Buy Now Pay Later offers consumers the flexibility of paying for purchases in installments over a period of time.
Buy Now Pay Later can be a quick, convenient way to buy, while managing your cashflow – and many retailers have built BNPL right into their payment options.
What is Buy Now Pay Later?
Once reserved for purchases of many thousands, “Buy Now, Pay Later” lets you make payments in installments on many everyday purchases, similar to how you pay for a car or home.
Usually, payment plans are set up as equal amounts over a short time.
BNPL fintech firms partner with merchants and offer their services as a payment method to a customer at the time of buying.
Most of the time, these fintech firms make money by charging the merchant a small percentage of customer BNPL purchases.
Powered by a pandemic-driven economy, the Buy Now, Pay Later movement has grown exponentially and is predicted to grow by 63 percent in 2022.
A recent survey shows that people are turning to BNPL solutions for all kinds of reasons, including 42 percent to “help me budget”; 39 percent because “I couldn’t afford the entire purchase”; and 23 percent to “avoid interest and fees.”
How Does Buy Now Pay Later Work?
Maybe you’ve been coveting a $350 Vitamix Explorian blender, and you find it on sale for $315 at your favourite online store.
You click to buy and find an option to pay the total amount or make four interest-free payments over six weeks.
If you choose the BNPL option, you will make your first $78.75 payment at the time of purchase and the following three payments every two weeks until it’s fully paid at six weeks.
While it varies between companies, many don’t perform hard credit queries on your report, which means your score won’t be affected.
Charges for the convenience of splitting your payment over installments vary from firm to firm.
Some charge no interest, some charge a one time fee, and most will charge some sort of fee if you have failed or missed payments.
Buy Now, Pay Later Providers in Canada
Founded in 2009, Paybright is a Toronto-based BNPL firm partnering with some of the biggest shopping names in the business – such as Apple, eBay, and Wayfair.ca.
The company was acquired in 2020 by Affirm, an American company that promises no hidden or late fees when you use them to pay for your purchases.
Sweden-based Klarna is an actively expanding BNPL firm found in 17 countries.
They partner with top retailers such as Sephora, Canada Goose, and NordicTrek, and provide an app for convenient shopping.
Since arriving in Canada, Sezzle has signed over 3,000 retailers and offers customers a BNPL plan of 4 convenient payments over six weeks.
Their SezzleUp offering provides a spending limit, similar to a credit card, which also reports your account standing to credit bureaus on a monthly basis.
Recently acquired by payment processing giant Square, Afterpay is all about buying now, paying later.
The firm offers a six-week payment schedule for items purchased at participating merchants – approval is instant, and there is no interest.
Affirm is an alternative payment powerhouse with a strong position in the American BNPL market sphere.
Their presence in Canada has significantly expanded since the acquisition of PayBright, and their offerings include flexible payment options for qualified buyers.
Benefits of Buy Now, Pay Later
1. Avoid Credit Card Interest Rates & Fees
Many BNPL firms offer interest-free payment options on your purchases.
If you compare this option against credit cards with their fees and interest, it’s not hard to see why “Buy Now, Pay Later” has become popular.
2. Clearly Outlined Payment Schedule
If you’re new to credit or just not confident in your ability to manage, it’s possible debt might creep up on you.
If the expectation is that you only make the minimum payment on your credit card, it can be challenging to stay on track.
Buy Now, Pay Later gives you the benefit of borrowing and the structure to manage it.
3. Poor Credit Isn’t Always a Barrier
For those living with less-than-ideal credit scores, most reasonable borrowing options are closed to them.
While the possibility to access BNPL will differ with each company, some do not require a credit check.
Even if the firm does a query, it may not mean you’re out of the running.
Drawbacks of Buy Now Pay Later
1. Returning Items is Complicated
As most people have experienced, online shopping is rife with uncertainty.
If you need to return an item, shipping fees and other costs can get complicated pretty quickly.
Sending something back becomes more difficult when you have signed a BNPL agreement – you may need to continue making scheduled payments while the merchant processes your return.
Reading the fine print is important as you may be obligated to keep paying even when you feel the retailer did not honour their end of the deal.
2. Potential Consequences for Late Payments
While BNPL services look friendly and accessible when you’re buying something online, it doesn’t take much for things to get costly.
A missed payment can result in steep fees, penalties and a very swift file transfer to a collection agency.
Read customer reviews before signing a contract.
If the BNPL provider isn’t willing to work with the customer even when it’s reasonable, it might not be the firm for you.
3. Easy to Overspend
When you’re lost in the possibilities BNPL plans give you, it’s probably a good time to slow down.
Buy Now, Pay Later sometimes makes it easy to impulsively spend.
Unfortunately, not all providers are open to negotiating if you need to make new arrangements.
Be careful what you sign now, so you don’t get overwhelmed later.
PayBright started as Health Smart Financial Services. James Fox and James Hyssen launched the company amid the 2008-2009 recession, so Canadians had a “simple, fair, consumer-friendly, and transparent” way to pay for healthcare services.
Frequently Asked Questions
- Does Amazon Canada do buy now pay later?
Yes and no. Amazon Canada appears to offer monthly payment options on “qualifying new products and certified refurbished Amazon devices sold and shipped by Amazon.”
There are limitations on this, such as the age of your Amazon account (at least one year old) and has a credit card on file. At this moment, they have not partnered with a BNPL provider to offer these services more broadly to Canadians.
- Are there credit checks with Buy Now Pay Later?
Some Buy Now, Pay Later firms complete some sort of a credit check, while others don’t at all. If you’re asking to be considered for a longer term, there is a higher chance your application will involve one.