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Is BNPL better than credit cards? Find out

The digital native and tech-savvy consumers, millennials and Gen Z are increasingly leaning towards the idea of micro-credit and buy now pay later services for a smoother user experience as well as merchant experience.

bnpl, credit card,
With BNPL there is no need to share bank or card details, because of which the payment process gets accelerated and makes for a smooth, safe purchase experience. 

Credit cards have been around for decades and have easily assimilated into the online shopping ecosystem with time. However, the hassles of paperwork, mandates of credit score, multiple levels of authentication, etc., take up time and effort. 

Nitya Sharma, CEO and Co-Founder, of Simpl says, “As patience levels dip among millennials and Gen-Zs for traditional paperwork, and the demand for flexibility and transparency rises, BNPL have stepped up to address these friction points.

To understand how – here’s a quick glimpse into some factors which make BNPL a great alternative to credit cards;

A. Relaxed eligibility criteria

For credit cards, you need to fulfil some eligibility parameters which include your income, credit history, credit score, etc. to avail of credit services. Whereas, Sharma explains, “BNPL doesn’t mandate the disclosure of any historical financial information. It relies on machine learning to assess credit eligibility.” 

B. Free of cost

Credit cards often involve a joining fee and/or an annual fee. BNPL has none of these charges, not even usage fees. The only charge that would be levied would be the outstanding bill amount. 

Sharma adds, “In case of delay in re-payment, the user is charged a late fee. In short, with BNPL one pays back only what one spends.”

C. Ease of use

With BNPL there is no need to share bank or card details, because of which experts say the payment process gets accelerated and makes for a smooth, safe purchase experience. 

When compared with credit cards, Buy now pay later

  • Eliminates the need for OTPs
  • Accelerates processing of refunds
  • Offers No or near-zero transaction failure

D. Safety and Security

Industry experts say the elimination of OTPs keeps your bank details secure. Moreover, Sharma adds, “BNPL platforms are also secured with top-grade security encryptions which secures one’s account details from cyberattacks.”

E. Massive Merchant Network

Irrespective of sectors, thousands of merchants across India accept BNPL as a payment option. Sharma points out “This scale of acceptance follows the trends in global markets, where BNPL is growing to be one of the preferred payment channels. The mass adoption of BNPL opens up a field of choices for consumers and becomes a strong factor of consideration when choosing payment options.”

Experts say BNPL credit decisions are taken by ML (Machine Learning) and AI (Artificial intelligence), hence, the selection criteria are evaluated without any human intervention. It uses machine learning to determine one’s creditworthiness and access to the service is determined by the algorithms. ML also decides the credit limit assigned to users, based on their spending behaviour. That’s how BNPL services offer credit to those without a credit history. 

Sharma explains, “While it’s true that the recent pandemic accelerated the adoption of BNPL, the reasons for user stickiness can be attributed to the greater ease of usage and the convenience and safety features accompanying this mode of payment.” 

According to industry data, India has predominantly been a cash favouring economy with more than 60 per cent of all transactions being preferred in cash. But, Sharma adds, “the digital native and tech-savvy consumers, millennials and Gen Z are increasingly leaning towards the idea of micro-credit and buy now pay later services for a smoother user experience as well as merchant experience.”

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