BNPL companies (Buy Now Pay Later) employ various strategies to generate revenue.
Let’s explore how BNPL Companies make money:
- Merchant Fees: BNPL providers charge e-commerce platforms and retailers a fee for integrating their BNPL services. This fee ensures that the BNPL option is available during checkout on these platforms.
- Interest and Fees on Late Payments: If consumers fail to repay within the stipulated period, BNPL companies charge interest or late fees. These penalties contribute to their revenue.
- Credit Risk Management: BNPL firms assess credit risk and set credit limits for users. They earn by managing this risk effectively and ensuring timely repayments.
- Partnerships with Financial Institutions: Some BNPL providers collaborate with banks or financial institutions. They earn a commission when users opt for BNPL through these partnerships.
- Data Monetization: BNPL companies collect valuable consumer data. They can monetize this data by selling insights to other businesses or advertisers.
- Cross-Selling and Upselling: BNPL platforms often recommend additional products or services during the checkout process. If users make additional purchases, the BNPL provider benefits.
- Premium Services: Some BNPL companies offer premium services, such as faster approvals or higher credit limits, for a subscription fee.
- Merchant Referral Programs: BNPL providers incentivize merchants to promote their services by offering referral bonuses or commissions for every successful BNPL transaction.
Some Good Reads on BNPL:
- Razorpay: The Rise of BNPL in India
- Six Profitable BNPL Business Models to Unlock Infinite Value
- What is the future of Buy Now, Pay Later (BNPL) in India?
- Decoding the BNPL model – Matrix Partners India
- Navigating the Buy Now, Pay Later Landscape in India: Balancing Convenience and Responsibility
Also Read: Buy Now Pay Later (BNPL): A Historical Perspective