“Buy Now, Pay Later” (BNPL) allows consumers to pay for items over time, with no or little interest. Customers choose BNPL payments because they are easy and interest-free. Using BNPL at the point of sale can help retailers increase average order values and decrease cart abandonment rates. By allowing BNPL payments, merchants can encourage customers to pay for goods or services.
How Does BNPL Work?
Although the precise conditions of the purchase will vary depending on the financing option you select, in principle, BNPL purchases function as follows for customers:
- The customer chooses the BNPL option from a registered shop at checkout as the first step in a BNPL transaction.
- Customers may occasionally be subject to a brief credit score to determine their eligibility for BNPL financing; this usually takes less than a minute. Some BNPL lenders perform a basic identity check; others demand a rigorous credit score check.
- Keep in mind that not all BNPL lenders provide term alternatives. Some people only have the option of one time period, interest rate, and monthly payment.
- Customers then return to the checkout to make a down payment on their order after choosing their payment arrangements. This down payment can range from 0% to 70% depending on their selected conditions, but it usually falls between 10% and 25%.
- Customers need to pay their monthly instalments in whole and on time after making the initial purchase to avoid paying late penalties. Additionally, they can pay for their complete order at any time.
How Merchants Benefit From Buy Now, Pay Later Option?
The following are the main benefits of accepting Buy Now Pay Later payments –
- Through BNPL, retailers may increase the affordability of larger purchases, attracting customers who might not otherwise be able to pay. Since third-party Buy Now Pay Later companies pay them completely at the time of purchase, merchants may securely provide this option without taking on any investment risk.
- Online stores may significantly reduce the cost of large purchases by spreading them out over 3, 4, 6, or more months. By doing this, they may connect with a larger audience, including younger people.
- The average sum a consumer spends whenever they complete a purchase is known as the Average Order Value (AOV). After introducing the “Buy Now, Pay Later” financing mechanism, several online stores saw an increase in AOV of up to 130 per cent. More sales result from a satisfying consumer experience. Consumers will be more willing to return if they know they can expect a hassle-free transaction.
- When given greater discretion over their purchases, consumers get more attracted towards buying. Giving your consumers various payment and financing choices is one way to give them more power.
- The frequency of cart abandonment may be cut by 35% by incorporating Buy Now Pay Later at the checkout. Although most customers claim they are only window shopping, this isn’t always the case when they ditch their carts. Buy Now Pay Later has effective solutions for these problems.
For instance, if customers leave their carts empty because they couldn’t find a good payment option or because the items were highly-priced, BNPL will be able to dismiss every justification.
BNPL helps customers to pay whenever it’s convenient for them. It facilitates the afforddability power of the consumers.
The new BNPL industry is anticipated to continue to expand, given its rising popularity. Even more, people are searching for methods to control their spending to avoid any obvious risks and increase their credit score. As long as customers plan their expenditures and complete all of their payments on time, there is no reason why they can’t use this digital payment service.