The “Buy now pay later” concept, despite being old, is a new phenomenon in the world of e-commerce. When making large purchases like buying a house or jewellery, the people prefer it, where the charges are paid off for a set period post-acquisition. The concept has other names like Point-Of-Sales Finance, credit finance when e-commerce is considered. During the COVID-19, BNPL services are witnessing a growth of more than 200%. This is due to the adoption by thousands of retailers. The article discusses the concept. Reasons to prefer BNPL, implantation, the positive effects of millennials and Gen Z people, and much more.
What is the concept of Buy Now, Pay Later?
This mode of payment allows the customers to purchase the commodity or service at the very moment without paying the amount at once or at the time of purchase. Instead, the users can pay back the cost of the product or service in instalments. This payment method is usually managed by a third party lender like Klarna, PayPal, etc.
How does the process work?
The payment options are made available to the users during the checkout time when it comes to e-commerce platforms. In general, three modes of payment are present:
- Pay later in full after 30 days without interest.
- Pay in installments in 3 or 4 equal, without interest or price difference.
- Pay in the intermediate term, with multiple installments into as many as 36 monthly payments, interest, and no price difference.
Reasons for preference
The trend of Buy Now Pay Later will keep increasing and gain popularity among the users. It is said that around 37.36% of consumers have used a BNPL service. This indicates a shift of preference in the users. To cater to this demand, an e-commerce website has started implementing the BNPL solutions. Here are some of the reasons for the shift.
- Attract the millennials
Millennials have altered the landscape of digital payments. They are averse to using debit and credit cards and prefer BNPL as a payment option. This allows them to choose from different plans available, and the BNPL solution is simple, which suits their financial solutions.
- Increased Sales
Cart abandonment is a significant factor for the loss of sales. The BNPL activities are a way to tackle it and drive sales. The later pay schemes let the buyer enjoy the products without paying upfront and at a single time. This saves the customers from the shock of losing a lot of money from the bank account, which serves to abandon the cart.
- High Order Value
The BNPL solutions increase the total sales as well as the order value. Order Value is the average amount the businesses earn from a single sales transaction by the consumers. Increasing the buying capacity of the customer increases the order value. The consumer buys more goods in a single transaction, significantly if the policies of BNPL restrict them to make a second purchase until the first one is cleared.
- Customer Loyalty
Every business aims to increase the loyalty of its customers. Retaining a customer is more accessible than getting new. The revenue also remains consistent if customers repeat purchases from the businesses. Due to the flexibility and simple nature of BNPL solutions, the customers prefer them and become loyal to the firm.
How to implement the feature in your store?
There are three significant steps related to implementing the BNPL solution in your business. Let’s dive into each of them to provide you with more clarity.
1. Finding a Suitable BNPL service provider
Finding the perfect BNPL service provider is essential for your business to flourish. Many service providers provide their services to different e-commerce platforms, and all work differently. Some of the famous names of BNPL service providers include Afterpay, Zip pay, Klarna and many more. Each of them offers different terms and conditions, with a set of benefits. Here is a list of standard features that every BNPL provider offer:
A. Terms for Loan
It varies depending on the providers. For a small loan amount, the term of repayment can be from a few weeks to six months. For a more significant purchase, the time can be more than two years.
B. Purchasing Power
The loan amount provided by the lending company starts from $35 to $30,000. The repayment frequency varies accordingly; customers can pay in monthly instalments.
A good BNPL provider offers a smooth service, with the customer’s loan being approved and sanctioned in minutes. Moreover, the process of application and managing the loan is entirely online to facilitate the e-commerce platforms.
D. Wide acceptance
The service providers accept a line of debit and credit cards. The provided cards do not expire, and the customers can reuse the cards by following specific simple steps.
2. Factors to consider before making the choice
As you can see, there are many service providers in the market, and most of them provide their customers with ample facilities. But, choosing the right provider to collaborate with is essential for the growth of the business because the millennials are incredibly cautious about the user experience.
You need to make sure the provider you choose integrates with your existing POS system. This will ensure a smooth checkout process for the users.
The service provider charges fees as a percentage of the purchase. Research the different fee structure of the provider and choose the best that suits you.
C. User base
Choose a popular provider with a strong and trusted user base, and this will help you attract more customers to the store.
3. Post Implementation Marketing
After selecting a provider and implementing the payment option, encourage the customers to use the method. Attract attention by making an official announcement, blog post, by sending emails, and other ways. The domino effect will help you gain more users.
“Change is the only constant”, and the world of e-commerce is changing, so are the payment methods. So now is the time to buy now pay later, use it to the fullest until something else replaces it.
Author Bio: Allison Janney is a Sales & Marketing Manager at ChargeAfter. She would like to share content on Finance Industry like Point of Sales financing, Buy now Pay later, consumer financing & Ecommerce financing for valuable reader.