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Buy now pay later: The game-changer in consumer finance

In the bustling bazaar of modern commerce, a new trend is reshaping how we shop and spend. Enter buy now, pay later (BNPL), a versatile method of payment that is revolutionising the retail industry. Purchases made through BNPL can be put off until a later date, with or without interest, as its term implies. 

From online marketplaces in the heart of silicon valley to brick-and-mortar stores in the bustling streets of Mumbai, BNPL is becoming a ubiquitous part of our shopping experience. This innovative payment method is not just changing how we buy, but also how we think about money and credit. 

So, let’s dive in and explore the world of BNPL – a world where you can seize the moment, enjoy now, and pay later.

How does BNPL work?

BNPL’s full form is Buy now, pay later. It has become increasingly popular among millennials and others as a convenient short-term financing option. It enables customers to make purchases, whether online or in-person and pay for them over a specified timeframe. You can choose between making a single, large payment or spreading it out over time with no-interest EMIs.

BNPL functions similarly to a small-ticket loan. When you make a purchase, the BNPL service covers the payment for you. You can then repay this amount over a specified period. 

Typically, an upfront deposit payment is required for these loans, which represents a portion of the purchase amount, usually 25%. Following that, the outstanding balance can be settled through scheduled payments spread over several weeks or months.

BNPL gives customers the freedom to buy what they want now and pay for it later. For instance, a young individual without a credit card has the chance to purchase a laptop at a nearly identical price, but they have the option to divide the cost into a few instalments.

A few of the available buy now pay later Indian apps include:

Maximum EMIsMinimum penaltyMaximum penalty
Paytm postpaidNot fixed10250
OlaMoney postpaid and wallet1250500
Freecharge pay later910475
Flipkart pay later1260600
Amazon pay later12125600

Advantages of BNPL

Convenience: BNPL provides a smooth and efficient checkout experience, ensuring convenience for consumers.

Increased affordability: It enables customers to buy high-priced items by dividing the cost into more affordable instalments.

Interest-free periods: Several BNPL services provide interest-free periods, which can make purchases more affordable.

Boosts sales: For businesses, BNPL can result in a boost in sales as it incentivizes consumers to make additional purchases.

Builds credit: Certain BNPL services provide credit bureau reporting, which assists individuals in establishing their credit history.

No credit card required: BNPL can be a fantastic option for individuals who don’t possess a credit card or choose not to utilise one for specific transactions.

Risks and considerations

While buy now, pay later (BNPL) offers convenience and flexibility, it’s important to be aware of potential risks and considerations:

Potential for overspending: The ease of BNPL can make you buy things you don’t need and spend more than you should, which can put a strain on your budget.

Late payment fees: If you don’t pay on time, you might have to pay late fees, which can add up over time.

Impact on credit score: Credit companies get information from some BNPL providers. So, payments that are late or not made at all can hurt your credit score.

Debt accumulation: Like credit cards, BNPL can cause a lot of debt if it’s not handled properly.

BNPL vs. traditional credit

Different types of credit, like loans, credit cards, and BNPL, can be used for different things. Credit cards and loans are usually used for bigger purchases or long-term loans, while BNPL is used for smaller, short-term purchases.

It can be more cost-effective to go with BNPL if you can repay the loan in full before interest is due. But late fees can add up, just like interest on a credit card.

When comparing buy now pay later vs. mutual funds, they serve different goals. The BNPL is a payment option, and mutual funds are an investment option.

The future of BNPL

The BNPL industry is transforming, with rapid growth in regions like the UAE and India, driven by digitization, e-commerce expansion, and its appeal to the youth.

With an initial worth of $6.13 billion in 2022, the worldwide BNPL market is expected to expand at a healthy CAGR (compound annual growth rate) of over 26% between 2023 and 2030. Amidst the fintech revolution, BNPL is poised to keep pushing the boundaries of innovation, providing increasingly tailored and effortless experiences.


The idea of buy now, pay later (BNPL) is changing the way money is handled and giving people more freedom and ease. However, it’s essential to use it responsibly to avoid potential financial pitfalls. As BNPL continues to evolve, it promises to play a pivotal role in the future of fintech.


What is the purpose of BNPL?

Buy now, pay later (BNPL) is a financial service that allows consumers to purchase goods or services immediately and pay for them over time. The purpose of BNPL is to provide a flexible and convenient payment option, especially for high-cost items. It can help boost sales for businesses and make purchases more affordable for consumers. However, it’s important to use BNPL responsibly to avoid potential financial pitfalls.

How is BNPL different from EMI?

Buy now, pay later (BNPL) and equated monthly instalments (EMI) are both credit options, but they serve different purposes. BNPL is typically interest-free if paid within a specified period and is used for smaller, short-term purchases. On the other hand, EMIs are used for larger, long-term loans like home or car loans, and interest is charged from the start. Both options require careful financial planning.

Is BNPL safe?

Buy now, pay later (BNPL) is generally safe when used responsibly. It’s a legitimate service offered by many financial institutions. However, like any financial product, it carries risks. Late payments can result in fees and damage your credit score. Also, overspending can lead to debt. Therefore, it’s crucial to understand the terms and conditions, make payments on time, and only purchase what you can afford to repay.

Is BNPL a loan?

Yes, buy now, pay later (BNPL) can be considered a form of short-term loan. When you use BNPL, the provider pays the merchant on your behalf, and you repay the provider over a specified period. However, unlike traditional loans, BNPL often offers interest-free periods and doesn’t always require a credit check. It’s crucial to understand the terms and conditions of your BNPL agreement to avoid potential financial pitfalls.

Why RBI is against BNPL?

The Reserve Bank of India (RBI) has expressed concerns about the buy now, pay later (BNPL) industry due to some companies not explicitly disclosing loans taken in the customer’s name. This lack of transparency attracted RBI’s attention, leading to stricter regulations. Additionally, some BNPL companies were found to be circumventing rules by partnering with banks to issue cards with diluted KYC processes.

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