Buy Now, Pay Later: The Game-Changing Juggernaut in Payments

Buy now, pay later is the latest juggernaut to hit the payments industry. Where yesterday’s innovations improved how people pay, today, it’s all about offering flexibility in when people can pay. Klarna, Zip, and Afterpay have spearheaded a sea change in customer expectations, with companies forced to jump on board or risk losing clients.

In our latest article, we wanted to champion the rise of such customer freedoms while providing a gentle reminder about some of the risks involved in BNPL payments.

I’ve been offered zero interest - so what’s the harm?
It’s true. Financing that dream purchase has become more accessible in the days of interest-free repayments - super accessible too! With such ease and convenience, it’s easy to lose track of the idea of needing to repay! Payments deferred seem like payments avoided.

But to prevent saddling yourself with insupportable debt, even if you cash out on the latest designer footwear, you must take precautions for every purchase. Before you decide on a buy now, pay later option to finance your transaction, you should ask yourself the following questions:

‘Is the purchase necessary’?
The dopamine hit of shopping can be infectious, but it can also be damaging from a financial perspective. Before your latest impulse buys, try to rationalise things. Ask yourself if the item is needed, or if not - is it budgeted for? If you struggle to support the purchase in the coming months, perhaps wait a little longer before you click ‘buy’. That way, it’ll be even more rewarding!

Is BNPL my only option?
It’s easy to get carried away with Buy Now, Pay Later. Instant gratification can be a hell of a drug. But it’s important not to rely on it as a no.1 payment solution. Sure, it can help you meet your urgent financial requirements, but it shouldn’t be the preferred option, mainly if it’s challenging to keep track of monthly outgoings.

Can I make the payments on time?
Despite the ease and flexibility of BNPL, it’s important to remember that payment deadlines exist, and missing them could impact your ability to get credit in the future. It’s vital to project a future payment timeline and determine if you can afford to include such debt repayments on top of existing ones.

Generally, it’s often better to pay off purchases in full and not have a loan hanging over your head. It’s easy to plan for and demonstrates a degree of financial responsibility that will stand you in good stead for your financial goals. Just as saving and investing goals exist, spending goals exist too. And it’s important to know what you’re getting into before adopting what can seem like a helpful shortcut.

You never quite know what the future will hold. You may lose your job or experience some financial setback which might impact your ability to make repayments. It’s, therefore, necessary to make some allowance for the events you can’t predict. That way, you’ll be able to reward your future self with a healthy credit balance.

Our verdict
While BNPL technology is changing the payment game, tempering your enthusiasm for deferred payments with sound financial planning is essential. Good decision-making is the basis of all financial security. And financial security is the basis for a secure future.

As with all forms of debt, interest-free or not, BNPL providers are responsible for ensuring customers are aware of the impact of failed repayments and educating customers about the risks associated with such finance options.

To help get a picture of what everyday consumers think about BNPL, the FCA has released an exciting transcript demonstrating the range of consumer opinion. Click here to read more.