Buy Now Pay Later - next big game changer in retail payment space?

Pine Labs - Indian payment solution co. will launch its integrated consumer ‘Buy Now Pay Later’(BNPL) credit offering across five Southeast Asian markets through a partnership with card network major Mastercard—in Thailand and Philippines by February 2021 and, subsequently, in Vietnam, Singapore and Indonesia after launching it in Malaysia. The partnership with Mastercard will enable Pine Labs to service three other banks in the Southeast Asia, where it will offer ‘Pay Later’ as a technology service to offer credit, debit and digital equated monthly instalment (EMI) solutions, as well as ride on online payment gateways to establish its presence on online shopping websites. ‘Buy Now Pay Later’ products allow users to turn their purchases into EMIs at 0% interest.

In India, almost 20% of all digital transactions were converted into ‘Pay Later’, and there's a similar trend unfolding in Southeast Asian geographies. The biggest advantage of ‘Pay Later’ is that it allows merchants to boost sales and helps consumers upgrade their purchases, due to the free cash available.According to Mastercard research, 43% of consumers in Southeast Asia will be willing to increase spending by at least 15% if they were to pay in instalments. Within a year, Pine Labs has already equipped 25,000 merchant outlets in Malaysia with its ‘Pay Later’ solution. Though Credit cards have long been a favorite source for easy-access, unsecured credit but excessive demands for upfront personal information before credit approval, short interest-free periods, and extremely high rates are proving to be a turnoff for younger consumers. Millennials are wary of the traditional credit card industry, is more protective of their personal information, and has, it seems, limited patience with clunky user interfaces.One benefit of a pay later option is that it circumvents many of the biggest downsides of using a credit card — like high interest rates, annual fees, and confusing terms of service.

In India, Pine Labs is estimated to have a 75% share in the offline EMI market among fintechs. ‘Buy Now Pay Later’ based purchases were up by 30% year-on-year in October, with Tier 2 and beyond cities contributing 54% to the overall transaction value of EMI products, on its platform, Pine Labs had recently said.The full potential of EMI-based products can be unleashed if they are present at the point of purchase, helping customers make more calculated decisions. Most ‘pay-later’ products are absolutely free for consumers who pay on time. Pay-later is an aspirational category that attracts well-intended users that are looking for great user experience when they buy online.While it helps consumers manage their budget and provides affordability, it is not intended to be a financing product that burdens consumers with high-interest rates and therefore only consumers that fail to make timely repayments incur charges. BNPL providers' smart algorithms mean they can assume credit risk for both the retailer — paying them even if the consumer defaults — and the consumer. Whatever happens, everyone is protected.

Some of the other global ‘pay-later’ leaders have proven that ‘pay-later’ moves key metrics for merchants, including cart-conversion, purchase frequency and basket size. Therefore, it extends beyond payments and becomes a tool for merchants to grow their business. This symbiotic relationship enables ‘pay-later’ companies to earn a fair share of the revenue for the value they deliver to merchants while being cheaper than a traditional credit card. In general, the fee structure varies across countries and merchant categories but are mostly in the range of 2-7%. Because ‘pay-later’ companies are technology companies as much as they are finance companies, so they can add a lot of value to merchants beyond just facilitating payments.

Courtesy : Mint, Justin Steed