Buy now, pay later is problematic for small businesses, expert says
Buy Now, Pay Later (BNPL) is a growing industry, offering consumers the ability to split the cost of their purchases into smaller installments. However, one expert said this form of payment may not be the right answer for small businesses.
BNPL’s global transaction value reached $120 billion in 2021, according to a new report from GlobalData. And the sector should continue to grow, with GlobalData Projection that the BNPL market could reach $576 billion by 2026.
But small businesses are struggling with the ability for consumers to pay later, according to Lara Hodgson, co-founder, president and CEO of Now.
“When people ask me if I’m ‘buy now, pay later,’ I tell them, ‘I sell now, I get paid now,'” Hodgson told the FinTech South Conference in Atlanta, Georgia. “But that no one pays attention to the burden of buying now, paying later is surprising.”
If you need help paying off your BNPL debt, you can consider using a personal loan to avoid late fees. Visit Credible to find your personalized interest rate without affecting your credit score.
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Interest rates are on the rise, but there is another way for businesses to borrow money while keeping their interest rates at 0%, Hodgson said. This is by “borrowing” from their suppliers or not paying an invoice as soon as they receive it. By delaying the time it takes them to pay the bill, businesses “borrow money” and improve their cash flow without paying interest.
“The biggest lender in the United States is not a financial institution, and it’s not the SBA,” Hodgson said. “It’s all about small businesses collectively. So imagine if, instead of telling them to borrow more money, we were to take that burden off them and empower capital markets financial institutions that can do it more efficiently at the instead of having another bankruptcy.”
She said this type of lending “has become so large that it could even bring the economy down if reversed.”
“For most large companies, if you said tomorrow that you have to pay every invoice when you receive it, which everyone in this room knows is technically possible, […] net margins for most companies would drop by double digits,” Hodgson said. “Wall Street would fold and our economy would collapse.”
If you’ve incurred buy-now-pay-later debt and need help paying it off, a personal loan can help. You can visit Credible to compare multiple personal lenders at once and choose the one with the best interest rate.
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BNPL’s suppliers – such as Affirm, Klarna and Paypal – are partnering with retailers to allow shoppers to split the cost of their online purchases into installments at checkout. These interest-free payments are usually due a few weeks after purchase. However, missed payments may result in late fees and other penalties.
Despite the risks to businesses and consumers, the BNPL sector continues to grow. At its WWDC event in June, Apple announced its next BNPL offering, Apple Pay Later.
Big Tech’s entry into the BNPL market also comes as pundits continue to call for more regulations. Last year, the Consumer Financial Protection Bureau (CFPB) opened an investigation on the use and security of BNPL programs.
BNPL’s products do not provide consumers with the standard protections required of credit card providers or other regulated lenders, and their opacity regarding fees and repayment terms could easily put unwitting consumers into harmful debt and unaffordable,” said Mike Calhoun, president of the Center for Responsible. Lending (CRL), said in a statement late last year. “Regulators should ensure that BNPL lenders only grant loans after determining the repayment capacity of the borrower.”
If you have used the BNPL and are looking for help paying off your debt, you may want to consider using a personal loan. To see if this is the right option for you, contact Credible to speak with a loan expert and get your questions answered.
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