, what is the difference between paying through a credit card or getting a loan? The real difference is that in getting a credit card or personal loan, an individual goes through excessive paperwork and risk assessment to be eligible for said credit facilities/loans, whereas, in BNPL, you are required to just have a bank account and their specific card. In BNPL, the customer usually pays a certain percentage in advance, and the remaining balance is in three-, six-, nine- or twelve-monthly installments. It usually has little or no mark-up, but zero markups are usually offered when the term of the contract is short-term. In contrast, if an individual wish to change his/her credit card balance into equal installments, the markup charged on the balance is significant, which makes it an expensive proposition for the consumer, as the interest keeps on accruing over the balance. The BNPL’s revenue model is mostly based on purchasing the said item at a lower price, and then selling it to the consumer at the same retail price. The difference between their purchase price and selling price for the BNPL facility is their margin. Furthermore, there is no risk for the retailer as they’re getting fully paid, most of it is borne upon by the BNPL offering facilities. It is estimated that 55% of consumers tend to spend more using BNPL than through ordinary payment methods[1]. In Pakistan, BNPL is slowly gaining pace in Pakistan too as startups have started investing in it. QisstPay and KalPay are two prominent BNPL platforms that are offering this financing arrangement. Different brands like Logo, Iron Gear, Sapphire, etc. have started offering BNPL arrangements. QisstyPay and KalPay, both are offering the same services, but the latter is shariah complied product. Pakistan has a market where the prices are highly volatile due to the economic and political situation. Platforms that are offering BNPL arrangements have the potential to be very widely successful because the market is huge and the fact that anything above Rs. 1,500 can be turned into installments. Alfalah Bank has also started offering this facility to its credit card users and is finding a lot of success, as people are converting their expensive and big purchases into installments. However, Alfalah Bank’s offering is different than the regular BNPL platforms because proper formalities are required before an individual becomes eligible for the credit card. Furthermore, there are processing charges in regular banking schemes, whereas there are no processing charges in BNPL financing arrangements. Buy Now, Pay Later is a great way to encourage and boost sales, particularly for new ventures, as it is an attractive proposition for consumers. Pakistan is in dire need of an innovative way of financing to move forward from the traditional banking schemes. It needs time in Pakistan from both sides because there are a lot of issues, but if one can overcome those challenges, then BNPL has the potential to be a game-changer.


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