Welcome to the Age of Buy Now, Pay Later

Buy now, pay later (BNPL) has become an extremely popular payment option in the past few years. It’s not only a convenient way to pay, but it’s also often used to purchase items consumers wouldn’t be able to afford otherwise. 

Salesforce reported that during Cyber Week around Thanksgiving, BNPL usage globally grew 29% from a year ago, with more than $22 billion in holiday orders financed. On Black Friday, 7% of global orders and 4% of U.S. orders were paid for with BNPL.

The use of BNPL loans has grown so much that the Consumer Financial Protection Bureau has opened an inquiry into the practice to better understand the product, ordering five BNLP providers–Affirm, Afterpay, Klaran, PayPal and Zip – to collect information on the risks and benefits of these loans.

If you’re still unfamiliar with BNPL, here’s what you need to know. 

What is Buy Now, Pay Later?

BNPL is a type of short-term credit in the form of a deferred payment option that allows consumers to split the cost of a purchase into smaller installments, typically four or less, with a possible down payment due immediately, or in some cases $0 up front, and often without incurring interest. BNPL loans are presented as a safer alternative to credit cards and can be more accessible to consumers with subprime credit histories.

Merchants typically enter into an agreement with a BNLP provider and pay between 3% and 6% of the purchase price to these BNLP companies. The advantage for merchants is that consumers tend to spend more and buy more often with BNLP capabilities, which increases their revenue.

What makes BNPL loans attractive?

Generally speaking, BNPL services are cheaper than credit cards if installments are paid on time, and the application process is a quick one. Consumers can use BNPL the same way as they would other types of credit with the advantage of not having to pay interest and with a much easier approval process than with credit cards. Often, BNPL loans don’t require a hard credit inquiry, which means they don’t impact a credit history. But it’s important to note that late payments or failure to pay a BNPL loan can impact a credit score.

BNPL loans offer a budgeting tool to afford purchases, sometimes essential ones. It provides convenience at a lesser cost than credit cards.

How can you take advantage of BNPL?

BNPL loans can be great if you are able to afford a purchase but would rather space out payments in time for cash management. That’s why medZERO is bringing the power of BNPL to healthcare by enabling employees to better manage their medical bills with interest-free payments scheduled over time. 

medZERO is unlocking a smarter way for your employees to pay for care. Contact us to learn more.

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