What is BNPL?
Let’s start with the basics. BNPL is an acronym for the English-language Buy Now, Pay Later, which means buy now, pay later. In the development of the acronym is contained the shortest and quite precise characteristics of this service, also known as deferred payment. However, it is worth knowing more details before deciding to take advantage of deferred payment.
From a customer’s perspective (whether you’re talking about an individual or a business), BNPL looks pretty simple:
- First, the customer makes a purchase – usually online – and chooses a form of payment (the name of this form often varies from supplier to supplier).
- He then chooses the type of de ferral – some stores offer deferred payment in installments or the option to defer for different periods.
- The ordered goods reach the customer.
- Finally, the customer makes payment – before the deadline.
In reality, however, there is much more going on “under the hood” of this process, especially between the 2. and the 3rd point in the above list. When a customer chooses deferred payment, the fulfillment company receives a request for consumer credit.
Mr. Gregory visits the website of an online store that offers deferred payment for businesses. He makes a purchase of PLN 32,000 and chooses the option: buy now, pay later. The store where Mr. Gregory buys uses the PragmaGO solution, so the entrepreneur can choose to pay for purchases up to 60 days after purchase. He makes a decision and places an order.
So much for the buyer’s side. From now on, the process begins to work on the basis of the order placed. From the customer’s perspective, however, the most important thing is that his order is immediately transferred to fulfillment – so he won’t wait longer for the products by opting for deferred payment.
And what does it look like from the vendor’s side?
When Mr. Gregory places an order with deferred payment, he is given credit for those specific purchases. The seller does not have to wait 30 or 60 days for repayment – he receives the funds right away thanks to the fact that he has signed a corresponding contract with a BNPL service provider. In this way, he provided his business with an additional differentiating feature (more payment methods available) while maintaining liquidity.
It works similarly with sales platforms – for example, Allegro. In the case of Allegro Pay Business, the financing provider PragmaGO has partnered with the marketplace so that buyers can take advantage of deferred payments and sellers receive the money immediately – without waiting.
How much does Buy Now Pay Later cost?
A major advantage of BNPL is that deferred payment for consumers generally does not involve additional costs. Entrepreneurs, on the other hand, may have fees charged, but the amount is not high. In turn, the ability to pay for goods later – usually by 30 days – means that the company can save a lot – for example, by buying products currently on promotion.
However, it is necessary to keep an eye on payment terms – if the entrepreneur settles the amount due on time, he will have to pay exactly the same amount as for purchases with immediate payment. However, if he misses the deadline, he will also have to pay interest or a penalty, according to the contract.
How does deferred payment financing work? Service providers that provide deferred payment funds have their contracts with stores and sales platforms. They make money from implementing the service and operating it, but, of course, from customers who do not pay on time.
The store, on the other hand, while it may incur costs, gains a competitive advantage – it offers a frowned-upon form of payment and makes shopping easier for customers. This is of particular importance in the context of data flowing from the report Deferred Payments in Poland 2023. They show that as many as 69% of consumers happened to abandon their shopping cart simply because the store did not offer deferred payment.
Buy Now, Pay Later services are particularly attractive to business customers who want to make corporate purchases while they wait for payments from their customers. In many such cases, deferred payment will make it unnecessary to take out a loan (often with interest), and the needed goods or materials can be used immediately in further operations.
However, there may be changes in the future that will affect the current state of affairs.
Deferred payments covered by new EU directive
For a long time, deferred payment issues were not sufficiently regulated in Polish and EU law, but this situation changed at the beginning of 2024. Since January, a new EP and Council of Europe document on consumer credit – the so-called “Consumer Credit” – has been in effect. CCD II directive. Its provisions repeal the CCD that has been in effect until now and update a good portion of the regulations to fit modern forms of payment. The changes have not spared the BNPL service.
The most significant change that the directive introduces is the expansion of the scope of the document in question. Since January, interest-free loans – such as the loan provided when using BNPL – have also been under scrutiny.
What will actually change?
Of particular importance is that all interest-free loans (and deferred payments fall into this category) are to be subject to the same criteria as standard loans, granted at interest. This could affect plans to develop these forms of payment, but also the potential costs.
However, there will certainly be an increase in the security of such transactions – the lender will have to provide the borrower with the most important information regarding the commitment being made. However, there is a provision in the directive that the customer should receive a full set of information at least a day before the contract is concluded. As it stands, as deferred payments are granted, this is quite a handicap – a big advantage of the service is often its instantaneous execution. For the time being, however, there are no sanctions for failure to meet this condition, and most importantly, a contract concluded without meeting this criterion will still be binding. In such a case, the customer will have the right to cancel the contract, and it is the responsibility of the lender to inform the customer no later than the day after signing the loan agreement.
The EU document is sure to undergo further transformations in the future – so it’s worth keeping the CCD II directive in mind.
Allegro Pay Business deferred payments now ready for changes
Some companies have managed to prepare accordingly. One of the market leaders in BNPL services, Allegro, has long been verifying the creditworthiness of its deferred payment customers. To do this, Allegro checks data in internal databases (where information such as account activity, purchase and payment history is recorded), but also external databases – such as the Credit Information Bureau.
Although the future may bring some changes that will affect the way deferred payments are used in Poland, there is no indication that the popularity of this solution is going to drop significantly. Polish entrepreneurs have already become accustomed to deferred payment, making this model of paying for purchases part of their business strategy.
Meanwhile, the number of payment gateways and financial solutions that allow payments to be made at a later date continues to grow, and using them is becoming more affordable.