What is Buy Now, Pay Later (BNPL) and how does it affect consumer behavior?

Buy Now, Pay Later (BNPL) is a short-term financing option that allows consumers to make purchases and pay for them in installments, usually without interest if paid on time. Services like Klarna, Afterpay, and even platforms like Amazon and Flipkart offer BNPL options. This model encourages more spontaneous or higher-value purchases, especially among young consumers, by reducing the upfront financial burden. BNPL affects consumer behavior by increasing purchasing power and reducing the psychological barrier of spending large amounts. However, it can also lead to overspending and debt accumulation if not managed properly. Financial institutions and fintechs benefit from increased transaction volume, while consumers enjoy greater flexibility. Regulatory bodies are increasingly monitoring BNPL due to concerns around credit risk, transparency, and its impact on financial discipline.