Best Buy Now Pay Later Apps
Modern Buy Now Pay Later (BNPL) services have been available since the mid-2000s. However, it took them about a decade and a half to gain popularity. Having grown in usage in the West, BNPL apps are now spreading into other parts of the world. These services offer various options for people to shop conveniently by making payments in instalments.
In this article, we will tell you about BNPL services and mobile apps: how they work, their advantages and disadvantages, and the best options to use for maximum benefits today.
Why Pay Later?
Making complete payments for goods and services is the best way to manage your spending. However, sometimes you may not have enough money to complete a transaction. At such points, you will need an option to make payments in parts over a short time. That is when the idea of "buy now, pay later" comes to your rescue. Through what looks like a personal loan, buy now pay later services allow you to spread out your payments, usually in equal instalments over a short time.
The Rise of BNPL
Payment structures like the contemporary "Buy Now, Pay Later" emerged about 200 years ago. They developed simultaneously with traditional bank loans and were available mostly in Western nations and India.
In the early stages, the instalment system was used for purchases like farm machinery, household furniture, and musical instruments. The list of items gradually increased over time, and everyday expenses began to receive preferential treatment.
What people found attractive about this system was its simplicity and lack of time-consuming procedures. During the period, merchants provided such services with little or no third-party assistance and kept manual records of debtors.
Credit card issuers are the typical rivals of instalment payment systems. Banks and other financial institutions issue credit cards and charge interest to encourage customers to make their payments on time. But there are also a lot of negative aspects to credit cards. Despite appearing easy to use, they still come with some forms of control, such as by financial institutions and regulatory agencies. Besides, you must pass a reliability and solvency check before registering, and poor behaviour might spoil your credit history.
FinTech businesses decided to profit from instalment sales at the start of the twenty-first century. The rising acceptance of cashless payments and the popularity of internet shopping both contributed to this. Even the dot-com bubble's collapse, which many said would limit the growth of online businesses, did not stand in the way. Today, many e-commerce stores accept instalment payments, including "buy now, pay later" services.
The instalments can be free or paid for by the customer — it all depends on the terms and conditions of the transaction. If a buyer breaks the agreement, such as failing to make the next instalment in time, the seller or third-party instalment service provider could charge a commission or penalty.
During the COVID-19 pandemic, the model gained popularity among young customers, also known as Millennials and Generation Z consumers. It was in the same period that e-commerce volumes skyrocketed. According to a report by GlobalData, transactions made through Buy Now Pay Later services accounted for $2 of every $100 purchased online in 2021. In the same year, the value of BNPL transactions worldwide was $120 billion, growing approximately four times from $33 billion in 2019.
Regulators are concerned about the Buy Now Pay Later industry's growing popularity. The FCA has been making several attempts to take control of the UK BNPL market. In February this year, the FCA compelled Klarna, Laybuy, and two other service providers to modify their terms and conditions so that customers can easily understand them and know the consequences of abusing their services.
How BNPL Works
BNPL providers have websites and mobile apps that consumers can use to obtain their services. The way they work differs slightly from how traditional instalment payments work. In particular, “buy now pay later'' is ideal for small purchases and short-term expenditures. But instalment loan payments are meant for big purchases, like buying a car or a home, and can cover a period usually longer than a few weeks.
In the market, you will find that some providers fix limits on the total amount you can spend on payments via their BNPL services. Also, they often break down the cost into three or four equal instalments: you make the first deposit at checkout and pay the balance from your BNPL account at regular intervals. The payment period can spread over a few weeks or months. Moreover, you can use the BNPL app to track the status and schedule of your payment.
Similar to instalment payments, buy now pay later services require minimal paperwork, making it easy to register and get the financial assistance you need. Some providers only accept basic personal information, such as your name, address, and phone number.
The simplicity and speed of using Buy Now Pay Later services are the main reasons they are so attractive, especially to young people. Also, they are known for their interest-free nature, which is what many consumers like about them.
Every BNPL company has its terms and conditions. They also have a design for how the payment should work. Nevertheless, generally, you can expect it to follow this pattern:
- You buy something from a retailer and choose BNPL at checkout.
- Your request to pay in parts is processed, usually within seconds.
- If the retailer agrees to BNPL, you make a down payment of a small amount, which could be 25% of the money for what you have bought.
- You then follow a series of three or four interest-free instalments to pay off the balance on the purchase.
There are different payment methods for BNPL services. Depending on the retailer and your BNPL company, you may pay the balance through checks or bank transfers. Other options include automatic deductions from your account with a traditional bank or neobank, or directly from your debit/credit card.
Buy Now, Pay Later for Business (B2B BNPL)
The buy now pay later alternative for business-to-business transactions is known as B2B BNPL. Like the BNPL for business-to-customer (B2C) purchases, which we have been talking about, the B2B BNPL system is a short-term financing product that enables small businesses to make instalment payments to their supplies, distributors, and other B2B marketplaces. It involves the extension of a credit line to a business according to its financial performance, allowing the company to spread out payments for purchases when experiencing tight cash flows or tough constraints in its working capital.
An example of a BNPL for business can be a small retailer who regularly purchases expensive cosmetics from a distributor or B2B marketplace every week. Here, a B2B BNPL service provider may extend a line of credit with a flexible payback option to provide enough money to cover inventory for 15 days. In this manner, the seller is assured of payment for the invoice, and the retailer does not struggle to find cash for purchases.
- Simple account registration process
- Easy-to-use services
- Fast approvals from service providers
- Payments can be linked to your bank account or card
- Opportunity to spread out payment for purchases
- Mostly interest-free payments
- Often do not need your credit history for registratio
- May carry out a soft credit check
- Better alternative to credit cards
- Convenience through automatic payment deductions
- Often offer virtual cards for online and in-person purchases
- May encourage frequent unplanned buying
- Late payment attracts a fee
- Repayment plan is not flexible
- Can spoil your credit rating and qualification for loans if abused
Best BNPL Apps
We searched the online market for the best “Buy Now, Pay Later” services you can use today and found the ones listed below. They offer simple account creation online and allow you to spread out your payments for purchases.
Klarna was founded in 2005 in Stockholm, Sweden. Ever since, it has extended its services from Europe to Australia, Canada, China, the United States, and many other overseas markets. It is arguably the oldest and best BNPL online platform with a user-friendly mobile app.
Klarna enables its more than 147 million active customers to pay for purchases from over 400,000 merchants through a variety of instalment payments. Popular examples of stores that accept Klarna for BNPL are Adidas, H&M, Lenovo, Tommy Hilfiger, Calvin Klein, and GameStop, to mention a few.
With Klarna, you can choose to make four interest-free payments (pay-in-4) or pay the complete balance within 30 days without interest. Those who prefer a longer-term option for larger purchases can use the 6-to-36-month financing plan. It also provides virtual cards for online and in-person shopping. However, expect a soft credit check to use this service.
Clearpay, which is also known as Afterpay outside the European Union (EU), was created in 2014 in Sydney, Australia. It is a “Buy Now, Pay Later” service provider that operates in the EU, Canada, the UK, the United States, and some other parts of the world.
Clearpay provides its 20 million customers with many shopping choices through its collaboration with more than 100,000 brands. You can use its mobile app to add a virtual card to your mobile wallet and easily make payments for purchases. It does no credit checks and splits purchases into four equal payments. However, the credit limit starts at $500, and you should expect a fee of up to 25% of your original order if you make a late payment.
Furthermore, businesses can use Clearpay’s application programming interface (API) for direct integration of the BNPL service with their e-commerce platforms. It is simple to use and does not require you to write any code. Moreover, individuals can use Clearpay for BNPL payments at several leading retailers, including Dillard’s, Forever 21, Pier 1, Urban Outfitters, MAC Cosmetics, and several others.
Laybuy is a New Zealand-based company that provides BNPL services. It makes it easy for people to make six weekly interest-free payments with no fees. Moreover, the Laybuy Card supports Apple Wallet and tap-to-pay technology, thereby allowing you to make fast contactless payments.
PayPal (Pay in 4)
PayPal was established in 1998 in California, United States. Since then, the company has allowed both its individual and business clients to safely make purchases through websites and mobile apps, as well as send money both domestically and internationally. It has developed a global platform that serves 325 million active users and is present in 202 countries.
The company provides “Pay in 4” instalment services for BNPL. Additionally, PayPal is a fantastic option for small purchases because it is accepted by millions of online retailers, like Nike, Best Buy, and Target, for transactions between $30 and $1,500. You must have a PayPal account that is active or create one at the time of purchase to use Pay in 4.
Clearpay is a good option for you if you have poor credit. It does not check on your credit history, thereby offering an easy-to-approve application.
An example of a BNPL app that has a credit limit is PayPal (Pay in 4). It limits transactions to $1,500. Any purchase above this amount will not be approved.
Clearpay, which is also known as Afterpay, does not do credit checks. Many others like Klarna and PayPal Pay in 4 will do a soft credit check that will not affect your credit score.
The Bottom Line
The BNPL market has expanded significantly over the past two years, but there is still a lot of space for it to grow and gain market share in different parts of the world.
Meanwhile, many people are still sceptical of BNPL services. The good old instalment plan has been "re-invented," according to analysts, by the millennial generation. Regulators worry that shared payment may encourage wild consumption among the populace and cause them to treat borrowing lightly. However, this industry has already attracted significant participants and demonstrated its viability.
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