Changing trends: Why ‘buy now, pay later’ is selling hot

November 23, 2020 4:45 AM

How Covid-19 has changed the festive season shopping trends.

In the past, offline retail businesses had no problem luring customers with attractive schemes and discounts during the festive season.In the past, offline retail businesses had no problem luring customers with attractive schemes and discounts during the festive season.

By Nityanand Sharma

Covid-19 has significantly impacted businesses and industries, especially the retail industry, which fell into a sudden slump with prolonged lockdowns; even now, small retail businesses are on the back foot as people are wary of crowded places. The crisis has also altered consumer sentiment and sabotaged demand, adding to the woes of retail businesses. Consumers are seen making the move to online purchases. Covid-19 has been indicative of how nimble e-commerce players are in the way they have adapted to the change in consumer behaviour.

Changes in India’s purchasing behaviour

In the past, offline retail businesses had no problem luring customers with attractive schemes and discounts during the festive season. However, the scenario is different this time. Apart from a handful of customers, who still prefer shopping at malls and physical retail stores, a majority has opted for online platforms.

—Since the lockdown, customers have shown an increasing preference towards contactless payment, and digital transactions have soared.

—It is not just consumers who want to avoid cash transactions, employees of e-commerce platforms are also wary of receiving and handling cash. Major e-commerce players have come up with offers promoting digital transactions instead of cash on delivery.

—Although people are still wary of stepping outside, it didn’t diminish their zeal towards festive season activities, including gifting; we witnessed a new trend of digital gifting.

—In the festive months, buy now, pay later (BNPL) services made an appearance, along with conventional digital payment methods. More and more people embraced the offerings of BNPL, which includes instant credit at no extra cost for small-ticket purchases, instant refunds, and a faster and safer checkout process.
Here’s how BNPL is advantageous to online shoppers:

Instant micro-credit: BNPL provides quick approval micro-credit; instant credit at the point of sale makes credit shopping easy and accessible. In the absence of any paperwork or documentation, users get access to and can enjoy the benefits of micro-credit without any lag. Moreover, BNPL platforms are secured with security encryptions, keeping customers safe from cyberattacks.

Relaxed eligibility criteria: Unlike their credit card counterparts, BNPL services do not have stringent eligibility criteria. Thus, even people with no credit history or credit score can enjoy this credit facility.

Zero cost: The BNPL service does not charge any fee to the consumer. The service is completely free unless the user fails to pay by due date, and even then, a minuscule and/or fixed penalty is levied.

Ease of use: BNPL allows for one-tap checkout, eliminating all the friction points a user has to go through while making a payment via credit/debit cards, UPI and bank transfer. With near-zero failure rate, no OTP, instant refunds and quick checkout, customers appear to love BNPL.

Consumer empowerment: Today’s consumers are wary of credit cards and the exorbitant fees, penalties and hidden charges that come with them. However, their needs haven’t changed, and BNPL is meeting those needs with the customer at the centre. With transparency and ease of access, and safety, it has given people greater control over their budget without sacrificing their needs and wants.

This year has witnessed a major shift in consumer preferences and expectations, and has also shown us the agility of the retailers and service providers in stepping up to meet the challenges. It’ll be interesting to see how this trend unfolds in the months to come.

The author is co-founder & CEO, Simpl

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