"Say Goodbye to Instant Payments: Exploring the Benefits of Pay Later Services" | Fynance

17 Feb, 2023

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"Pay later" services, also known as "buy now, pay later" or "BNPL" services, have become increasingly popular in recent years. These services allow consumers to purchase products and services and delay payment until a later date, often in installments. Here are some statistics and trends related to pay-later services:

  1. Growing Popularity: According to a recent report by Worldpay from FIS, BNPL adoption has increased by 39% globally between 2020 and 2021. In the UK, over half of the consumers have used a BNPL service, while in the US, nearly 40% of online shoppers have used such services.

  2. Younger Demographics: Pay-later services are especially popular among younger consumers. A survey by PYMNTS found that 43% of consumers aged 18-24 have used a BNPL service, compared to 33% of consumers aged 25-34.

  3. Increased Sales: Retailers who offer pay-later services often see increased sales and conversion rates. A report by Klarna found that retailers who offer BNPL options see an average increase of 30% in order value and a 20% increase in conversion rates.

  4. Concerns about Debt: Some consumer advocates have expressed concern that pay-later services may encourage consumers to take on more debt than they can afford. The UK Financial Conduct Authority (FCA) recently announced new regulations for BNPL providers to address these concerns, including limits on late fees and more stringent affordability checks.

  5. Expansion into New Markets: Pay later services are expanding beyond traditional retail sectors into new markets such as healthcare, travel, and education. For example, some healthcare providers are now offering BNPL options for medical bills, while travel booking platforms are offering BNPL options for flights and hotels.

Pay-later services continue to grow in popularity, with younger consumers driving much of the demand. While concerns about debt and affordability remain, these services will continue expanding into new markets and offering more flexible payment options for consumers.

Pay later services to have the potential to benefit both consumers and businesses in a variety of ways. Here are some potential benefits of pay later services:

  1. Increased Sales: By offering pay-later services, businesses can increase their sales and conversions, particularly among consumers who might not have the funds to make a full payment upfront. This can help businesses reach a wider audience and generate more revenue.

  2. Improved Cash Flow: Pay later services to allow businesses to receive payment for products and services immediately, even if the customer is paying in installments. This can help improve cash flow and reduce the risk of non-payment.

  3. Enhanced Customer Loyalty: By providing more flexible payment options, businesses can improve customer satisfaction and loyalty. Customers are more likely to return to a business that offers convenient payment options and a positive buying experience.

  4. Access to New Markets: Pay later services can help businesses expand into new markets, particularly in sectors such as healthcare and education, where payment plans can help make expensive services more affordable.

  5. Reduced Risk: Some pay-later services offer businesses protection against fraud and non-payment. By partnering with reputable pay later providers, businesses can reduce their risk of financial loss due to chargebacks and other issues.

  6. Improved Financial Inclusion: Pay later services can help provide access to credit for consumers who may not have a credit card or may not qualify for traditional financing options. This can help improve financial inclusion and provide more opportunities for people to access the goods and services they need.

Some of the key benefits of pay-later services for consumers are as below:

  1. Increased Affordability: Pay later services can help consumers afford purchases that they may not be able to pay for in full upfront. By spreading the cost of a purchase over time, consumers can better manage their finances and make larger purchases more affordable.

  2. No Interest or Fees: Some pay-later services do not charge interest or fees to consumers, making them a cost-effective option for those who need to spread out the cost of a purchase.

  3. Improved Credit Score: Pay later services can help consumers build their credit score by providing a way to demonstrate responsible repayment behavior.

  4. Flexibility: Pay later services often offer flexible repayment terms, allowing consumers to choose a payment schedule that works best for their financial situation.

  5. Convenience: Pay-later services are often quick and easy to use, requiring only a few clicks to complete a purchase.

In Malaysia, pay-later services are gaining in popularity as a payment method, particularly among younger consumers who are more comfortable with digital payments. The most popular pay-later service in Malaysia is GrabPay, a digital wallet offered by Grab, a ride-hailing and delivery platform. Other pay-later services available in Malaysia include Atome, Hoolah, and Split. In addition, to pay-later services, cash, credit cards, and e-wallets are also popular payment methods in Malaysia. Cash remains a standard payment method, particularly in smaller towns and rural areas where digital payments may be less common. Credit cards are also widely used, particularly for larger purchases, while e-wallets such as Touch 'n Go, Boost, and GrabPay are gaining in popularity for smaller transactions. The payment landscape in Malaysia is diverse, with a range of payment methods available to consumers. While pay-later services are still relatively new in the market, they are expected to grow in popularity as more consumers become aware of their benefits and as more providers enter the market.

Here's how to pay-later services typically work:

  1. Checkout: The customer selects the pay later option at checkout and provides their personal and payment details.

  2. Instant Decision: The pay later service provider uses automated algorithms to assess the customer's creditworthiness in real-time, based on factors such as their credit history, income, and spending patterns.

  3. Approval: If the customer is approved for pay later, they can complete the checkout process and receive their purchase immediately.

  4. Repayment Schedule: The pay later service provider sets up a repayment schedule, which could be in the form of a fixed number of installments or a flexible repayment plan. The customer is usually required to make regular payments over a specified period, with interest and fees applied to the outstanding balance.

  5. Payment: The customer makes payments to the pay later service provider, either through automated debits from their bank account or by manually making payments through the provider's platform.

  6. Completion: Once the customer has paid off the entire amount owed, the pay-later service is complete and the transaction is closed.

It's important to note that different pay-later services may have different terms and conditions, fees, and interest rates, so consumers need to read and understand the terms and conditions before agreeing to use a pay-later service.


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