We have entered into the era of Buy Now Pay Later This means one can purchase any item today And pay for the item after some time in easy installments It resembles a Credit Card But it is different Because this facility is also available to people who have no credit scores Or the banks have refused them to provide a credit card And that’s why the growth of Buy Now Pay Later services has reached 600% But this system has a lot of flaws Which are less spoken off.
Popularity
Let’s understand why the services of Buy Now Pay Later are so popular. This service is different from that of any credit card Because to get a credit card one should have a credit score And it requires a lot of documentation work But only KYC is required for Buy Now Pay Later Services And your account gets ready to transact In fact, if your bank refused you to provide a credit card Still, the service of ‘BNPL’, Buy Now Pay Later can be availed And through BNPL, even payments of 200-300 can be made The average transaction value done through the BNPL service is Rs 485 This service is also available on the checkout page of Food Delivery Applications like Zomato and Swiggy So nowadays People are eating food on EMI 55% of the users of this BNPL tells that this service is very simple to use hence we use it And 48% of the users tell if they don’t get access to this service on any platform Then they don’t use that platform And this system has already grown up a lot One-Third of the total credit card users of India have already become users of BNPL services Only 6% of the total population of India have a credit card This means there is a huge population that cannot be given a credit card or some people don’t want to have one And this is the target population of the BNPL service And by the year 2026, there would be around 100 Million users of BNPL service in India And currently, 60% of the users of BNPL service have an age of fewer than 35 years This means, mostly my viewers are the target audience of BNPL From the outside, the BNPL service seems to be Boon for the sellers Suppose there is a college-going student who wants to buy a new phone worth RS 12,000 But he gets pocket money of Rs 3000 per month only He cannot obtain a credit card from the bank As he does not have a good credit score So, by using the BNPL service he can buy the mobile phone And would pay the amount in six installments of Rs 2000 per month This means he can borrow some money from his future and can purchase the Mobile In spite of the bank not offering him a credit card And the merchants also tell that their conversion rate at the time of check out goes up by 20-30% if the BNPL service is available And the average order value is raised to 30-50% This means that the people who were not able to purchase expensive items earlier Can now purchase everything through the BNPL Service But then, what are the problems with this BNPL service?
Limitations
MDR which stands for Merchant Discount Rate Is an amount that the seller has to pay to the bank whenever any transaction through a credit card is made Usually, this amount is 2-3% of the order value But when shopping is done through BNPL Service Then this amount is doubled or tripled The seller has to pay more to the company offering the BNPL Service As compared to the banks against a payment done through credit cards Now let’s look at the disadvantage of BNPL service from the point of view of a customer.
1. Many times the usury laws do not apply to the users of BNPL Through the Usury laws, the government ensures that the credit card companies do not raise the interest rates without prior information Or the company does not charge you extra for any other condition The Companies offering BNPL services draft their terms and services in such a way That many times the usury laws do not apply to the users And then these companies impose huge interest, late fees, and hidden charges To which no one is aware off when you sign up for these services And usually, the late fees imposed by the BNPL service are 4 to 5 times the fees charged by banks against credit cards.
2. Regarding the procedure of credit reporting Credit in simple words is a Debt You order anything from the online platforms whether food, footwear, or mobile phone If you are purchasing anything through BNPL, it means you are taking a loan If you are ordering food every day worth small amounts Then your loan gets on adding Many times these BNPL service reports this loan in such a way That your credit score keeps on getting lower But the customer does not get aware of this When the user checks his credit score after 6-7 months Then S/He gets to know about the low credit score And the reason was the continuous lending of money Leave the users aside but sometimes these BNPL companies do not even report properly to the Credit Bureau And thus the Credit Bureau does not get to know how the bad loan kept on increasing.
Debt Trap
You receive a superpower through the BNPL service One can buy anything and pay in installments And through this many people buy unnecessary items 60% of the users of BNPL service told that they have bought some unnecessary item some time by using this service And 45% of the BNPL users mention that their credit score keeps on degrading by using the BNPL service And 36% of the users told that they can not pay their due amount on time The BNPL Service providers earn huge money by imposing huge late fees But people get stuck in Debt Traps As the BNPL cards are easy to get People apply for a new card to repay the due amount of the previous card And usually, these people are those who can not be provided a credit card People including College-Going Students And the Debt Traps are a curse for these people.
Frauds
You don’t have any idea, but loans keep on getting sanctioned through your PAN Card. As the BNPL does not require a lot of authentication, laws and the account opening is very simple The fraud against the users of BNPL services keeps on adding The growth rate of the customers of BNPL service is 600% And the fraudulent activities on BNPL services keep on increasing by 54% on year on year basis. RBI is fed up with the fake loan apps And the BNPL Service is also creating a nuisance Hence the RBI has made it clear, that none of the nonbanking financial institutions like E-Wallet can not offer any type of credit This means these can not offer any loan For providing any type of loan, a bank account has been made mandatory And the repayment can also be made through a bank account And usually, the BNPL companies issue a card in partnership with any bank The banks are not allowing the BNPL company to add a new customer as the RBI policies may change soon The Governor of the RBI has urged the need for balance between Digital Innovation and Digital Revolution For the proper growth And the RBI is continuously working on this Now, the RBI is setting up Digital India Trust Agency for Digital Lending And solve all these problems together and in the same place And I have a very simple message for you Don’t receive any card without proper information Check your credit score at regular intervals Become financially responsible.
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