Buy now and pay later, the next revolution

Muscle Technology
Aug 28, 2021
7 min read

BNPL adoption continues a strong acceleration, fueled by changing consumer spending habits during the pandemic. At 2021, we are living in a momentum that is driven by e-commerce technology and a ubiquitous desire to deliver a new way for consumers to shop more online.

BNPL adoption continues a strong acceleration, fueled by changing consumer spending habits during the pandemic. At 2021, we are living in a momentum that is driven by e-commerce technology and a ubiquitous desire to deliver a new way for consumers to shop more online.

What is Buy Now, Pay Later?

Buy now, pay later (BNPL) allows you to buy items without paying for them all at once. Instead, you pay only a portion (usually in 3, 6 or 9 months) of the price upfront, spreading out the remaining cost over a predetermined number of installment payments. Maybe the great thing here is that these payments are often interest-free, and the approval process is fairly fast for consumers. No queue in any bank or long calls to verify your credit record.

But this is not a new thing, older generations like your great-great-grandparents they use a similar BNPL for trendy useful products like phonographs, radios, electric refrigerators and televisions. They were pioneers.

Now it’s back and integrated into the checkout experience! With modern technology making it easy to split the cost of a purchase.

“At the heart of it, payments come down to choice – and people want more from their money with greater flexibility and control in how they pay and where they shop,” said Craig Vosburg, Chief Product Officer, Mastercard.

The landscape

BNPL is must have technology for trendy e-commerce websites, specially for those with great products, so there are new fintech startups that enable retails to do BNPL in a seamless way.

“An August survey by Credit Karma shows that 44% of Americans have used a BNPL offer, and 75% of that group have used them at least twice.”

There are big unicorns modifying the landscape like Affirm, Afterpay, Klarna, and QuadPay all partner with various retailers to offer point-of-sale installment lending (another name for BNPL). 

Recently, the Bitcoin ranger Jack Dorsey (Twitter Founder) announced a $29 billion deal in August to buy Australian company AfterPay as a foray into the space. Affirm, one of the early  and better-known companies in the space, recently partnered with Amazon and Peloton for a buy now, pay later option. The other investor is the artist Snoop Dog  investing in Klarna, a 4 split payment technology –so BNPL is a really hot trend!

What about VISA or Mastercard? Since 2017, Visa has a good position here because its installments' solution supporting today’s leading BNPL fintechs like: Afterpay, ChargeAfter, Klarna, Sezzle and Zip. These fintechs scale fast by issuing digital credentials or virtual cards, so consumers can seamlessly use installments at checkout. Mastercard is creating a huge ecosystem of startups and their own BNPL technology.

But what makes BNPL a very trendy topic? First, the simplicity of getting an offer approved. Second, the choice of how and when to pay, which allows consumers to manage their money better. And third, the ease of repayment, typically pulled from the consumers’ debit card or directly from their bank accounts.

How Buy Now, Pay Later Works 

Not all BNPL programs aren't all exactly the same. There are no one-size-fits-all rules for BNPL programs, as each company operates differently. However, this is generally what to expect with BNPL: 

  1. Select BNPL: You make a purchase at a participating retailer and opt for buy now, pay later at checkout. If approved (you're told a couple of seconds).
  2. Pay a portion: Put down a small upfront payment, for example, 20% of the overall purchase amount. You then pay off the remaining amount due in a series of interest-free installments. 
  3. Select the series: Pay the outstanding balance over a set number of monthly installments (which are usually interest-free or very low interest) 
  4. Pay with reward points: Most innovative programs allow you to pay with your loyalty points using a smart cash and points slider, payments can also be deducted from your debit card, bank account, or credit card automatically.
  5. Approval: Choose the BNPL option when checking out at a participating retailer and get an approval decision within seconds.

These loans don't add to your credit card debt and affect your credit score, normally; in fact, they're often too brief to be reported to the credit bureaus at all.

Buy Now, Pay Later Advantages and Disadvantages

Are there some disadvantages with BNPL? It depends on the program, but sometimes you could miss out on any perks that credit cards offer, such as cash-back or rewards points –but with muscle technology this is totally different check here, And if you want to return an item you bought via BNPL, it can get complicated. Of course, missing or late payments result in late fees, damage credit score. 

By the other hand, a great list of advantages or benefits from BNPL are these:

  1. Customer oriented increase convenience and a disciplined way to pay for purchases over time. Low pressure experience.
  2. Frequently zero-interest or lower interest than credit cards. No-interest payments allow you to save money compared to other methods of borrowing like credit cards or personal loans.
  3. Good credit/high credit score not necessary to qualify.
  4. Ultra-fast approval embedded with traditional e-commerce checkout.
  5. High credit score, usually not required.

Why Banks are choosing Muscle BNPL technology

Muscle A.I. technology uses the  power of APIs to personalize BNPL checkout experience. When a customer decides to make a purchase via Muscle BNPL and use reward points to reduce overall payments, Muscle is taking advantage of AI/ML,  empowered to collect and analyze customer data in order to make more sophisticate BNPL decisions. 

Muscle BNPL gives the possibility to buy products with your loyalty bank points and also calculate a personalized series of installments –every customer will have their own BNPL checkout. 

“Muscle BNPL uses A.I. to collect and analyze data in order to better evaluate their customers for future payment arrangements during the checkout process. “ Said Jose Cordero, Muscle CEO

By applying AI strategies to this ongoing stream of data, it becomes possible to turn one-time customers into highly-valuable, long-term clients. 

Muscle A.I look at what the user is purchasing and make suggestions for additional purchases from other shoppers with similar behavior. This not only increases overall turnover, but it also boosts revenue in the form of more transactions and ticket value. 

A.I. can be used to create value further down the line. For example, a user who always pays their installments on time could be offered exclusive products and improves in loyalty rewards points.

In conclusion, there are several actors integrated their BNPL approach to retailer and e-commerce, Muscle brings a trained A.I. for disruptive banks thanks to our API technology.

If you want to check our technology, just contact us.

Ricardo Murillo
Subscribe to amazing content
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.