To begin with, it is a short-term financing option that has been getting quite a lot of hype since the COVID-19 pandemic. It allows buyers/consumers to purchase a product and pay it back later, mainly in the form of monthly installments. The good thing about buy now pay later is that it doesn’t involve traditional credit providers like banks, finance companies, etc.
Therefore, BNPL is a fintech-enabled payment method most commonly offered on significant eCommerce platforms. In simple terms, it provides buyers the ability to make large-ticket purchases and complete the payment through several smaller EMIs.
A POS (point-of-sale) financing system elevates consumers’ shopping experience more than traditional payment methods.
Why is BNPL a Popular Choice among Buyers?
Usually, when checking out from an eCommerce store, consumers are most likely to use their credit or debit card. This includes the need to pay off the whole purchase amount then and there. But, with BNPL, it is not the same.
Here, they need to pay a minimal amount upfront (sometimes nothing) and then split the rest through weekly, quarterly, or monthly payments.
It is a hit among buyers because it gives credit access to customers who might not be eligible for other credit options – personal loans or credit cards. The eligibility criteria for the pay-later payment system are relatively nominal.
Why is BNPL a Popular Choice among Businesses?
In the ever-growing eCommerce market saturation, merchants and retailers are constantly on the lookout for new technologies to grab customers. They need customers loyal to their products and ready to increase their average ticket prices. Furthermore, they also need to reduce the frustrating problem of shopping cart abandonment.
This is where BNPL comes into the picture as a viable solution to all these. Having the pay-later purchase program integrated into your business means customers consider buying more often from your store. Besides, they are more likely to consider making large-ticket purchases – so merchants get benefitted too.
Also, the best thing is that BNPL service providers pay the total amount to the merchant right at the time of purchase. Therefore, there are no financial risks associated with it.
BNPL: How does it work?
Merchants and retailers choosing the BNPL financing in their platform will likely see increased conversion rates, transaction amounts, and better sales figures overall.
Most BNPL lenders that offer interest-free loans to consumers collect their revenue from merchants. Depending upon the service provider, it can be through discounting the transaction amount or other ways. The lenders also collect a minimal percentage fee against every transaction made through BNPL.
Apart from that, when consumers fail to pay their outstanding within the stipulated installment dates, the pay-later service provider gains revenue from late fees.
Final Thoughts
Customers choosing the buy now pay later program as their payment method should first understand the terms and conditions related to the particular company. That’s because it might impact their credit access in the future.
On the other hand, as far as businesses are concerned, integrating BNPL into their payment gateway is a great way to attract more customers and boost customer satisfaction. Increasing customer satisfaction makes customers more likely to become loyal to the brand.