Financing big-ticket purchases through “buy now, pay later” is gaining ground internationally. In Latin America, the credit model faces a bumpy growth outlook.
Globally, the Buy Now, Pay Later (BNPL) phenomenon is rapidly gaining ground. The vertical grew 197% year-on-year in the second quarter of 2020 alone, according to a report from Cardify. But in Latin America, ‘buy now pay later’ has not yet taken off. Some players argue that the lending model is still in an early stage of development, while others suggest that access to information is its main obstacle. “It’s not such a clear vertical,” Fabrice Serfati, director and partner at IGNIA Partners, a fintech-focused venture capital firm, told iupana. “Mexico, for example, continues to be a place where any fintech has an impressive growth possibility. There is a very low level of banking, but at the same time there is a very great need. All that digital divide was shortened throughout the pandemic, so these people want to consume. The big problem is the lack of information.” The ‘buy now, pay later’ model facilitates purchases by deferring payments into installments, without the need for a credit card. Depending on the model, either the buyer or the seller will pay a fee for the service. For businesses, the advantage is that it offers an alternative payment method for high-value purchases, while increasing the average purchase ticket by up to 60%. For the consumer, it offers transparency over the all-in cost of borrowing, and greater control over monthly spending.