The rise of fintech firms over the past two years has given a lift to digital lending, which in flip has resulted within the rising recognition of the Purchase now Pay later (BNPL) scheme. BNPL playing cards like Sliceit, Postpe, Uni, or Lazypay, aside from serving those that are typically not eligible for bank cards, have additionally emerged as new challengers to conventional bank card firms. So, what are the advantages or problems with a BNPL card in comparison with credit playing cards, and are they price your time?
Credit score line v/s bank card
BNPL playing cards aren’t technically bank cards however a credit score line that may be seen as short-term client loans. Such loans are typically supplied by an NBFC, whereas a fintech firm manages the interface. So, one will discover the identify of the NBFC within the CIBIL report as a substitute of the fintech firm/model. Apart from, there’s a third participant: the financial institution that points these playing cards, as fintech firms can not accomplish that on their very own on account of RBI rules. In case of a bank card, there may be typically just one occasion, which is the financial institution that manages the interface, distributes the credit score, and points the cardboard to customers. This ensures a single level of contact in case of any question from the client. Nonetheless, for BNPL playing cards, one might should take care of the NBFC along with the fintech firm for any queries.
Audience
BNPL playing cards goal individuals who don’t have any credit score historical past to be eligible for bank cards (typically a youthful viewers) and so the monetary threat concerned right here is extra. Bank card issuers typically goal a working inhabitants which has good credit score historical past and so their dangers are a lot decrease.
Becoming a member of and annual charges
BNPL playing cards don’t normally have any becoming a member of or annual charges. Relating to bank cards, many primary and intermediate playing cards don’t cost such charges. Nearly all premium playing cards (specifically life-style playing cards) have becoming a member of and annual charges which may be whilst excessive as ₹50,000- 60,000 plus 18% GST. BNPL playing cards additionally give beneficiant cashback presents to its customers for spending on Zomato, Swiggy and Uber. Just lately, Slice gave 10,000 cashback on Apple merchandise as a promotional supply. Aside from these, many of the BNPL playing cards let you pay in components as a substitute of 1 full fee. Uni card offers a cashback of 1% if the mortgage is repaid in full as a substitute of in instalments.
Bank cards give rewards in 3 ways: cashbacks, reward factors, and air miles. Cashback playing cards like Axis Flipkart and ICICI Amazon pay give 5% cashback for purchases on Flipkart and Amazon, respectively. Axis Flipkart additionally offers 1.5% cashback in case of no-cost EMI purchases, whereas IDFC playing cards and Axis Ace give cashbacks within the vary of 2-2.5% on virtually each transaction. Many premium playing cards give reward factors that can be utilized to buy merchandise, e-book flights or resort rooms. Playing cards like HDFC Infinia, Diners Membership Black, and SC Final return 3.3% on most such transactions. Then there are playing cards like SBI Etihad or Axis Vistara which give larger returns (largely greater than 10%), notably to frequent flyers, within the type of air miles. Relating to rewards and advantages, bank cards are presently miles forward of BNPL playing cards.
Credit score interval
Most BNPL playing cards enable customers 3-5 days to pay their month-to-month credit score payments (Uni, being an exception, offers 10 days), whereas most bank cards give 12-18 days to settle any month-to-month dues. On account of such very brief credit score interval, the possibilities of an consumer lacking the due date are larger within the first case, whereupon they should pay late fee charges and curiosity costs. One main situation with virtually all BNPL playing cards is the close to lack of privateness for the client. Most of those corporations ask for entry to contacts, SMS, and metadata data of all apps put in on the customers’ units aside from the standard knowledge like location and KYC particulars. These extra permissions to entry delicate knowledge like contacts aren’t typically required for bank cards issued by banks.
Grievance redressal system
In case of bank cards, banks are a single level of contact for any grievance and their grievance redressal system is obtainable 24*7. With BNPL playing cards, many customers get caught between the fintech and NBFC corporations.
Conclusion
BNPL playing cards are a brand new phenomenon, however the disadvantages outlined above outweighs any advantages.
Kashif Ansari is an assistant professor at Hansraj Faculty, College of Delhi.
Supply: Live Mint