How Has Buy Now Pay Later Assisted Consumers During The Pandemic?
It’s no secret that the COVID19 pandemic has changed many things about the world we knew. While it has caused some disruption in our day to day lives, the pandemic has hit the economy the hardest. Consumer spending dropped by a staggering 7.5% during the economic closures around the world in March and April. This estimates a decline of nearly $1 trillion in revenue, which the US economy has not seen since 1987.
Unfortunately, this has led to many people losing their income and with that, their ability to make costly purchases. Consumers are rather using the money they have to pay off existing debts. In addition to that, consumers are more conscious of how they spend their money and are growing wary of using credit cards due to the interest that adds to already mounting bill payments. According to large credit providers, transactions made by credit cards decreased by 31% by the end of April.
Retail and eCommerce stores have had to adapt to the current crisis and change the way they operate in order to meet the demands of consumers, which means taking consumer’s financial constraints into consideration. The goal for many retailers now is to offer flexible payment methods to help reduce some of the financial burdens the pandemic has created. Buy Now, Pay Later or also known as Point Of Sale financing has been the solution for many consumers and merchants alike and continues to grow in popularity during this uncertain time.
Buy Now Pay Later Has Provided More Financial Security
Due to the structure of Buy Now, Pay Later financing, it has become a viable solution for most businesses. Taking a large purchase and breaking it down into smaller monthly payments allows consumers more financial flexibility when purchasing expensive goods. Another reason why this payment method has become more attractive to consumers is that in most cases, it comes without interest if the consumer is able to pay off the loan quickly.
The terms offered by Point Of Sale financing partners like ChargeAfter also make it easier for consumers to apply and get approval for instant loans. The pandemic has affected the income of many people and some are not earning as much as they used to.
With prime lenders and larger credit providers, income is usually the deciding factor. And should a consumer not fall into the earning bracket requirement, they are turned away. The Buy Now, Pay Later model caters to those who prime lenders see as a high-risk borrower and offer more flexibility in terms of approvals and payback terms.
This has allowed consumers to purchase or replace higher value goods like refrigerators and furniture even in a time when financial pressures are at an all-time high without using a single credit card.
The Shift From Traditional Credit
Long before COVID19 ravaged throughout our cities, Buy Now Pay Later solutions were already gaining steady traction, especially among the younger generations like millennials. However, the need for these payment plans have become more prevalent in the wake of the pandemic.
The younger demographics who may not have steady jobs or who are currently relying on their savings to get through this current global situation have become more inclined to online financing like Buy now Pay Later. According to research, only 34% of millennials added to their credit card debt since COVID19. This could be due to many factors, however, these are the consumers who are most aware of the interest, bad credit ratings, and debt associated with credit cards and are turning away from them altogether. With preexisting financial strains like mounting student loans and other high-interest debts, the younger demographic already has a distaste for traditional credit.
Buy Now Pay Later has quickly become the solution to purchasing high ticket items among the younger generations. It offers more transparency with predetermined monthly installments that do not have any extra “surprises” on the bill and also enable consumers a sustainable and affordable way to get the goods they want.
Based on this, there is no doubt that Point Of Sale financing will continue to grow steadily as the world returns to a new normal.