As more retailers turn towards ecommerce to make their sales, things that were once proven successful seem to no longer work.
As the new generation enters the market, there has been a shift in expectations and desires, forcing online retailers to change the way their business functions. A significant shift in expectations comes from a Buy Now Pay Later model that provides flexible payment options.
Proof of evolution can be found in consumer research, as studies show that businesses that offer seamless payment plans have seen a 76% increase in sales.
According to another research report, 85% of shoppers like Buy Now Pay Later options because they are an interest-free and fuss-free way to purchase long-sought items.
Buy Now Pay Later – What is it?
BNPL is not a trick – it means exactly what you think. This third-party solution allows customers to buy things in real-time and pay for them in the future without additional interest charges.
As a retailer with an online store, this might sound like a risky process – how do you trust an unknown individual to pay you back? However, before you dismiss the idea of BNPL services ultimately, this method is becoming increasingly popular worldwide.
Many online stores provide BNPL options to shoppers, allowing them to purchase all kinds of products, including clothes, electronics, kitchen items, you name it.
How BNPL Guarantees More Customers
BNPL allows customers to buy anything they want without waiting for payday. Think about all the online purchases a business will witness if consumers can shop for their favorite products and pay via interest-free repayment plans.
BNPL providers provide installment plans with flexible terms and different payment options that can be divided over three months to a couple of years. This is a give-and-take situation where customers get a more expensive item than they can afford. They do not need to make full payment to purchase their desired product. And you, on the other hand, increase the likelihood of sales.
Once the item has been purchased, customers can make payments on fixed dates. These interest-free payments are convenient, and there are no transaction fees, penalties, or maintenance fees.
BNPL services allow individuals access to luxury items that they previously believed were unattainable. This makes the service extremely attractive to young consumers who go from paycheck to paycheck.
Keep in mind that BNPL providers pay attention to a customer’s credit history, but the service uses its own algorithm to create a unique payment plan for the customer.
Hence, if your online store caters to GenZ and millennials, this is a wonderful option that you should think about introducing to boost sales.
|Important BNPL Statistics|
|The Buy Now Pay Later market is estimated to grow by $41.83 billion between 2022 and 2026.|
|35% of consumers use BNPL services to make purchases of $500 or more.|
|BNPL is expanding into the healthcare and food industries.|
|As compared to 2021, 42% more consumers use BNPL as the payment method becomes more popular.|
|75% GenZ and millennials use BNPL.|
Why Customers Prefer BNPL
BNPL Gives Consumers an Alternative to Credit Cards
Over the world, younger generations are ditching credit cards and using BNPL services to enter the buying market, especially for big purchases.
After all, paying the high costs of conventional credit card bills is not easy, especially in terms of interest rates and fees. Millennials have the biggest debt load that continues to grow, so they no longer want to opt for complicated payment methods that will only contribute to their overall debt.
BNPL Allows Increased Flexibility
Customers are always worried after spending their cash in one sitting, especially when sales are live and they have a whole list of purchases that they would like to make.
In cases like these, BNPL payment plans are more convenient than others as they ensure instant approval and simplify the shopping process.
In fact, the biggest convenience is being able to order items on big sales or holidays ahead of time instead of waiting for the next month’s salary. Customers enjoy this option as it allows them to make stress-free decisions while eliminating the possibility of forgetting to order their best-liked items later.
BNPL is a Fuss-Free Payment Option
Compared to conventional credit cards, BNPL provides customers with an affordable payment option as long as the customer can meet the payment deadline by the BNPL provider.
Unlike credit cards, BNPL providers are not too strict about selecting their shoppers, as they only require a soft credit check. The best part is that BNPL does not have additional fees, and consumers do not have to pay interest on their repayment plans.
Reasons Why You Should Introduce BNPL Services on Your Online Store
BNPL Services Can Boost Online Sales
As online purchases continue to rise, BNPL provides payment options to consumers that were not available in the past. This service has caused a 25% bump in the sales of high-value products.
For example, customers are more inclined to spend more on expensive products, such as a television that costs $5000, if they can split the payment into ten installments of $500 each. This removes the pressure of spending too much money in one sitting, allowing consumers to feel better about their online purchases.
If you run an online store, we recommend highlighting the payment method and options you offer so that customers can make informed decisions.
Think of your checkout page as the final destination that very few people reach. The more you market your BNPL service, the more likely your website visitors will make an extra effort to reach the checkout page and buy what they came for without getting distracted.
Increases Average Order Value
Under ordinary circumstances, retailers do not expect consumers to buy ten products in one sitting or spend a few thousand dollars in a single transaction.
However, with BNPL services, this is becoming a massive possibility as this facility encourages consumers to buy whatever they want and pay when they can.
This helps increase the average order value (AOV), allowing a business to benefit from higher profits. In fact, research also shows that brands that provide their customers with interest-free financing plans have seen a 160% boost in AOV.
Offers Low Risk for Merchants
The best part is that merchants do not have to worry about dealing with scams or unreliable customers. This is because BNPL providers pay merchants and will cover the cost of customers who do not end up paying.
This is a brilliant opportunity for retailers as it not only lowers the likelihood of loss but also ensures that the customer goes home happy, creating a win-win situation for both parties.
Gives Customers a Superior Credit Solution
One cannot deny that BNPL services offer an affordable finance option instead of credit cards. With credit cards, interest payments and fines are the norms, but BNPL provides a safe form of debt without stressing customers out or making them risk all their life savings.
Credit card loans can quickly rise in double-digits with skyrocketing interest rates, trapping you in a sea of debt. This is why most customers hesitate to make purchases or find themselves in a tricky financial situation that stops them from becoming repeat customers.
As a business owner, your first fear might be that you are selling your services and products to people who cannot afford them, putting you in a tricky situation.
However, just like credit cards, BNPL providers pay retailers after transactions. This means that the burden of non-paying consumers does not fall on the retailer, saving them from loss and hassle.
Increases Consumer Loyalty
BNPL services help provide financial flexibility to customers, helping them become loyal clients quickly. Since customers can opt for installment payments without any additional fee, they do not have a reason to look around for the best price or shop from competitors.
BNPL services help customers stick by for future sales, increasing business value.
When customers have flexibility, they enjoy a positive purchasing experience which, in turn, lowers the number of abandoned carts and boosts customer retention.
Allows High Conversion Rates
As an online business, if you manage to retain your customers, you will experience a higher conversion rate that will help your business grow. Implementing BNPL as a payment option is a great advantage over your competitors who are still stuck with old payment methods.
Even though the benefits you may get with BNPL depend on third-party providers and how your business functions, it is no denying that it makes payment a frictionless process without stressing customers out.
Best Ways to Implement BNPL on Your Online Store
Over the years, the world has seen debit cards, credit cards, currency exchange, cash on delivery, barter, net banking, online payments, online wallets, and, today, BNPL services. This payment method has greatly benefited merchants, regardless of whether they are D2C retailers or conventional goldsmiths.
Retail therapy is the best kind but to allow customers to enjoy it, and retailers need to find ways to decrease the burden on their bank accounts. This will be where Buy Now Pay Later services can help.
Once this service has been implemented, retailers will feel like investors enjoying huge returns over time.
Keep in mind that BNPL services:
- Increase sales and conversion rates while lowering cart abandonments.
- Increase average order value without putting extra burden on the retailer.
- Allow financial flexibility that increases consumer retention and loyalty.
- Targets a generation that plays a vital role in determining your brand’s future and how much revenue it will earn.
Even though BNPL has loads of benefits, it is not a one-size-fits-all solution. Even though the payment method can be integrated into the business, business owners must ensure they do not lose their brand identity.
For example, BNPL services are an excellent way of attracting a big group of consumers to luxury products, but they might contradict your business’s essence. However, if your online store targets a younger audience, BNPL is a great idea.
However, BNPL’s success depends on its integration into your online store. Here are a few tips that will allow a seamless transition to this new payment method:
Understand who your target audience is. If you have customers who do not like the pay later method, this payment option will have the opposite effect on your business.
Before you finalize the BNPL provider you want to opt for, make sure that you check transaction limits, installment rules, and the provider’s overall credibility. If you are satisfied with everything they provide, you can work on integrating the payment plan into your online store.
Highlight the Buy Now Pay Later option on landing pages, product pages, and checkout pages as much as possible. Customers should be drawn to it so that they can boost your sales.
If you sell high-end products, generate social media ads, and target your audience with posts and videos about how flexible BNPL is.
Train your employees so that they can answer customer queries and help get rid of any doubts they might have. It would be best if you had a support team to deal with any BNPL query since this is still a relatively new payment method.
Keep reading RBI’s regulatory updates and keep on top of fintech trends to provide the best BNPL experience to your customers.