The Popularity of Buy Now, Pay Later

With the new adoption of various payment methods and ways to service financial needs, companies are supporting new ways to accept payments that no longer require physical items such as cash, cards, or even the need to physically touch another person or machine.

Along with these changes in how payments are physically accepted, how payments are being processed are adjusting to the technology changes as well. Buy Now, Pay Later systems or services are quickly becoming popular amongst companies and businesses where customers are granted the opportunity to purchase items using payment plans rather than making the full payment upfront. This option has seen a large increase between July 2020 to March 2021 amongst ages 18 to 24 and 55 and older.

Buy Now, Pay Later systems typically work through providing users four to six weeks to make payments in intervals with no interest. Some companies like Affirm provide 0% APR for certain brands or items. There is the option of extending payments past the four to six-week payments timeframe; however, they may result in increased APR percentages depending on the servicer or company. PayPal and other financial institutions are starting or have created their version of buy now, pay later systems.

About 56% of Americans have reported using buy now, pay later systems for various reasons. Some of the top reasons are due to avoiding credit card interest fees and making purchases that wouldn’t fit into the buyer’s budget. Other reasons include the opportunity to borrow money within a credit check and buyers having maxed out credit cards. While buy now, pay later covers a range of items, studies have found the service is used to mostly purchase electronics.

The COVID-19 pandemic has contributed to the overall include in the usage and popularity of buy now. pay later systems in 2020 to current. Many consumers, despite becoming unemployed, were able to pay off debts during the pandemic and found the usage of buy now, pay later solutions better than collecting credit card debt once again. As digital financial services and systems continue to adapt to changes in the world, buy now, pay later solutions and services will change as well.