Buy post-payment began to appear in the early 2010s and are starting to become popular in the US following initial successes in Australia and Sweden.
These service providers will screen shoppers, approve payment plans, and arrange connections with another bank or financial unit to create loans and take risks. It's the same as previous unemployment insurance programs, except that customers get prepaid products. This whole process takes only a few minutes.
Retailers have never seen the current business environment they are suffering, with 20,000 to 25,000 stores expected to close in the U.S. alone this year. The coronavirus is expected to have a stronger impact on the retail industry than it was during the financial crisis, and the recovery is expected to last at least twice as long as it will in the near future.
A recent retail payment innovation, called post-payment up pre-purchase, could bring some relief — not just to consumers but also to retailers who are fighting the coronavirus crisis.
While the service is rooted in e-commerce, suppliers are also starting to expand into in-store retail, although the customer experience of signing up at the sign-up counter can be more complex.
Buy post-payment programs became popular before the COVID-19 pandemic began. The economic crisis is likely to prompt many retailers to consider post-purchase programs, giving consumers and merchants an advantage.
For consumers, post-paid prepaid purchase programs, unlike regular credit cards, offer a defined payment period that results in a negative balance. In contrast, with credit cards, the used limit fee can take years to pay off if only the minimum payment is made per month. Moreover, many post-payment prepaid purchases allow customers to choose their repayment term – three to 12 months or longer. Other providers have a fixed structure - usually four payments in six weeks.
Merchants often choose to receive interest payments as an engine to buy, reduce or eliminate costs for consumers. Some merchants see this grant as a marketing cost, similar to a discount code.
Programs tend to appeal especially to shoppers who don't like carrying credit card balances. Users are more tech-s knowledgeable than older shoppers, and because, as a group that grew up during the Great Depression, they tend to be wary of credit card debt.
Buy post-payment programs can help more shoppers return in the future, removing somewhat the aches and pains of the most pronounced economic crisis in memory.
A recent study found that once consumers try a post-paid prepaid purchase program, they often end up using multiple post-paid pre-purchase providers. The so-called comfort in this category suggests that the number of users will grow over time as more users try and expand into more purchases with other providers.
Buy post-payment programs also benefit sellers. Even in the best of times, online shoppers sometimes fill their online shopping carts, only to recognize them at checkout or to abandon the purchase altogether at the time of authentication. A post-purchase program offered at this critical time can help alleviate shopper anxiety.
Likewise, post-purchase programs can help facilitate larger purchases. Let's say a customer wants a new television and has 9.9 million to spend today. If a post-purchase option is offered, the buyer may be persuaded to move to the 15.9 million product. A March 23 study found that nearly 40% of those surveyed said they would stop shopping as big as household items until the coronavirus pandemic eased in their country, while 20% said they would stop buying until the pandemic ended globally. More post-payment options may persuade some shoppers to get involved.
To be sure, there is a risk in buy now pay later and the financial providers themselves have to shoulder it. In times of economic uncertainty, lenders may want to withdraw the provision of this type of credit. After all, they will be the one who suffers losses in case of default.
But there are also incentives for financial providers. Like credit cards, prepaid post-purchase solutions attract consumers across the credit line – both those with outstanding credit and those with lower credits. However, post-paid prepaid purchases do not have the same risk profile as regular credit card purchases. Post-purchase providers can, on their own or with financial providers, make quick adjustments to risk patterns, which are quickly reflected in the portfolio with a short term of several weeks or months. In addition, lenders can claim additional interest rates to compensate for the increased risk they are incuring.
Moreover, in many post-payment purchases, the first payment is made on the same day as the purchase and future payments are established through automatic payments. That provides some protections for lenders; After all, avoiding an upcoming automatic payment is much more difficult than simply ignoring an invoice that arrives by mail.
Post-payment buying is not a retail panacea and their success in this era depends on making responsible approval decisions. But if awareness of sellers and consumers continues to grow, post-purchase programs could help more shoppers return to the early days, eliminating some of the effects from the most pronounced economic crisis in history.