By Tim Harris, CEO, FuturePay Holdings Inc.

We’ve all heard the hype about Buy Now Pay Later (BNPL) loan solutions, which offer consumers the option to stretch payments for a purchase out over four or more installments. BNPL has gained popularity in recent years, allowing consumers to receive their merchandise before they have fully paid for it. It certainly came as a surprise, then, to see that a well-known BNPL provider recently introduced its own credit card, blurring the line between BNPL and more traditional financing options that are known for flexibility, ease-of-use, and ubiquitous usage.  

Can this nod to traditional revolving credit financing be viewed as an admission that BNPL is growing stale, and that its appeal and utility are entering a downward slope?

Buy Now Pay Later has been criticized for promising no-interest installment loans , yet shoppers are often faced with late fees when they are unable to manage its rigid repayment schedules. As Digital Transactions Editor John Stewart recently noted, BNPL providers have been “at pains to rebut notions that buy now, pay later credit can be predatory loan products.”

Furthermore, since BNPL customers often take out multiple BNPL short-term loans for separate purchases, making it difficult to track which can lead to missed payments and the potential for associated fees.

Another issue with BNPL loans is its limited reporting to credit bureaus. According to a recent report from research firm EMarketer, consumers may be “understating their debt” due to BNPL’s limited reporting. “Since many BNPL lenders don’t provide their data to credit reporting agencies, a true evaluation of US consumers’ outstanding debt is difficult to calculate,” the report confirms.

Digital Revolving Credit Has Greater Advantages

One significant shortcoming of BNPL is that it does not provide consumers with a revolving credit line, which means that the merchant’s relationship with the customer ends once the purchase is paid-off. Not unexpectedly, the new BNPL credit card mentioned earlier doesn’t include a revolving account option, either. Digital Revolving Credit offers benefits that traditional BNPL solutions don’t deliver. Digital Revolving Credit represents an appealing balance between the instant availability and convenience of BNPL financing and the flexibility of conventional credit card programs, while avoiding the weaknesses of each of these methods.

Digital Revolving Credit is as convenient and immediate as BNPL. It can be accessed instantly from a consumer’s shopping cart. Unlike  BNPL’s fixed installment loan structure, however, once a Digital Revolving Credit account is opened, shoppers can keep that credit line open indefinitely and reuse those resources again and again.

It’s also easier to maintain good standing with Digital Revolving Credit since account holders can structure their payments according to their budgets, even changing monthly payment amounts if their needs warrant. This flexibility is very useful during inflationary economic times, when a shopper may have less disposable income.

Digital Revolving Credit options like FuturePay’s MyTab e-commerce solution must adhere to the same regulations (e.g., the Card Act) as traditional credit card companies, requiring safeguards like hard credit pulls and reporting to the credit bureaus. This provides a greater level of protection for consumers than offered by BNPL programs.

Digital Revolving Credit also offers benefits for e-commerce merchants by fostering repeat purchases. With that comes the added potential to build customer loyalty, and as a result, higher customer lifetime value (LTV).

Digital Revolving Credit provides benefits for both consumers and merchants, and walks the line between the ease-of-use and accessibility of BNPL and the extra regulatory safeguards of credit cards.