Buy Now, Pay Later, which is also referred to as BNPL, has emerged very rapidly as one of the most favored payment methods amongst consumers. Payment methods offered by Klarna, Afterpay, Affirm, and PayPal Pay Later enable consumers to make installments on their purchases rather than paying the total amount at once.
From the merchant perspective, the rise in the popularity of BNPL brings up an interesting discussion: Is it worthwhile to use?
The answer varies from case to case, depending on how the merchant wants to benefit from using BNPL.
Why Customers Like BNPL
More consumers today are seeking out options that will give them flexibility in terms of their payments, particularly when it comes to big ticket items. BNPL allows consumers to make payments gradually without having to use a credit card.
For most of them, this lowers the entry point for making the decision to purchase something.
The value of this is especially important for ecommerce companies, retail companies, furniture stores, electronics stores, beauty brands, and service companies that offer high ticket items.
How BNPL Can Benefit Merchants
Perhaps one of the greatest benefits of BNPL is its ability to boost sales. Merchants get increased conversion rates since their customers are less prone to abandon the purchase process if they are offered flexible payment terms.
Merchants might also benefit from:
• Larger average ticket sizes
• Higher levels of customer satisfaction
• Increased repeat transactions
• Enhanced checkout process
• An opportunity to reach a younger generation that favors other ways of payments
In almost all cases, the merchant still gets paid initially by the BNPL operator, which will handle installment payments from the client themselves.
Understanding the Costs
Although BNPL can contribute to growth in sales, it is essential that businesses be aware of the fees that accompany BNPL purchases. The transaction fees associated with BNPL purchases are typically higher than the fees charged on conventional credit card purchases.
One has to weigh the benefits of improved conversion rates against these costs before proceeding.
Other considerations include the management of refunds and dispute resolution, as well as integration into an organization’s payment infrastructure.
Is BNPL Right for Every Business?
Not all businesses will gain equally from Buy Now, Pay Later. Businesses with low price points are less likely to see any great benefit, while those that operate at higher prices tend to perform better.
Age of the customer is another important factor. Younger customers tend to use BNPL much more than older customers, particularly in online settings.
The most effective strategy would be to analyze your customers’ behaviors, their average order values, and their checkout processes before making the decision.
Flexibility Is Becoming the Expectation
Customers today look for convenience in payments. While using BNPL won’t replace other means of payment, it will provide yet another option for improving customer experiences and increasing sales.
In many cases, BNPL offers a merchant the chance to make the checkout experience easier, as well as to help customers feel more confident about their purchases.
