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The concept of buy now, pay later (BNPL) is not new. A few different forms of this type of payment method have been around for some time. However, with the growth in eCommerce and mobile commerce, this type of financing is now regaining steam.
The high-value purchases people make, from cars to electrical goods and furniture, are usually transactions for which payments are made over a period. Traditional credit cards and store-specific credit cards are typical examples of the shop now, pay later form of payment.
But BNPL offers a win-win opportunity for customers and businesses. It makes it convenient for customers to pay for an item at a later date instead of bearing the brunt of the cost at the point of purchase. On the other hand, the business/seller receives full payment for the product being bought, keeping the bottom line intact without facing the risk of losing the money.
BNPL has also become more helpful in the post-COVID-19 situation, where many consumers face a money crunch. There are a few BNPL apps in the market that make it possible for people to make payments later. Several banks, too, have come out with their own BNPL services. Both online and offline payment options are available for customers.
Buy now, pay later payments may be executed in different ways. Here are four usual ways:
• Pay in full amount within a certain interest-free period, which is the most direct option.
• Pay in the short term with multiple installments, with no interest and no price alteration. This could be typically three or four installments within 15-30 days.
• Pay in the short term with multiple installments with no interest but a price difference.
• Pay with regular installments, with no price alteration but with interest.
The terms of payment may vary from retailer to retailer. But generally speaking, the time limit to make the complete payment would be within the respective billing cycles.
There is a significant number of consumers looking for alternate payment options like BNPL payment on their purchases online. In fact, according to the Buy Now Pay Later tracker by PYMNTS.com, about 87% of consumers between the age of 22 to 44 are interested in monthly installment plans as against immediate payment.
Another significant benefit of BNPL is that it can improve AOV and conversions.
Average Order Value (AOV) and Cart Size
Average Order Value (AOV) is the average amount a customer spends when they make a purchase from a business. Businesses can boost AOV by implementing buy now, pay later payments. Digitally driven BNPL is gaining rapid acceptance and looks like it is here to stay. Thousands of online stores are now enhancing their checkout pages to include buy now, pay later options.
Customers prefer to buy products they want and need online, effortlessly and reasonably. Providing a BNPL option allows brands to attract more customers and boost average order value (AOV). When customers know they can make the purchase seamlessly with a 1-tap, without the hassle of providing their financial details, they feel comfortable adding more things to their carts.
Conversion rate usually denotes how many of a business site’s visitors convert into leads and paying customers. Businesses and retailers need to make sure their website is simple and easy for consumers to traverse and make a purchase. From an eCommerce business’s perspective, a conversion is essentially a product checkout. An optimized site swiftly understands the payment possibilities and opportunities to ensure a smooth experience for the customer. A tactic that brands can use is including a supportive pop-up that offers 0% financing on the check-out page, based on their cart size, purchasing history, and more. For regular customers, businesses can offer customized payment options, leading to a personalized shopping experience which eventually translates to higher retention. These simple add-ons alert customers about profitable options right away and effectively lead them through the sales funnel.
BNPL solutions are becoming increasingly popular and being incorporated into the checkout pages of more eCommerce sites. This option lets customers buy the products they want instantaneously and pay for them in various installments. It also provides businesses a better opportunity to sell their products. Credit card firms, banks, and fintech companies are already offering multiple BNPL options and are gaining several advantages. Hence, as a business, it is the right time to make the best of this win-win opportunity by offering additional payment methods to your customers.