How do BNPL platforms differ from traditional credit cards for consumers?

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Buy Now Pay Later Platforms Offer Alternatives to Traditional Credit Cards

Buy Now Pay Later (BNPL) services provide consumers with an alternative to traditional credit cards by allowing payments to be divided into installments. A key differentiator is that BNPL platforms generally do not require a thorough vetting of a user's credit history for eligibility, making them more accessible. While signing up typically involves providing personal details, with some services mandating users be 18 or older, the approval process is often less stringent than for credit cards.
Accessibility Through Lenient Credit Checks

Unlike credit card issuers who conduct extensive credit history checks, many BNPL platforms do not prioritize this step. This approach allows a broader range of consumers to access credit. For instance, Atome employs its own credit scoring system, utilizing artificial intelligence to assess user affordability, rather than relying solely on traditional credit reports. This focus on alternative assessment methods contributes to their wider accessibility.
Varied Installment Structures and User Requirements

The structure of installment plans and the requirements for users vary across different BNPL providers. Atome, for example, offers three-month installment plans, with credit limits that can differ based on whether a user possesses a credit card. Similarly, FavePay Later, launched in 2021, also provides three-month installment options and uses a "user assessment" to determine credit limits. Grab PayLater, introduced in 2019, allows for either four installments or full payment the following month, and has specific age and membership tier prerequisites for its users.
Revenue Models and Late Payment Policies

The financial models and policies regarding late payments also distinguish BNPL platforms. Atome, for instance, collects fees from merchants and imposes penalties on users for late payments, rather than charging interest. FavePay Later charges a percentage of the outstanding amount for late payments, while hoolah implements tiered late payment fees based on the transaction value. Grab PayLater freezes accounts for missed installments and charges a reactivation fee. Shopee's SPayLater, which offers deferred payments over two, three, or six months, includes a processing fee and a penalty for late payments. In contrast, Split, which claims to be Shariah-compliant, does not charge late payment penalties and instead works out individual payment plans, monetizing through success fees charged to partner stores.

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How do BNPL platforms differ from traditional credit cards for consumers?

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