How pandemic-weary young people are embracing ‘live now, pay later’ finance solutions

An evolution from ‘buy now, pay later’, the payment system offers the youth of today a way to unlock intangible services like travel, healthcare and lifestyle experiences now, and worry about the cost later

Tristan Chiappini

Published: 10:15am, 12 Jun, 2022

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The concept of consumer credit at the point of sale has existed for many years, from merchant loans to bank lending and credit cards. There have been further evolutions in recent years to the way consumer credit is offered and structured, largely transformed by the advent of big data, digital identities and smartphones.

Technology like this enables fintech companies to easily gather customer profiles and user behaviour, giving them the ability to approve loans in just a few seconds. The result is that nonbank credit providers have become more competitive than ever.

“ Buy now, pay later” (BNPL) is a short-term finance solution which enables consumers to pay for goods and services in instalments. With firms such as Klarna marketing to young people, the service has quickly become commonplace as a way to keep up with peers and access the latest trends in an instant.

Digital lending is expected to reach US$92 billion in transactions in Southeast Asia alone by 2025. In Singapore, the government has recognised the growth of BNPL in neighbouring markets, and the Singapore FinTech Association has launched a working group to develop a code of conduct for providers. This signals increasing regulatory attention and the potential for the payment method to gain further ground.

Following Klarna’s success, other fintech companies are adding instalment financing into their payment mix. BNPL is becoming a popular payment method across the globe, with firms such as Atome, hoolah, Rely and Grab getting in on the act.

It is no secret that the onset of the Covid-19 pandemic brought a decline in consumer spending worldwide. Even before that, though, BNPL served as a budgeting tool for consumers, helping them delay payments and spread costs. The shift to e-commerce created the perfect environment for it to thrive online.

Chinese millennials are even buying burgers on instalment plans

For young people just starting their career or who have less spending power, BNPL can be a gateway to big-ticket items or necessary purchases with staggered payments. This offers no-strings convenience and a feeling of control not found in traditional credit, which often has high interest rates and fees.

This has led to innovation in the sector, and what started off as a method for online payments has evolved into an option for in-store checkouts. BNPL has evolved into “live now, pay later” – a way to unlock intangible services such as experiences and modes of self-improvement, letting people live now and worry about the cost later.

To appeal to younger generations, tech players have gone to great lengths to understand what makes young people tick. With the last two years keeping most of the world’s population at home during the pandemic, there is a notable shift in consumer behaviour wherein the youth of today value experiences over material possessions.

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“Live Now, Pay Later” gives young people the freedom to purchase desired experiences and items while downplaying the concerns of not having enough funds up front. It is becoming the enabler of living in the moment and casting aside financial worries aside, something regulators have noticed.

With healthcare services in some parts of the world unaffordable and out of reach, “Live Now, Pay Later” can help people access the care they need by paying in instalments. This could also be extended to educational or vocational courses to help young people improve their career prospects.

It is worth nothing that BNPL has been criticised by those who worry that it encourages young people to spend beyond their means, shop impulsively and sign up for payments they cannot keep up with, resulting in debt and poor credit ratings. However, “Live Now, Pay Later” can be a force for good among wellness-conscious and experience-driven consumers.

Yes, you can afford that luxe bag – just buy now, pay later

Fintech firms involved in the sector have largely taken on the responsibility to ensure consumers do not overburden themselves with debt, but more regulation could be required to ensure a standardised approach to this new form of lending.

“Buy now, pay later” and “live now, pay later” offer vast opportunities for consumers and merchants. They continue to transform how we prefer to pay for things, who can experience them and when these experiences can happen.

Tristan Chiappini is vice-president of partnerships and head of APAC at PPRO, a specialist for local payment methods and value-added services