InvestorQ : What are buy-now-pay-later options and why are most Fintech companies promoting them?
Mitali Bhutta made post

What are buy-now-pay-later options and why are most Fintech companies promoting them?

Answer
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3 days ago


If you have used online short term funding sites like Lazypay; that is exactly what these options are about. Let me explain, Fintech and e-commerce companies are now focussing on buy-now-pay-later options. Under these schemes, consumers can buy an item and get interest-free credit for 35-45 days. Post that, interest is charged along with a still penalty.

Many of these facilities are also structured as point-of-sale or POS loans. Here is how it works. Firstly, the implied interest rates on such loans are much higher than on normal personal loans. The interest rates range from 20% to 36% annually.

As the festive season approaches, many Fintech companies are focusing their attention and energies on the pay-later product. It gives lenders more control on the end use of the money and that is a safety net that people don’t speculate with the money. In traditional loans, lender has no control over end use of the funds.

Many Fintech players are also offering unified payment interface or UPI-based payment options at stores, which is a “borrow and spend” kind of facility. Many of these spot loans also entail processing charges of Rs.650 per transaction.

Lazypay can also be used for online payments as also at physical stores with varying interest rates. It is like a conventional credit card, users can also pay the minimum due and pay the outstanding amount in the next payment cycle. Of course, it could create a debt trap.