Some stores and banks offer payment services for goods in installments or on credit. This is very convenient for users who are not ready to pay the full amount for a product or service right away. With the development of technology, BNPL services have appeared in the financial market, and have received high approval from users. If you are thinking about developing a fintech solution and are looking for a company that provides fintech software development services, we recommend contacting Kindgeek. And from this article, you will learn about the solutions that users prefer to pay for goods and services.

POS Credit

This is a type of consumer credit that the buyer applies for directly in the store when purchasing goods.

The bank pays for the purchase, and the buyer subsequently repays the debt to the bank. The terms of the POS credit are specified in detail in the contract.

Such a credit can usually be issued for a period from 3 months to 3 years. A particular store enters into an agreement with a narrow range of banks, and the rates on POS credits are higher than on regular cash credit. The advantage is that such a credit is approved literally within an hour.

Installment Plan From The Bank

In this case, consumers buy goods on credit but do not pay interest. Buyers pay the cost of goods in equal installments according to a schedule over a certain period of time.

Installment plans are usually issued for six months to a year. However, you should not think that when paying in installments, the buyer does not overpay: the overpayment is already included in the price of the goods. In household appliances and electronics stores, you can often see two prices – when purchasing immediately and when purchasing in installments. The second price, as a rule, will be higher, but there are stores where the figures are the same.

The way a buyer repays an installment debt is also reflected in the credit history, as is the payment behavior of a consumer loan. Clients with a bad credit history will find it difficult to obtain installment plans from the bank.

Installment Plan From The Store

This service can be arranged by the seller himself without the participation of the bank. The right to claim the debt is then assigned to the credit institution. If the buyer applies for an installment plan from the store, then a credit agreement is not concluded with him. In this regard, the seller has no obligation to transmit information about the installment plan to the authorities that monitor credit history. Also, with such installment plans, the client is not asked for a credit history.

Disadvantages of installment plan from the store:

• the service can be purchased for a limited range of goods;

• the debt must be repaid in a short time;

• down payment required;

• the buyer cannot refuse additional services

Installment Cards

These cards are issued by banks. The essence of these financial products is that the buyer needs to repay the debt to the bank within a certain time without interest. If the buyer violates the payment schedule, he will also have to pay penalties and fines.

The benefit for the bank is to earn money from commissions paid by retail outlets and from fines from debtors. An installment card is similar to a credit card, so the buyer’s credit history will be checked. Non-payments are also reflected in the buyer’s credit history.

BNPL Services

The abbreviation stands for “Buy now pay later”. The service involves paying the purchase price in installments.

This method of payment to a point of sale is used in online stores. The buyer finds the desired item on the website and selects the option to pay in installments. As a rule, 25% of the cost of the goods is debited from the bank card that is linked to the buyer’s account. The remaining amount will be debited from the same card in installments over a short period of time.

If the payment schedule is violated, the buyer, as with other payment methods, will pay a fine. BNPL services are not included in the credit history, and a loan agreement is not drawn up with the client. For this reason, many buyers choose BNPL, and developing such an application is a promising idea that can be implemented with a reliable fintech product development company like Kindgeek.

But the debt repayment period is shorter than in other cases and sometimes is only 1 month. For this reason, the service is not suitable for expensive purchases.

From the point of view of consumers, the BNPL service is a convenient way to quickly receive the desired product without overpayments, proof of income, and the need to sign documents: all you need is a phone number and a one-time payment of part of the amount. This allows consumers to plan their budget and makes shopping more comfortable. However, the buyer needs to assess his capabilities and financial burden himself.

You also need to take into account that the conditions for all BNPL services are different. It is worth carefully studying the service offer.

For stores, the benefit is to increase the average check. At the same time, they do not risk anything: the BNPL service immediately transfers the full cost of the goods. The services themselves earn money from the commission they receive from the seller of the goods.

Key differences between BNPL and installment plans from a bank: there is no need to sign a loan agreement, there is no exchange of information about the buyer with credit history tracking authorities, and the service itself is provided for a shorter period.

Final Thoughts

Modern life is full of surprises, including unplanned purchases. Consumers are looking for convenient shopping solutions and are often finding them in new payment solutions like BNPL. If you want to develop your own payment solution, be it a digital wallet, neobank, or BNPL service, and are looking for a reliable fintech software development company, we recommend paying attention to Kindgeek. The company provides services for developing fintech products from scratch, as well as white-label solutions for neobanks, which will allow you to enter the market much faster.