Buy Now Pay Later: The Rise of Convenient Consumer Credit

Buy now pay later (BNPL) schemes have become increasingly popular in recent years in India, particularly among young consumers. These schemes allow consumers to make purchases upfront and spread the cost over a period of time, usually with little or no interest charges.

The rise of BNPL schemes can be attributed to several factors. Firstly, the growth of e-commerce has made it easier than ever for consumers to make purchases online, often without having to leave their homes. BNPL schemes offer an additional layer of convenience, allowing consumers to make larger purchases without having to pay the full amount upfront.

Secondly, many consumers, particularly younger ones, are wary of credit cards and other traditional forms of credit. BNPL schemes offer an alternative that is often perceived as more transparent and easier to understand. Many BNPL providers also offer interest-free periods or low-interest rates, making them an attractive option for consumers who want to avoid high credit card fees.

However, there are concerns about the potential risks associated with BNPL schemes. One concern is that consumers may be encouraged to overspend, leading to debt problems down the line. Some critics have also raised concerns about the lack of regulation surrounding BNPL providers, which could leave consumers vulnerable to fraud or other forms of exploitation.

To address these concerns, some countries have introduced regulations around BNPL schemes. In the UK, for example, the Financial Conduct Authority (FCA) has introduced new rules that require BNPL providers to conduct affordability checks on customers before approving credit. The FCA has also introduced rules around how BNPL providers can advertise their services to consumers.

Despite these concerns, it seems likely that BNPL schemes will continue to grow in popularity, especially in countries like India. As more and more consumers turn to online shopping, the convenience and flexibility offered by BNPL schemes will become increasingly attractive. However, it will be important for regulators and consumers alike to remain vigilant and ensure that these schemes are transparent, affordable, and regulated appropriately.