How ‘Buy Now, Pay Later Model’ is changing consumer shopping habits in India, Marketing & Advertising News, ET BrandEquity




Selling in instalments is an age-old effective technique that keeps customers engaged with the stores. (iStock image)

By Shivbhadrasinh Gohil

With evolving technology, a drastic change has been observed in the consumers’ shopping habits and how eCommerce functions. With the customers moving towards online shopping eCommerce environment has become more competitive, even for daily essentials to every household item. eCommerce is one of the fastest-growing purchasing channels that has gained widespread popularity amongst the Millennials.

At times, Credit cards were more often preferred and considered the primary source for delayed payment options. But, Buy Now, Pay Later is slowly taking its place. Most start-ups and eCommerce websites like Amazon and Flipkart offer Buy Now, Pay Later options today. This facilitates the users to purchase the goods in advance and pay for them later.


Most eCommerce businesses have tried adopting new payment methods that facilitate users by providing a seamless shopping experience to their customers. According to one study by Statista, one out of three UK consumers preferred the BNPL model in early 2020.

There are multiple other ways to make payments online, but it is equally essential for the store owners to offer the most convenient and preferred payment method. Some might opt to pay through Visa or Mastercard whereas, some may even prefer Apple Pay, PayPal or any other medium. Currently, Buy Now, Pay Later is the preferred choice of many!


But, what exactly is BNPL? Are you willing to add the BNPL option to your website? If you are thinking of adding the BNPL option, it is essential to consider specific points and keep certain things in mind.


What is Pay Later?
Pay Later can also be referred to as “Shop Now, Pay Later,” which is a financing option that allows you to purchase without worrying about making the payment. Merchants offer a Pay Later solution to their customers and pay in instalments instead of paying the entire amount at a time.

BNPL options are becoming prevalent when shopping online. The customers can pay the instalments over time, and the solutions are offered to the customers with almost no interest, which means no additional costs.

Selling in instalments is an age-old effective technique that keeps customers engaged with the stores. At times, stores reserve the item while paying it off in instalments. Once they complete payments, they can carry purchased items to their place.

After making the purchase, they will still have to return to stores to complete the instalments on time. This will help establish solid relationships, build trust, and facilitate staying in touch with each other. If you are running an online eCommerce store, you might also consider providing a BNPL option to your customers to improve their loyalty to your store. You can easily implement such a payment facility in your eCommerce store using third-party modules. For eg, if you are using Magento for your online store, you can use Magento 2 Partial Payment extension to implement the Buy Now Pay Later functionality in your store.

Factors Giving a Rise in the ‘Buy Now, Pay Later:
The Buy Now, Pay Later model has been around us since a long time. However, currently it is being adopted at a faster pace by the customers and a number of factors has added to its adoption rate.


Provided below are the factors responsible for the increasing trend of BNPL in the eCommerce market:

The Covid 19 Pandemic and Change in Consumption Patterns
During the pandemic, disastrous shifts have been observed in the global economy, and even some people were dismissed from their jobs. This uncertainty in income led to a decrease in the purchasing power of the people, limiting them to purchase only the daily essentials.

During such tough situation, BNPL proved to be an amazing solution for the customers that allowed them to purchase products beyond their purchasing power. It also helped eCommerce store owners improve the average order value by encouraging the customers for bigger purchases.

India’s Buy now, pay later industry is booming. According to Economic Times research, India’s BNPL market is expected to rise to $45-50 billion by 2026 from $3-3.5 billion now.

Demographics Related Purchasing Power
A large number of users of BNPL are Millennials and Gen Z. It has significantly been assumed that the next generation is likely to dominate the future of BNPL. Due to the ease of using these payment methods, technogeeks prefer using such modes of payment.

It is even beneficial for those just starting their careers as it facilitates purchasing without going into debt.

eCommerce Penetration
The growth of the eCommerce industry has been remarked as one of the reasons behind the rise of BNPL and its development shortly. It is crucial to determine yourself and set yourself ahead in the eCommerce rat race. Providing pocket-friendly payment options is one of the effective ways to increase sales and boost conversion rates.

Thus, BNPL is one of the tactics that can be used effectively in any eCommerce business to lure potential customers and retain the existing ones.

Working of ‘Buy Now, Pay Later:
BNPL is a short-term financing solution that offers customers to pay for purchases in flexible instalments instead of paying the total amount at the time of purchase. Customers can either pay a total amount after 30 days or make 4 to 5 monthly instalments at a specific time interval.

“Buy Now, Pay Later” Payment Options
For example, Klarna provides three basic options that may vary from country to country. They are:

1. To make full payment after 30 days.
2. Pay later in 3-4 equal instalments without any interest.
3. Split the cost of more significant purchases into smaller ones by dividing the amount into 36 monthly instalments. Interest charges are applicable.

Pay Later Checkout experience
Here, sometimes people purchase the item they like, add it to their cart and click ‘checkout.’ There are several payment options available at the checkout, such as credit cards, debit cards, or pay with any BNPL method.

The shoppers can enter the card details and easily opt to buy now and pay later with either of the payment method. These can provide customers with flexible payment options by offering numerous possibilities.

Pay Later at the Point of Sale
The BNPL option is even provided for certain retailers who do not offer such a facility in certain countries. Purchases are charged to make payment within 30 days or via financing.

The payment options are offered by both online as well as offline retailers. It involves the customers generating a QR code to be scanned at the point of sale. Here, the retailer is offered credit and the customer can make payment later on.

Benefits of ‘Buy Now, Pay Later:
BNPL facilitates improving customer experience by providing multiple payment options to the customers. As a result, it would be beneficial in several ways such as:

Zero-interest is the most attractive feature for most consumers as it facilitates not making essential purchases but also making discretionary purchases. Thus, zero-interest rates eliminate the concern for paying high-interest rates and enables managing their budget for the month without any worries.

Quick Processing
The process of credit is fast and effortless. The customers do not have to wait long for its approval, and they get quickly approved on a real-time basis, and the chances of rejection are significantly less compared to other options such as personal loans.

It offers flexible payment options irrespective of the value of goods. These will be beneficial for the customers when they want to purchase heavy or bulky products and pay the total amount at the time of purchase. Thus, offering flexible payment options helps attract new customers and retain existing ones.

Increased Purchasing Power
Due to ease in accessibility and the zero-interest BNPL model, the purchasing power of people has been increased gradually, especially during festivals. Making payments in instalments makes it easier for customers to purchase heavy appliances and gadgets easily.

Builds Trust
It is not possible to get a trial for many products, and in such cases, it allows customers to test the product without committing to the purchase. They can even return the product if they don’t like it much as it is not much to worry about as they haven’t spent much on it.

Decreases the Chances of Cart Abandonment
The chances of cart abandonment may reduce drastically by offering Buy Now, Pay Later options. As per the survey by Baymard Institute, it is found that mostly 6% of cart abandonments are caused by a lack of payment options.

Allures New Customers
People always prefer this mode of payment option. Even having cash in their hands, they choose BNPL options as they are interest-less. Particular customers might always look for Buy Now, Pay Later options or specific apps that provide such payment options.

Boosts Sales
Offering BNPL helps to increase conversion and boost sales. The customers do not have to worry about having money in their bank accounts here, and the only thing they have to do is make payments within that particular time frame. This would be especially beneficial if the product purchased is too pricey or wants to make a bulk purchase.

Summing Up
It is crucial to provide various payment options and give consumers many choices. Integrating a buy now, pay later options helps increase sales, reduces cart abandonment and builds trust. Providing BNPL options gives us an outstanding opportunity to differentiate from others and stand apart from the competition.

Buy Now, Pay Later has proved to be appealing if the customers do not wish to pay for the purchased item all at once. Hence, the future of BNPL seems to be bright, provided the customers can use the facility properly and can clear the amount at a specified time duration.

-The author is co-founder and marketing director at Meetanshi. Views expressed are personal.

Ecommerce has transformed the way consumers shop in India in the past few years, supported by an increase in Internet and smartphone penetration, a rise in digital literacy, and the government’s digital push…

It has also created a ‘feed’ — similar to the one on photo and video sharing application Instagram. Flipkart’s partnership with regional language social media platform ShareChat has also gone live where influencers are conducting live sessions on its short video app Moj and their followers can buy goods on Moj itself.

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