Buy Now Pay Later (BNPL) is a payment model that enables customers to utilize a delayed payment option. It is an excellent payment system for consumers who want to buy a product now but do not have the funds available. They can opt for the BNPL option to place their order without paying for it immediately. Typically, an online payment processor takes the responsibility of receiving payments from the customers while the eCommerce store gets paid upfront.
The BNPL option brings numerous apparent benefits to the customers. However, many eCommerce owners may not envision how it can help their business. Let’s look at the benefits of the buy now, pay later option for consumers and retailers to get a better idea.
Benefits of BNPL for Consumers
No Strain on the Cash Flow: Many consumers cannot pay for an expensive purchase immediately, especially when they already have other financial obligations. With the BNPL option, they can better control when to spend the available money. Rather than paying immediately, such consumers can plan to pay small EMIs after placing the order.
No Load on Financial Vehicles: Most customers would prefer not to touch their bank account or max out their credit card to make the purchase. The financing source of BNPL is a separate line that does not make a part of the customer’s credit utilization rate.
Freedom to Customize a Payment Plan: Would the customer want to place the order and pay for it within the first six months? Or would they prefer to pay for it based on their income fluctuations? There are numerous payment plans customizable with the BNPL option. Sellers and financiers are surprisingly flexible with their payment plans.
Seamless Buying Experience: Many online payment gateways offering BNPL options are available online. Buyers can check out their purchases, set up automatic payments, and use data for reporting. Asking for the BNPL option never hurts.
Benefits of BNPL for Retailers
Competitive Edge for the Business: Owing to the increasing prevalence of BNPL options across eCommerce stores, including it in the payment options will put the business at par with the competition. If the competitors offer BNPL to their buyers, the company will miss out on sales to its competitors. Conversely, offering the BNPL option to the customers will give the retailer a leg up on the competitors who do not provide it yet.
Increased Sales: The BNPL option will increase the conversion rate and boost revenue. There are chances that a customer gets dissuaded from a store because it does not offer the payment method they prefer. Therefore, offering multiple payment modes, including BNPL, will reduce this possibility. Besides that, customers will more likely finalize an order sooner if they are comfortable paying for it by spreading out the cost in EMIs. The BNPL option will convince the customers to buy sooner. So, they have less time to re-think the purchase, change their mind, forget about it, or find a competitor.
Reduced Cart Abandonment: According to a report, implementing BNPL solutions can increase sales by 45% and decrease cart abandonment by 35%. The most common reasons for cart abandonment are lack of payment options, complicated checkouts, and unreliable website layouts. Another reason could be that the users were just browsing through the website. They wanted to see the product costs, shipping rates, delivery time, etc.
However, when they find the BNPL option on the checkout page, they may decide to place the order because they can pay the price later. BNPL helps minimize cart abandonments by offering customers a more secure, faster, and less complicated payment medium.
Ability to Increase the Price: When the buyers know that they don’t need to pay the price upfront, they may agree to pay a higher price for the same product. Since they can spread out the cost in EMIs, they don’t mind paying a little extra as it won’t constrain their monthly budget.
Improves Brand Trust: Giving customers the BNPL solution builds brand trust and turns them into loyal customers. People who buy from the same site repeatedly do so because the seller successfully fulfills their needs and shows value to the buyers.
Incorporating the buy Now, Pay Later option into the online payment processor system would benefit both customers and retailers. Apart from meeting the customers’ needs, it grows the retailer’s pool of returning customers, thereby boosting the business’s Customer Lifetime Value (CLV).