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| Buy first pay later is a $100 billion industry |
The purchase and payment service, known as BNPL, has become one of the main financing and payment services, and the rate of its use has doubled in recent years.
Millions of shoppers around the world trust these services to fund their purchases in real time. Companies like Kalrna, Affirm and Afterpay have proven their strength here. As well as local alternatives in countries of the world, including the Arab world.
But the interest of technology leaders in this area has greatly increased its value. PayPal has already started offering similar services. In addition, Amazon and Apple have signed agreements with Affirm, which provides this service. Square also acquired Afterpay for $29 billion.
The shopping and payment service looks much better than traditional credit cards. However, this did not prevent the emergence of a large number of criticisms, especially from economists. Because these services double the purchase price, even if they are not needed.
Buy now, pay later
Payment after purchase service is also known as point of sale loan. In the United States, this is known as "layway," which means payment in installments or deferred.
Obviously, these services allow their users to buy the product and get it instantly in return for continuous installments.
When shopping online or in store, users can choose to buy now and pay later. However, he usually has to repay this amount within a relatively short period of up to four months.
Even if the service provider gets a certain percentage of sales, some shopping sites add a special "buy first, pay later" button. This is because this same option encourages buyers to buy.
In addition, the fines will be used by the company providing the service to generate additional profits from users who are late in paying the premiums. These services allow users to purchase relatively expensive products that are difficult to purchase with cash.
The effects of the Corona pandemic
The coronavirus pandemic has led to a significant increase in the use of these services. In fact, online shopping has increased dramatically in general due to the pandemic. Due to the economic impact of the pandemic, everyone prefers to pay in installments rather than pay in full.
According to reports, e-commerce-related payments totaled $4.6 trillion, an estimated 19% increase from 2019.
Buying first and paying later makes up only 2.1% of the total.
While that percentage may seem small, it is $2 trillion, or $97 billion. This percentage is expected to double to 4.2% by 2021.
Risks and benefits
We can easily deduce the risks and benefits of BNPL services. The advantages of making it easier to purchase the product for everyone are obvious. The danger is that this person will not be able to pay in the future.
In addition, as mentioned earlier, ease of use leads users to easily buy and purchase products that are expensive or not needed.
But the situation is no different from a credit card. It has a mixture of risks and benefits, and it can improve the lives of thoughtful users or harm the lives of negligent users.