It seems that options like monthly installments and credit cards were less for Indian marketers. For the last two-three years, many fintech firms have come up with another scheme called Buy-Now-Pay-Later (BNPL). With the Covid attack in 2020, its popularity among consumers also started to increase.
Buy now, pay later. It may sound good to hear this sentence because in this you get the facility of payment later like a credit card. But if you are negligent, then late payment charge and interest cost can pierce your pocket.
According to ZestMoney, an Indian EMI financing and pay letter company, about 68 percent of its users are from tier-2 and tier-3 cities. The remaining 32 per cent of users are from tier-1 cities.
Here we are trying to explain to you the dangers associated with Buy-Now-Pay-Later with the example of 27-year-old Shalini Rao of Poona. Because of COVID-19, like other people, Shalini Rao also shifted to online. But with the online, she gradually moved towards the BNPL. Rao says that he found this facility quite convenient and attractive around the festive season. It also had the facility to convert purchase payment to EMI. But Shalini Rao later had to pay a heavy price for it.
According to a ZestMoney report, the average age of consumers opting for BNPL in 2020 was 34 years. According to ZestMoney’s 2020 report, most of the people availing this facility used it for online education purchasing, buying other electronic equipment, fashion and travel.
ZestMoney CEO Lizzie Chapman says that in 2020 a lot of people opted for the BNPL. This year will also see an increase in this business. Consumers are opting for all digital options for credit.
Yogesh Verma, Mswipe’s business head, says people in metro cities like Mumbai, Delhi and Bangalore are increasingly adopting the BNPL option. The average transaction size under this is Rs 43000.
How does this scheme work
The buy-now-pay-later scheme allows you to buy something now and pay it later in installments. Its most basic format is that when you open your account with a fintech firm and get your registration done in it, this firm gives you the convenience of shopping with one of your partner merchant (online store).
You make this purchase in advance and pay it in 15 to 30 days. But in case you are unable to make the payment for your purchase within the stipulated period, then you have to pay huge interest. Which depends on your bill amount. Some BNPL firms offer 3 to 6 months of payment in installments on the basis of no-cost credit on purchase of expensive items. This means that you have to pay the bill in the same period. Some fintech companies in this segment include companies such as Amazon Pay, ePayLater, Kissht, LazyPay, Simpl, Slice, ZestMoney.
You can get your registration done in many fintech companies at the same time. In this, you get a credit limit according to your credit profile. Many e-commerce companies like Flipkart, Amazon, BigBasket also provide facilities like buy today, pay later. Food delivery companies like Zomato and Swiggy are also not far behind. Here also you get this kind of facility. Travel portals like Goibibo and Cleartrip also provide this facility.
Digital lending consultant Parijat Garg says that such fintech companies are targeting people who do not have credit cards.
BNPL works as an alternative to credit cards. Under this, you buy a facility and an item now and pay it later in a certain period, but after this period, you may have to pay a big price with late fees and interest.
Aparna Ramachandra of rectifycredit.com says that if you are negligent or forget about you, this feature can be very heavy on you.
Now here once again we take the example of Shalini Rao. Shalini Rao got caught in the lure of such schemes and made many big purchases and in the event of losing the job during the Covid period, she defaulted in paying bills and could not repay the EMI within the stipulated time. Due to which a debt of 60,000 rupees was incurred on him.
Aparna Ramachandra says that a personal loan taken from a bank is also cheaper than a buy-now-pay-later scheme in the event of default. On personal loans of up to 5 lakh rupees, large banks charge annual interest of 8.9 and 10.5 per cent, while the interest charged under the buy-now-pay-later scheme is much higher.
Apart from this, your credit score is also bad if you default under BNPL scheme. Due to this, you may face difficulty in getting loan and if you get a loan in any way, then you have to pay huge interest on it.
Ramachandra further said that before going into such a scheme keep in mind that all the fintech companies providing this facility are offering you personal loans in different packaging which are quite expensive and unsecured.
Therefore, you should take advantage of this type of credit facility very thoughtfully. Otherwise you may get caught in debt. If in any case you also take this option, then pay the bill or installment on due date.
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