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Understand How Interest-Free Installments, Popularized in Brazil, Were Reinvented as “Buy Now, Pay Later” and Became the Center of a Billion-Dollar Dispute Among Tech Giants.
The installment plan, a long-time acquaintance of Brazilians, has gained a new technological face and is expanding worldwide. Under the acronym BNPL (Buy Now, Pay Later), the interest-free installment model has become a billion-dollar bet. Fintechs and major tech companies, such as Apple, are heavily investing in this market, which is expected to generate up to 1 trillion dollars globally by 2025.
What is “Buy Now, Pay Later”? The New Face of Installment Plans
“Buy Now, Pay Later” is, in essence, the installment plan that Brazil popularized. It allows consumers to split the cost of a purchase into several installments, usually without charging interest. The main difference lies in the technology. Credit approval is almost instantaneous and done directly at the time of online purchase or in physical stores.
The revenue for these companies does not come from interest on consumers. They charge a fee to retailers. For retailers, the advantage is clear: offering this payment option increases sales volume, raises the average cart value, and improves the conversion rate of customers.
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Tech Giants and Banks Enter the Billion-Dollar Dispute
The potential of modern installment plans has attracted market giants. Apple announced a partnership with Goldman Sachs to launch “Apple Pay Later.” With it, users will be able to split any purchase made with Apple Pay into four interest-free payments.
Other companies are also making aggressive moves. Block, the payment company founded by Jack Dorsey (founder of Twitter), bought the Australian fintech Afterpay for 29 billion dollars. PayPal also has its own installment service, competing directly with new players like the Swedish Klarna and the American Affirm.
Why Did Modern Installment Plans Become a Global Success?
The success of the installment plan model is based on benefits for both sides of the counter. For consumers, it represents a simple and transparent way to buy higher-value products without compromising their budget all at once. Ease of use is one of the main attractions.
For retailers, it is a powerful tool to boost sales. By offering interest-free installments, they remove a purchasing barrier for many customers. This results in more people completing their purchases and often spending more than they would have if they had to pay everything upfront.
Balancing Growth and the Need for Regulation
Projections for the installment plan market are impressive. Analysts estimate that the sector will process between 650 billion and 1 trillion dollars in transactions by 2025. However, this accelerated growth brings challenges.
The ease of access to credit raises concerns about the risk of consumer over-indebtedness. Therefore, regulatory bodies in countries like the United Kingdom are beginning to discuss the creation of clearer rules for the sector. The goal is to ensure consumer protection without stifling the innovation that the installment plan model provides.
