Why is BNPL So Popular among Young Consumers?

Consumers are increasingly turning to the buy-now, pay-later (BNPL) model, which is expected to rise by 80 percent between 2020 and 2022. As a result, millennials will account for 40% of all BNPL users in 2021, the biggest percentage of consumers by age group. Consumers in Generation Z are already using BNPL at a greater pace than their millennial counterparts, so it's projected that they'll catch up soon.

Gen Z will likely use buy now pay later apps at least once by the end of the year, compared to 37 percent of millennial buyers, but millennials will continue to make up the majority of those who use BNPL.

There is considerable awareness of major BNPL providers among both kinds of consumers, and BNPL is expected to gain prominence as it becomes a more prevalent payment method. Fifty-six percent already prefer BNPL over credit cards because of the convenience of making payments,  instant loan approval procedure, and the absence of interest charges.

What Is BNPL, And How It Works?

BNPL is a payment option that lets consumers make purchases online or in shops without having to pay the whole amount at the time of the transaction. Instead of paying the entire purchase price upfront, this payment option lets consumers pay for their products over time in equal payments over a predetermined time period with no interest. Customers can choose between interest-free installments and various payment alternatives. What's not to like about this?

It's no surprise that customers in the Millennial and Gen Z generations prefer to pay with BNPL. In this day and age, when money is tight, and credit is scarce, young people are constantly on the lookout for budgeting options that are simple, flexible, and affordable. Particularly in the absence of interest charges. BNPL is a popular method of payment among younger people, according to data. This is owing to the fact that they employ mobile apps that make purchasing quick and convenient. This age group is being targeted by merchants on social media sites, which helps them produce sales.

Make purchases that typically wouldn't fit in your budget, thanks to the support of BNPL. Thirty percent of millennials and even fewer members of Generation Z don't have a credit card. They are seeking a means to manage their finances without the worry of debt and interest that traditional lending may bring. Shoppers who want to extend their payments out over a period of time without incurring any additional fees may choose the Buy Now, Pay Later option for instant cash with no cost EMI.

The Main Drivers of the BNPL Trend for Millenials and Gen Z

When it comes to purchasing goods and services, younger generations prefer to pay for them later rather than pay for them upfront using standard credit cards. With this, they can get what they want in terms of fashion (clothes, make-up, and technology) and stay up with their friends. Additionally, many customers are on a budget. There are, however, additional elements at play:

  • Control: The economic situation has impacted Millennials particularly hard, boosting the desire for financial solutions that are flexible. BNPL solutions, including subscription-based services, allow them to feel more in control and predictable.
  • Because they care about value and sustainability, this payment method allows them to buy fewer products of better quality and spend more money to buy less.
  • Credit cards, on the other hand, are viewed as having hidden costs and ambiguous terms of the agreement, making them less transparent than buy now, and pay later. Subscriptions and paying fees on a weekly or monthly basis are commonplace for this age. As a result, the idea of dividing a large sum of money into a series of smaller installments is well-known.

What makes buy now, pay later services perfect for Indian millennials, Generation Z?

Not only are Indian millennials and members of Generation Z using purchase now, pay later because credit is so readily available. Using these payment methods instead of more traditional ones for making large-ticket purchases offers various advantages.

  • This is perhaps the most significant benefit of using a buy-now, pay-later payment arrangement. With purchase now, pay later; you no longer have to be concerned about going over your monthly budget while purchasing a big-box item. A variety of repayment alternatives are available to accommodate a variety of budgets. After making a down payment, you may pay the balance in monthly installments with no interest.
  • Conventional personal loans charge hefty costs for processing. Services such as "buy now, pay later" remove this barrier entirely, making it easier to use and more affordable with the instant loan approval.
  • There aren't any additional fees: Methods of payment that allow you to buy now and pay later often do not include any interest or other charges at the end of the term. Buying a product is now a much quicker process, and you don't have to wade through pages of legalese to make a transaction.
  • There is no paperwork involved: Payment options such as "buy now, pay later" don't involve any form of paperwork. These services are also available online, and no particular paperwork is required for use.

Online Shopping During COVID-19 With Buy Now, Pay Later

Consumers believe they've made more internet purchases during the epidemic, with 71% saying they've done so. Indeed, nearly two-thirds (67 percent) claim to have done "more than half" of their shopping online in the last year.

Statistics on COVID-19's Online Shopping with Buy Now, Pay Later

The epidemic has led to an increase in online purchasing time and the use of Buy Now, Pay Later by many customers. According to a survey, 51% of customers said they utilized Buy Now, Pay Later services throughout the epidemic with instant cash with no cost EMI.

Over 40% of purchases are made in clothing and electronics, followed by furniture (32%), appliances (28%), housewares (22%), and cosmetics (24%).Final thoughts

Gen Z and millennials alike want to be able to manage their own money independently and easily. A high-demand product can be purchased before it runs out, or the expense can be spread out over a longer period of time. They can buy an item or a package at discounted prices right away. This is a terrific choice for millennials, who typically lack the credit history needed to secure favorable loans.

A prominent criticism of BNPL is that it encourages people to spend recklessly with an instant loan without EMI. Many people don't know that it's just another payment option. There is nothing wrong with using a credit card to pay for your coffee, but it's not the only option. BNPL might therefore serve as a link between credit and debit cards for many millennials and Gen Zs, giving them the freedom to buy anything they want, whether it's a 3-for-2 lipstick bargain or a suit for their next interview.

Millennials and Gen Zers are now the top spenders, but they're both getting better. Split payment choices will become increasingly important for today's younger consumers, who are looking for alternatives to traditional credit solutions, as well as for simplicity of use and flexibility.