BUY NOW, PAY LATER: THE CASHLESS ‘HIRE-PURCHASE MODEL’ RESHAPING FINANCING

 

WHAT IS HAPPENING TO THE PHYSICAL CASH WORLD?

Ignore at your own peril! Its is more than official that physical cash supply is running down and this is affecting how businesses around the world are engaging with their customers. With the scarcity of physical money, isn’t it clear that it is getting harder for you to make simple payments at an affordable rate on your money as a consumer? And as a merchant with loads of stock that is hardly moving, what are some of your options to solve this pickle? As you are pondering your answer lets move on forward a little.

Hire purchase is not something new to economics, this model definitely saw the light of day due its need in society. The economy works in cycles of booms and recessions ever since the beginning of civilization, and this means that at one-point consumers have disposable money and another time their pockets are literally empty. The introduction of hire purchase meant that merchants and consumers could strike a balance between themselves and keep business going on as usual allowing for customers to pay for items in instalments over a given period in time agreed upon by the two parties.

The Buy Now Pay Later (BNPL) model works in a similar way to hire purchase, however here you become an owner of an item before you complete your payment, plus there are payment models are designed from a few weeks to up to 24 months and sometimes beyond that. This gives people various payment plans to choose from for convenience. 

 

THE SURVIVAL INSTINCT KICKS IN GLOBALLY

Hire-purchase, a term that seemed to leave our vocabulary is slowly finding its way back onto our lips in this current age. However, this time we are witnessing a sweeter version of the ‘Hire Purchase’.

Buy Now Pay Later model works in a more automated way as opposed to the manual way that merchants had to track their customers with hire purchase.

Let’s look at an example. I am a consumer who needs to acquire a mobile phone but I can’t afford the whole amount at once, this is my problem. Then we have a merchant who has stock flowing if from China or wherever, they have too much stock but no customers, because the economy is in a recession or whatever the case at the time.

These two parties have each a unique classic problem the economy faces every now and then.  This leads to a solution to be sought after henceforth, and the Buy Now Pay Later model has come to their rescue. With Buy Now Pay Later the payment plan is automated for the defined period of payment and all you do is continue enjoying the item you purchased.

Being able to pay in instalments is convenient for consumers because they can use that money for something else and thus enhance their desired quality of life. With Buy Now Pay Later model, a merchant and consumer go into an agreement that is automated, meaning the money could be deducted automatically from your mobile phone once the conditions to do so are triggered by the system. This is very convenient for both the consumer and the merchant because they don’t have to keep their mind on what is going on in the background, but only see to it that the amounts being transferred periodically are as agreed in the contract.

One thing I would like stress is how much time and stress this automated process of business takes away from the parties concerned. As a merchant you don’t have to worry about whether or not a customer has made instalment payment, that is because this is taken care of by the system accordingly. The consumer has the privilege of using something on credit and doesn’t have to worry about the process of moving money around, because that has also been taken care of systematically.

 

LETS FIX THIS TOGETHER, OR NOT

Now, as a merchant you might be asking yourself whether this is for you or not. Buy Now Pay Later model may not be for you. This model is suitable for merchants who would like to increase sales but have to wait for longer periods to receive the payment, or are you a merchant who has stock that risks depreciating quickly and you want do cut you losses, or are you someone who actually loves the model and would make it your main business model, this could be for you.

As a consumer, you might approach it from your income status to see what works for you. If your payments are late but consistent then this could be something for you to try. You could also be a low-income earner but need to acquire something that could be an asset to you and generate some income like an entrepreneur, this could be for you., or maybe you just went through some great financial loss and has figured out how to get back on your feet.

Buy Now Pay Later is a new business model and is slowly that trending upwards in its adoption rate thanks mostly to blockchain technology which has allowed for easier and more appealing business models to be customized around the world, hence adopting with challenges we face in local and global economy.

Some big Buy Now Pay Later players around the world include the likes of Finnish Klarna, while in Africa  we can talk about LipaLater of Kenya, CredPal of Nigeria, as well as Sympl of South Africa.

Gerald Munduga

bladuneet@gmail.com

(The writer is a Tech Business in Africa Blogger)