Buy Now Pay Later Loans: The (Not Really) New Thing

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Buy Now Pay Later Loans: The (Not Really) New Thing

  • The Buy Now Pay Later (BNPL) space is hot, like Affirm going public and Alliance Data’s $ 450 million acquisition of Pain.
  • The installment loan is nothing new, however. Prior to 1977, it was the most popular form of credit and paved the way for credit cards.
  • Today, consumers owe their card lenders nearly $ 1 trillion, while unsecured guaranteed loans total $ 156 billion.
  • Fintechs are flourishing in the BNPL space, representing 38% of the market in 2013 against only 5% in 2013.
  • The fintech breakthrough in installment loans evolved by repackaging installment loans as “buy now pay later” and adding three features.
  • The three features added by BNPL: “pay in four” month model, omnichannel access to retailer sites and a user-friendly approach for non-bankers.
  • The four main drivers of BNPL are user experience, attractive terms, a lower interest rate and easier credit underwriting.

About the report

The new payment option is seeing significant growth in many markets, but consumers need better protection for fair loans, prices and remedies.

Consumers sometimes find that interest-free loans come with unexpected fees and charges. As with any other form of consumer loan, clarity, fairness and transparency are not optional.

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