Buy Now Pay Later vs Credit Cards: Which mode of payment is more beneficial? Expert answers

With the emergence of fintech and financial services, the entire banking industry has gone through a transformational shift. Experts believe that only 8 per cent of the world’s currencies exist in physical form and the rest are cached as mere digits inside computer memory. 

Tashwinder SIngh, MD & CEO of Niyogin Fintech Limited informs that recent research suggests that the global Fintech market is expected to record a CAGR of 18.9 per cent from 2023 to 2032. He adds, "With the help of technology, people can now have access to a variety of payment options like Buy Now Pay Later (BNPL), Credit cards and many more. They are not just widely used but are also swaying the market by changing the scenario of the entire credit system."

Understandng buy now, pay later (BNPL) in India's financial landscape

Buy Now Pay Later (BNPL) is an online payment credit system that offers customers purchases in both online and offline modes and pays for them at a later date, often without incurring any interest.

Emphasizing the rapid transformation of India's financial landscape and the rise of BNPL, the MD & CEO of Niyogin Fintech Limited, says, “With India's financial landscape changing so quickly, Buy Now, Pay Later (BNPL) services have emerged as a strong payment method. The younger demographic, in particular, is embracing digital financial services, providing a significant opportunity for fintechs to cater to their needs."

"Unlike credit cards, BNPL doesn't saddle consumers with pesky fees like processing fees, joining charges, or annual fees. Moreover, BNPL typically boasts lower interest rates, making it a more cost-effective option for many. Also, BNPL grants consumers a generous interest-free period of 10–30 days to settle their dues without incurring any penalties," he points out.

Credit Cards vs BNPL: Understanding the shift

BNPL has slowly started to emerge as a credible alternative to credit cards that were the original BNPL product through which some of the consumer durables loan products offered interest-free EMIs. 

Referring to a data report, Tashwinder added, “A report by Mordor Intelligence states that around 22 per cent of Indian consumers are utilizing BNPL services for their online purchases, and this percentage is expected to grow further in the coming years. However, customers need to be cautious and aware of the possible effects on their creditworthiness. Even though a hard credit inquiry is typically not required for BNPL transactions, defaults or late payments can still have a negative impact on a person's credit score and general financial stability.”

Credit Cards vs BNPL: Differences

Buy Now Pay Later offers novel advantages such as flexibility, interest-free installment plans, and a streamlined online shopping experience.

Credit cards were the original BNPL product offered by some of the consumer durables loan products that offer interest-free EMIs. 

The prime difference between credit cards and BNPL is based on the credit limit offered, usage pattern and the structure of repayment. "As the world moves towards a cashless future, both businesses and consumers should be aware and informed about the potential benefits of these payment innovations while mitigating risks," he says.

While credit cards have long been the cornerstone of financial transactions, BNPL services offer novel advantages such as flexibility, interest-free installment plans, and a streamlined online shopping experience.

“While BNPL undeniably offers numerous advantages, cultivating responsible borrowing habits remains paramount. Consumers must grasp the implications of their financial choices and prioritize timely repayments to safeguard their creditworthiness and long-term financial security," he sums up saying.