Buy Now, Pay Later: Are These Payment Apps good?
Most stores across Singapore have had a new payment option via apps such as Hoolah, GrabPay or Atome. These options spread payments for the next two months after purchase. Let us discuss the payment options available, the risks behind it, and a clear view of what you can do before jumping in!
How does Payment Apps work?
Michael (not his real name) has been planning to upgrade his phone to the latest Samsung Galaxy phone, the Samsung S21. With such a massive price tag ($1028.00 at the article release date), Michael was reluctant to spend so much money at one go just to replace his ever diminishing S10.
When he found out about the new payment plan that hoolah collaborated with Samsung, Michael was thrilled. The idea of spending a third of the cost right away, and the rest over the course of two months was perfect for his tight wallet. He can enjoy his purchase immediately, and the next instalments automatically get deducted from his card each month until it is fully paid for.
These apps are called Buy Now, Pay Later (BNPL) payment options as it offers a new way to pay for purchases without having to use our credit cards or pay for an expensive item so quickly. In theory, it is fuss-free, and you only need to pay up when the due date occurs.
What Payment App options are there?
While there are apps in the market, there are a few which has become mainstream. Those are GrabPay, Atome, Hoolah, Pace and Rely. Let’s discuss some of these apps and how some apps have more unique features than others.
Rely was launched in 2017, becoming one of the first few businesses catering to the BNPL trend. It pioneered the way an app can detail how a purchase can easily be split over the course of three months, and having it be deducted seamlessly from your debit card.
As long as you have a debit card, above 21 and is a Singaporean citizen, the process is relatively simple. It has partnered with online and offline retailers across the fashion, beauty, lifestyle, and fitness industries, among others. Oftentimes, Rely has promotions with offline retailers to get new customers to download the app and buy products using the app.
Rely plans to expand across Asia over the coming years, with new solutions. It recently announced its second payment option, where you can split a payment into 4 instalments bi-weekly, shortening payment durations and reducing monthly payments.
Pace has a similar app solution, but much more straightforward and simple. The app shows the customer shopping options, the purchases you have made, and your profile, with the debit card used saved.
Unlike Rely which has mainstream stores in their catalogue, Pace has mostly local products and companies in their catalogue.
Hoolah is one of the fastest-growing BNPL apps on the market growing today, with more than a hundred stores in their catalogue, with some of the biggest names (Samsung and Nike included). Like pace, it also features a relatively simple app.
However, Hoolah has a credit limit feature, whereby all purchases that are not completed must be under a certain amount ($1200 at the article release date). With this feature, Michael (who got his new S21), will be able to use up his credit limit, but will not have enough for any more major purchases. This helps to ensure customers do not overuse the instalment functionalities.
GrabPay is a stored wallet, and will be talked about in our next article! Launched in December 2020, PayLater is Grab’s version of the BNPL payment option. It seamlessly connects Grab services and GrabPay QR to BYPL capabilities. With PayLater, now you can split or delay your grab rides, food delivery, or even shopping to the next or the following months.
The advantage GrabPay has over it’s competitors is it’s already vast catalogue and a go-to app for anything and everything.
What are the advantages of BYPL?
With people spending more time online and more time shopping, everyone is looking for more payment options to get what they want as soon as possible. A new purchase that may look out of budget right now can now be affordable through the use of BYPL apps.
And with these apps, therein becomes the lack of necessity to use your own credit card and involuntarily hurt your credit score directly. You can use your debit card at all times and not be chasing too much debt too quickly. There is 0% interest at any given moment, hence no excess costs whilst paying off the instalment.
Many current BYPL users commented that these apps help to lower their monthly expenditure and it helps to not see a large amount on their credit card bill at the end of the month.
These apps have been catered to ensure you are well informed of your payment options and gives you reminders on when to pay off your bill. You can also pay off your bill early and not be slapped with any fees.
What are the disadvantages of BYPL?
BYPL has a unique psychological aspect of buying, which could lead to an ever-growing debt trap for consumers. Now imagine Michael at the start of this article. What if his new phone purchase spurred him on to more purchases using this payment option? While it may seem affordable now, Michael, like some consumers today, will not know whether they would be able to pay off their second or third instalment.
Even worse, if Michael does not pay off his instalments in time, these apps will make a meal out of these consumers, charging them late fees that can come with whopping interest rates. This also affects their credit scores, hence creating a storm that did not seem it was going to occur.
These BYPL apps has to ensure it’s consumers not buy excessively and know of the risks involved in doing instalment plans. Apps such as Hoolah try to limit their customers to one major purchase by limiting their credit limit, or by limiting by the amount of things consumers can buy via the app.
Whichever way one can think about it, Buy Now Pay Later (BNPL) payment options are here to stay, and they will continue to grow in popularity. Younger people who are not eligible to afford a credit card can pay via instalments, and large purchases will not seem like a heavy risk anymore.
What is the bigger worry is, will this option be a boon to help us get what we ever wanted, or will we drown in a debt we would never imagine?