BNPL and cash-strapped consumers amid economic crunch

ONYEKORMAKA ASABOR looks at how a new payment option, Buy Now Pay Later, has come to rescue customers from the grip of inflation

A new payment option, Buy Now and Pay Later, is fast becoming popular in Nigeria, as the harsh economy renders consumers cash-strapped. Apart from the spiralling inflation, other consumer goods are harassing the pockets of not a few Nigerians, so much that they can hardly afford luxury items.

The situation was captured by the International Food Policy Research Institute’s recent report thus, “The current rise in global market prices for major food commodities almost mirrors that of the 2008 food crisis, presenting a worldwide threat to food security. The situation is particularly severe in Africa, where the Coronavirus Disease and now the Russia-Ukraine crisis have exposed the vulnerability of food systems to major shocks, particularly in countries like Nigeria that rely heavily on import of major staple foods such as rice and wheat.”


Fintech’s BNPL to the rescue

It is not an exaggeration that not a few financial technology companies are literally scrambling for space, virtually and physically, to offer consumers BNPL opportunities. 

Fintech companies that are into BNPL business have undoubtedly become the rage of the moment, as not few Nigerians have seized the opportunities inherent in the payment option. If you have shopped online recently, you may have noticed the ubiquity of BNPL financing option, particularly in the phone retailing markets. Some tag it “Easybuy” and they have representatives in different phone shops.

With the snowballing prices of household items, gadgets and other devices, the purchasing power of the average Nigerian shrinks by the day. Hence, it makes sense to look to other more comfortable means of paying for these items, and this is where the BNPL finance option in Nigeria becomes expedient to a few end-users, who want a convenient payment option, and merchants that want to make good sales. 


What is BNPL?

Buy Now Pay Later is self-explanatory; it is a payment service that allows customers to delay the final bill, as they might not want to wait until payday to make a purchase. In fact, with BNPL, consumers are able to start using a product before full payment. In most cases, they would pay for the purchase in instalments of four to six.


BNPL firms’ customers speak

The BNPL or Easybuy has its downsides, as interest is paid until the last instalment is paid. This raises the value of the item purchased; hence, it is advisable to pay cash, if possible, for every purchase.

Douglas Iwuchukwu, who reportedly bought a smartphone from a shop around Ogba, Lagos, said, “If anyone has money to buy a phone outright, it is better than buying to pay later. Even if the sellers claim they sell products on BNPL platform on interest-free basis, the consumer would discover that they are being charged more.”

Despite hidden charges, which Iwuchukwu claimed merchants are wont to add to the price of the good, the offer still stands good, since it is difficult to gather money under the prevailing economic situation.”

No doubt, he hinted that saving a lump sum to buy a smartphone when there are other competing needs to be met is, more often than not, unachievable, especially for consumers that are on low income.

Fred Arokola detests buying goods on credit, no matter the hue – whether outright or partial.

As for buying from fintechs that operate BNPL option, he said, “Customers can pay over a period of eight weeks, depending on the terms and condition peculiar to the fintech.

“Worst of all is that the terms and conditions normally stipulate a surcharge, if a payment is missed, while customers are allowed to reschedule a payment for a second or third time, and failing to meet the rescheduled date may draw the ire of the fintech.”

Financial Street gathered that when the contract between the buyer and seller under BNPL gets messy or embarrassing, it is possible for multiple fees to be added to one order, and the company, Arokola noted, “reserves the right to initiate payments and withdraw funds from any bank account on file at any time to effect all payments, including delinquent payments in a manner that is reminiscent of shark lenders.” 


What’s in it for consumers?

For every business transaction, there must be something for the parties to make it attractive. 

Mrs. Agatha Ebizidie said, “Consumers are expected to pay for a product there and then, but instead, a middle-man lets him or her pay a percentage, and then spread the cost out over an extended period of time. This flexibility can benefit many of the consumers, especially in a high inflation economy as witnessed today.”

BNPL providers also try to ensure it is a quick purchase and credit agreement process, their platforms user-friendly, and simplicity king. 

For instance, a transaction by Solomon Iwegbue, a company driver, resident in Mowe, Ogun State, buttressed Ebizidie’s view. When he wanted to buy a new phone last year, he never waited until he had enough cash to buy it outright.

He said, “When I priced the Itel A16 Plus phone, it was difficult to dispose N19,600 at a go with my meagre salary. However, when I found the phone being displayed under BNPL condition, even at a higher price, I went for it because it would be more convenient for me to pay, and I have completed the payment.” 

BNPL agreements, Financial Street observed, are not characterised by typical time-consuming and somewhat frustrating pages of forms to fill out when an intending buyer applies for traditional credit.

Many BNPL services offer interest-free financing and may also offer frequent customers’ loyalty points toward future purchases or other reward programmes.

However, BNPL is still a financial product with terms and conditions, and so contract terms must be understood before a customer makes a decision that could cause him or her stress or anxiety later.

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