Select Page

Factors and Psychology Behind the Great BNPL Allure

Apr 29, 2022

“Hey, buy your favorite designer shoes now. Pay later at your convenience.”

Can anything be sweeter than these words?

It’s sure to beat the sweet pleasure of biting into soft, creamy, warm waffles. Except, of course, you pay for them later too!

Now don’t be lost. We’re not blabbing about a random retail marketing gimmick.

We’re referring to the strategic, monumental Buy Now, Pay Later (BNPL) phenomenon that’s taking the world by storm.

If you don’t know what BNPL is, here’s a starter

BNPL is the hottest revolution in the world of credit payments. It gives consumers access to instant credit lines to pay for products they want at their leisure. BNPL fuels, not just food delivery and e-commerce today. It pervades the world of travel, fashion, education, insurance, and anything and everything that allows digital payments.

In India alone, the BNPL market is estimated to grow at a CAGR of 24.2% from 2021 to 2028.

Buy Now Pay Later Market Size in India

Did you know?

Over 49% of consumers spend more when using BNPL service than they would on a credit card (Source:, a consumer spending data firm).

Yes, the Buy Now, Pay Later service stimulates people to checkout with fuller carts loaded with luxury products compared to other payment forms

But why is BNPL so popular?

Several tangible and intangible components contribute towards the immense allure of the BNPL phenomena. First, the proliferation of BNPL is more in online commerce than in-store ones due to changing customer behavior coupled with the impact of the pandemic. Second, it has also made businesses leverage this payment mode as a potent tool to entice customers to load their carts with impulsive purchases.

1. Pandemic-driven online commerce

The Covid-19 pandemic provided a significant boost to BNPL, as the restricted mobility accelerated online purchases. However, consumers had limited purchasing power, and the existing credit infrastructure did not support the demand and supply dynamics.

This was precisely when BNPL emerged as a potent enabler helping lockdown consumers use instant credit to purchase food supplies, medical supplies, apparel, and services such as online courses, insurance, utility payments, housekeeping services, etc. The financial support BNPL provided consumers during the pandemic was unwavering and relentless. Thus people began purchasing only from businesses that provided BNPL payment options

2. Instant gratification across demographics

Over 50% of Gen Z and millennial consumers who are most tech-savvy amongst the consumer base indulge in the convenience, affordability, and speed that BNPL transactions offer over other forms of payments.

Today’s youth have lower purchasing power, a volatile credit rating, and a whim to purchase anything and everything in an instant. BNPL gratifies its caprice by providing instant credit, convenient repayment plans, and soft credit checks that do not impact individual credit scores.

But it does not mean that older consumers are not drawn by the Buy now pay later allure. On the contrary, the no interest rate feature and convenient duration to pay off the loan attract consumers across all demographics.

3. Convenient, affordable repayment plans

Most BNPL providers enable consumers to repay the credit within 15 days without any interest. Or you can switch to easy EMIs with 2,4,6, or 12 months window or facilitate auto-debit from your bank account. You can also use the scan and pay option to pay in stores and use the BNPL UPI ID to go cashless anywhere, anytime

4. Easy KYC, no exorbitant charges

With minimal eKYC, you can enjoy maximum credit based on your income. There are no complex interest calculations, service charges, compound interests, or hidden charges, unlike credit cards. All the payment terms are stated upfront before the payment.

Also, there is no need for OTP verification, entering card details, recharging your wallet every time you need to make a payment.

Psychological factors that accelerate BNPL adoption

Intrinsic psychological factors play a critical role in accelerating the growth of BNPL. Understanding the psychology behind BNPL helps businesses design product/service offerings according to customer behavior and preference, increasing customer experience, satisfaction, and conversion.

The pain of paying

Ever experienced the pleasure of a tranquil spa massage or a scrumptious plate of grilled lobster vanish right when you pay the bill with cash? Here’s why.

When people make purchases, they immediately experience the pain of paying.

Love-hate chemistry between spending and consumption

No one can deny the peculiar love-hate chemistry between spending money and the pleasure of enjoying what you pay for.

When payments get deferred, it triggers relief in the brain, allowing you to enjoy life at the moment. Using the Buy now pay later option instead of cash to pay for your dream product or service lets you enjoy the moment without worrying about the money left in your pocket.

Payment modes and their emotional impact

Payment modes such as cash, credit cards, BNPL, and debit cards leave their own psychological ‘pain of payment’ impact on the consumer.

Dr.Carey Morewedge, Asst.Professor in Carnegie Mellon explains the pain of paying with a simple formula.

Cost of your item/pool of resources (cash/BNPL/others) = pain of paying

The larger your resource, the greater will be the inclination to make costlier purchases. For example, when you are shopping using BNPL, you feel like spending a small fraction of money from a large reserve with no immediate deadline. So the pain of paying becomes dramatically less in BNPL.

Whereas drawing a few currency notes out of your pocket seems like you are consuming a large portion of the available fund. Thus the pain of paying in immediate cash payment is more significant.

How can businesses make the most of BNPL?

Adopting BNPL gives your business instant access to an enormous customer base who would otherwise refrain from spending due to lack of credit availability, exorbitant credit card interest rates, and credit rating depreciation. As BNPL removes all purchase barriers, you can immediately see a rapid increase in sales and revenue.

Merchants and businesses can reap huge profits as BNPL drive higher average order values (AOV) and conversion rates and lower cart abandonment and customer acquisition costs. In addition, now that BNPL reduces the pain of instant payments, it triggers repeated purchases, which is a huge deal for businesses that strive for increased sales, customer satisfaction, and loyalty.

However, trying to build your BNPL infrastructure in-house will exert a lot of strain on your bandwidth and productivity. Partnering with reputed API providers will help you deploy efficient plug-and-play BNPL systems at an incredible speed. API service providers empower businesses to go to market within days with seamless integrations and in-built analytics solutions.


Like everything else in life, BNPL is a double-edged sword too. Though it fosters a win-win situation for both consumers and businesses, this short-term credit instrument presents a few risk factors. For example, consumers can run the risk of debts if they indulge in too much impulsive shopping. And e-commerce aggregator businesses may suffer from merchant fraud or credit risks if KYC and regulatory compliances are not adhered to.

Want to know more about BNPL? Write to us at

Subscribe to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.

Follow us on LinkedIn and Twitter for insightful fintech tales curated for curious minds like you.


Submit a Comment

Your email address will not be published.

You May Also Like…