Intriguing Insights #13 - Taking the pain out of payments

Amazon Pay Later  has got 2 million users and more than 10 million transactions since it launched in April 2020. To start with let us understand what Amazon Pay Later is. It is essentially a service that extends a virtual line of credit to eligible customers shopping on Amazon.in. It offers the option to repay in the subsequent month at no additional fees, or in EMIs up to 12 months at nominal interest rates.

The following four behavioural economics heuristics will help put in perspective the success of this service since its launch last April. 

Loss Aversion Bias: The pain of losing is twice as much the pleasure of gaining… once you have surfed through Amazon - not being able to buy can be quite undesirable and the option of Pay Later just gives one access to what they want to buy. 

 
The Cashless Effect: We are more willing to pay for something when there is no physical cash involved. The very premise of this service is built on taking this pain out of payments. 

The Law of Least Effort: If there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action. The easy access makes this option very popular with those seeking credit. 

The Scarcity Principle: We always want what we can’t have. When Amazon says We have made Amazon Pay Later available for a limited set of customers it in effect has made the service more attractive.

No surprise then that the adoption of Buy Now Pay Later (BNPL) in India is expected to grow at 24.2% CAGR from 2021-2028.