Buy Now, Pay Later: More on the Future of Banking

In recent years, huge shifts have taken place that have radically changed the world of banking. From cryptocurrency to virtual banks, the financial technology (fintech) industry is laying the groundwork for new phenomena that will affect consumer habits. One of the most significant trends is the increase in Buy Now Pay Later (BNPL) services. This financial sensation is rapidly changing how people consume and manage their money, pointing to a future in which traditional payment and credit models will no longer be normal.

The Background on BNPL 

BNPL services, which are most popular among Millennials and Generation Z, have prospered because of their accessibility, flexibility, and convenience. This type of short-term financing allows consumers to make immediate purchases of items and pay for them over time in a series of installments. How is this different from conventional credit These loans are repaid in fixed payments that do not include interest or other costs. Unless, of course, the borrower chooses an extended payment plan or is late with payments. In this case, an interest rate or fee will apply. BNPL platforms often make most of their profits by charging merchants a fee.

Citizens in countries such as Germany and Sweden have already actively integrated this payment option into the way they shop. And in the United States, the number of people using BNPL services to make payments is steadily increasing. In 2021, 31% of Americans used BNPL's services. According to FinMasters' research, that figure will rise to 43% by 2022. Looking ahead a few years, the worldwide BNPL market is estimated to be worth a whopping $3.98 trillion by 2031. Affirm, Afterpay, Paypal's Pay in 4, and Klarna are currently the market leaders in the Buy Now Pay Later business.

BNPL’s Future in Fintech

The industry's exponential growth is due to the convenience it provides to both merchants and customers. On the one hand, e-commerce businesses have increased their conversion rates as a result of the expanded payment choices provided by BNPL companies, while on the other side, customers receive the immediate gratification that comes with obtaining the object of their present infatuation. So, naturally, giving individuals an alternate option to purchase products like clothes, electronics, home goods, and more without having to go through lengthy credit checks is likely to increase spending habits, boosting e-commerce company sales.

Not only will BNPL affect the way customers budget and spend their money, but it also intends to completely change fintech as we know it by combining forces with another of fintech's major divisions, cryptocurrencies.

The leading online cryptocurrency brokerage in Sweden, Safaello, and BNPL provider Klarna Bank established a partnership in 2021. This combination provided Klarna clients with more payment choices to settle their BNPL costs, while Safaello users were given the ability to purchase cryptocurrencies straight from the bank without incurring interest. 

As the world approaches a period in which alternative and independent banking systems are gaining popularity, keep an eye out for more initiatives of this nature. In no time, they'll be challenging traditional banks and credit bureaus. Many have already begun integrating BNPL services into their business processes. 

BNPL is gaining popularity as consumer demand and a fluctuating economy affect people's liquidity. As a result, more countries throughout the world are likely to adopt this way of payment as a go-to option for consumers who cannot afford to pay the complete amount upfront. However, just because BNPL is widely available does not mean that it is always an appropriate choice. According to FinMasters, 57% of BNPL consumers regretted using this form of payment to purchase goods. Nonetheless, we're looking forward to seeing where this fintech trend will lead the ever-changing financial landscape, as well as how it will affect consumer habits in the future.