Risk of “buy now, pay later” trend

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Guest post by Daniel Tannenbaum

Throughout 2020, the ‘Buy Now, Pay Later’ product trend became increasingly popular, no longer just for large purchases, but used to make much smaller ones online.

This market is today one of the fastest growing forms of credit in the country, often aimed at young adults. With this product, users can make purchases on credit and refund them later.

While this form of credit has become incredibly popular and is being hailed as revolutionary in the world of fintech, substantial risks can arise, including damage to your credit rating and high interest charges if repayments are missed or delayed.

Concerns surround this product, with some reporting its popularity and ease of registration could distract users from the fine print of agreements – which is essential for them to fully understand how this form of credit works.

There have also been calls to regulate the market, said MoneySavingExpert.com founder Martin Lewis recently of “Buy now, pay later” products: “My problem is like with payday loans, [when regulators come to act] it will be too late. Today we are in the explosion of this form of credit.

“It’s absolutely huge. It’s a massive form of credit that is unregulated without control… and I would ask for maximum speed to get that through in a regulatory environment. “

As these products grow in popularity, with a call for regulation and such public reporting around user concerns, this recent trend and its place in the future of short-term finance has been somewhat overshadowed by emphasis on the safety and well-being of consumers.

This future focus on the well-being of borrowers can be seen in many examples in the industry, including the downfall of notorious market leaders like Wonga, Uncle Buck, The Money Shop and QuickQuid – Wonga in particular renowned for its rates. interest that could exceed 1,000 percent. APR.

This is also seen in startups that have subsequently emerged to fill the short-term credit gap, including the peer-to-peer fintech platform. Finance yourself, offering more reasonable loan options and support to borrowers who are starting to experience financial difficulties, including interest-free extensions and no prepayment charges.

Founder Nadeem Siam comments: “We want people to leave in a better financial situation than when they started.

“We are totally committed to providing smarter, simpler ways of delivering financial services, helping individuals to borrow or invest in a selfish market that is easy and safe to use. We believe we can empower people by disrupting the status quo with our Fintech products and changing the way people conduct their financial lives. “

Final thoughts

As ‘Buy Now, Pay Later’ products, and the concerns and calls for reform that go with them now, have become a big trend in the lending industry in 2020, with more reasonable options now available and With the fall of various ‘legal usurers’, we can hope that the future of short-term finance looks more manageable and fairer to those who need it.


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