The Buy Now Pay Later (BNPL) business model has entered a new phase that's reshaping the payments landscape. Zero-interest, ad-supported (ZIAS) BNPL is the new structured model that I am talking about. It is a subsidised payments approach that flips the traditional BNPL structure on its head.
This business model is more like a trade-off because consumers pay only for their instalments, and merchants cover any interest or fees incurred. In other words, consumers split payments at no extra cost, while merchants or businesses fund the service.
Essentially, the reason merchants are funding the service is because they gain higher conversion rates, larger basket sizes, and increased visibility. That means the cost of offering the instalments becomes a marketing and sales investment for participating merchants and businesses.
What makes this approach unique is that the incentive for businesses is embedded directly into the checkout experience. When a customer chooses to pay in instalments, the participating business automatically covers the interest and installment cost as part of the transaction.
This removes the need for separate advertising campaigns or promotions to attract customers for the business. In return, consumers only pay for the product purchased itself through structured repayment methods.
The growth of BNPL is driven by e-commerce and retail
The adoption of BNPL is rapidly expanding in the commerce sector. This expansion is largely driven by its integration into e-commerce platforms and retail outlets. As more online stores and physical retailers offer BNPL options at checkout, consumers are also increasingly choosing instalment payments option to complete their purchases.
BNPL has also become a cash-flow management tool for consumers as living costs increase. They can easily split payments for essentials and discretionary spending.
This is where the zero-interest, ad-supported model comes in, because its target users are looking for short-term credit alternatives with little to no interest, outside the traditional banking rails.
According to Wesley Billett, who created Happy Pay—a South African company operating on the zero-interest, ad-supported business model—“Credit has previously been monetised through the consumer, but providing that it can be monetised through value creation instead, everyone benefits. When merchants grow, consumers shouldn’t have to go into debt to make that happen.”
Notably, there are three parties involved in this business model: the platform operating the model, the participating business/merchants, and the consumers. The main benefit for the platform operating the model is that it creates a network effect.
The platform attracts more businesses to join the network, and joining the network will expand the platform's reach and transaction volume. The platform can monetize this growth indirectly by charging the participating businesses a fee or leveraging the increased sales data for insights, all while keeping the service free for consumers.
