Growth is rarely achieved overnight. It is more often than not, the result of a concerted effort by change-makers. The faith of early adopters and a certain element of luck are the keys behind the success of businesses, technologies and trends that dominate our day to day lives. An illustration of this is the fintech space, an arena where consumer behaviour has remained fairly stagnant. But now the rise of ‘Buy Now Pay Later’ platforms are poised to upend things.
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The birth of ‘Buy Now Pay Later’ platforms
Previously, people were provided with an option to pay for goods and services with cash or their debit cards. But as costs rose, they were left with little choice but to either rely on burdening loans or interest laden credit cards. It was, therefore, inevitable that a change was due to this sphere of life given the inflexible and practically archaic manner in which consumers were forced to operate.
Slowly, but surely, the winds of change began to blow. With more flexibility than any other payment format in the market coupled, a new payment method called ‘Buy Now Pay Later’ began picking up momentum. Today, clear signs of the transition to ‘Buy Now Pay Later’ are visible in nations across the globe. According to a report by FIS-Worldpay, it is noted that the usage of this new platform has steadily risen since 2018. Starting from 3% of global e-commerce consumers, the number has steadily grown to 8% in 2019 and is expected to reach 16% global usage by the year 2023.
Additionally, younger consumers being able to make purchases without the fear of unpleasant interest rates or threat to credit scores. Hence, the interest-free instalment system of ‘Buy Now Pay Later’ is a welcome reprieve.
The benefits for merchants
While the confidence shown by these young consumers is bolstering the growth of this platform, the main drivers that will determine the success of ‘Buy Now Pay Later’ are the merchants. More specifically, those who actively chose to integrate ‘Buy Now Pay Later’ payment methods into their e-commerce websites and make it an active part of their sales funnels.
From a merchants perspective, one of the immediate benefits is that it opens up swathes of new customers to their business. Moreover, it offers an attractive incentive at checkout for Millennials and Gen Z’s who are tech-savvy and debt-averse. Many of them hail from low-income backgrounds and vigilant about not hurting their credit scores.
Unsurprisingly, more than half the audiences of leading ‘Buy Now Pay Later’ platforms consist of people between the ages of 25-34. Thus, highlighting the opportunity to capture these high-value customers, whom merchants may never have been able to engage with before. The integration of a ‘Buy Now Pay Later’ platforms allows merchants to offer these customers an alternative to making purchases over interest-free instalment payments.
Another benefit is the reduction in marketing effort required by merchants to secure higher value orders. With a ‘Buy Now Pay Later’ platform, their business will organically gain more exposure to a wider range of demographics. Granted, some merchants may express concern that this could result in unsustainable overspending by customers. However, it is the general process of ‘Buy Now Pay Later’ platforms to ensure that no merchant is left high and dry. Consumers are encouraged to purchase within their frame of possibility, however, if they find themselves unable to pay back the costs promptly, they are simply barred from the platform. Thereby protecting the merchants while absorbing the risk.
The benefits of ‘Buy Now Pay Later’ platforms beyond merchants
For merchants, there are several benefits to reap by utilizing ‘Buy Now Pay Later’ platforms. But they’re also the biggest ambassadors of the concept as it’s introduced to growing global markets. As credit card payments are expected to contract from 46% to 28%, there is a shift in payment trends globally. Beyond the bottom line of an individual business, ‘Buy Now Pay Later’ platforms also have macroeconomic benefits.
During trying times like the current pandemic, consumers aren’t keen to make large purchases. As such, the flexibility and relatively lower risk offered by Buy Now, Pay Later platforms offers a means to keep industries operational. In turn, a route for national economies to stay afloat. Ultimately, the concept of Buy Now, Pay Later isn’t constrained to the economies of developed nations. Its adoption is universal, with the South East Asian region showing rapid growth. It’s driven by high consumer demand and merchants seeking to capture these consumers who may show loyalty for years to come.
For example, Mintpay in Sri Lanka resolves a major inconvenience that is driven mainly by the once a month salary cycles that are considered the norm. However, what this means is that as the month drags on consumers are left with less disposable income. This effectively stunts their ability to move and make necessary purchases. With the implementation of Mintpay, people are now able to make purchases with peace of mind and ensure that they can meet their needs, hassle-free.It seems the future is clear, as the generational buying power organically shifts to the younger Millennial and Gen Z populations, ‘Buy Now Pay Later‘ platforms are likely to become the expectation as opposed to the exception. As for merchants, there is no better time than the present to adopt this new payment framework and prepare yourself for the future.
