Buy Now, Pay Later (BNPL) – What’s The Difference Between Credit Cards, And How Sustainable Is It As A Payment Solution?

Buy-Now-Pay-Later (BNPL) solutions have increasingly creeped into our daily lives. They’re at physical check-out counters and e-commerce carts, encouraging us to use their solutions with a nice discount as a first-time user.

The DollarsAndSense editorial team used this opportunity to discuss BNPL solutions in our podcast. You can listen to our podcast here: Buy Now, Pay Later (BNPL) – What’s The Difference Between Credit Cards, And How Sustainable Is It As A Payment Solution?

BNPL vs Credit Cards

When we talk about buying something today, and paying for it later – without interest charges – there’s another very similar solution: credit cards. In our podcast, we talk about the main differences between credit cards and BNPL solutions.

For a start, BNPL solutions tend to be fully digital. For better or worse, there is typically no physical card that we need to use. Of course, we can also use our credit cards via digital means today.

Read Also: Just Got Your First Job After Graduating? 4 Reasons Why Getting A Credit Card As Early As Possible May Make Financial Sense

While credit cards can be used for both lower-priced items or big-ticket expenses, BNPL tends to be reserved for smaller-ticketed purchases for now. BNPL also tends to offer interest-free instalments spanning several months, while credit cards usually have monthly payment terms.

BNPL players are also not regulated, while credit card issuers tend to be very heavily regulated. This has no doubt boosted the BNPL take-up rate as well. It isn’t just unique to Singapore – this is also apparent in major BNPL markets such as the U.S. and Australia.

Read Also: Buy Now Pay Later (BNPL) VS Credit Card: What’s The Difference When Buying Using These Two Methods

Are BNPL Solutions Sustainable?

There are over 10 BNPL players in Singapore today. All of them are aggressively marketing their solutions – with free gifts and perks to win market share.

Firstly, this is hinged on the BNPL market not being currently regulated. The landscape may evolve once regulation finally catches up – and it will, with MAS already “examining some form of regulation for BNPL schemes”.

Once BNPL schemes have clearer ground rules, existing credit card issuers can be freed to join the game. This may not have a pretty outcome, as majority of BNPL players are not profitable as it is.

To become sustainable, appropriate fees and charges may have to be levied to BNPL customers – which may further diminish the differences between owning a credit card.

Question On Ethics In BNPL Marketplace

Finally, in our podcast, we discuss how ethical it is to target consumers who are less financially savvy. While it’s never a bad thing for more solutions in the marketplace, the fact remains that BNPL players can target two groups that credit card issuers may not be able to: 1) students and 2) those from lower-income groups.

While this can be a benefit for these groups. The obvious question mark is why can’t credit card companies offer them their solutions in the first place. Regulation, as well as credit ratings are the main reasons.

At the end of the day, there’s little point in stifling innovation or protecting credit card companies. What’s really needed in the market is proper education in credit management, as well as a great credit solution.

Read Also: The Simple Truth Behind Buy Now, Pay Later (BNPL)

You can listen to our full BNPL podcast episode here: Buy Now, Pay Later (BNPL) – What’s The Difference Between Credit Cards, And How Sustainable Is It As A Payment Solution?

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