To succeed as an online retailer, you need to get your customers to click the “buy” button. However, today’s economy can sometimes make it difficult to close deals. Money-conscious consumers are often reluctant to spend on their credit cards and will think twice before using them.
Fortunately, even if your customers lack the cash to purchase your products, your business doesn’t have to suffer. BNPL (buy now, pay later) can help you increase those sales and improve customer satisfaction.
Buy Now Pay Later (BNPL) is a point-of-sale financing option that allows your customers to pay over time for goods they purchase.
Customers usually make an upfront payment towards a purchase, followed by payments over time. In the consumer’s interest, BNPL agreements usually come with no interest and fees.
There may be a few differences between BNPL arrangements, but they all work essentially the same way. Customers will be able to select “buy now pay later” when purchasing at a participating retailer.
Their approval will be notified within seconds. A small payment will be made upfront and payment terms will be agreed upon. Upon receiving the full purchase, the merchant immediately ships the customer’s order. Following that, the customer pays the remaining amounts directly to the BNPL provider.
Despite appearing to be an attractive option, there are costs associated with it. Retailers typically pay around 5.99% in fees to providers, but some charge up to 8%. Despite this cost, many retailers swear by BNPL, claiming that BNPL has significantly increased their sales. There are, however, some businesses that do not benefit from this option. Take a look at some of the pros and cons.
BNPL can increase sales revenue, which is one of its biggest advantages. By adding this payment option to your e-commerce website, you can reduce abandoned carts and increase sales.
In addition to making your products more affordable, you also make them more accessible to a larger audience. Increasing big-ticket sales and attracting younger customers who may not have as much purchasing power may help you increase sales. The result is usually a higher overall average order value (AOV).
By offering BNPL, you can also improve the overall experience for your customers. The most satisfied consumers are those who have the power to make their own purchasing choices, as well as the ability to pay on flexible terms. Your recurring revenue may increase if you have satisfied customers who return and purchase again.
Despite all these advantages, there are some potential drawbacks to consider when adding BNPL. Most people are concerned about paying up to 8% in fees. The increased sales, however, easily offset this additional cost for many retailers. Nevertheless, you should consider this additional expense before making a decision.
BNPL payments are also not easy to integrate into some retailers’ current sales systems. Technology and tools may add to the cost, as well as the cost of hiring an e-commerce website expert.
Some businesses won’t qualify for this program. Businesses that work with BNPL providers are often carefully screened. You may not be able to add BNPL to your checkout if you don’t meet their minimum criteria. Gaming and tobacco are also excluded from participation.
The idea of getting immediate access to products they want without having to pay for them all at once appeals to most customers. BNPL providers often offer zero-interest financing, which makes it an attractive alternative to credit cards.
Most of the time, BNPLs will only perform a soft credit check, so their score will not be affected. Buyers with credit issues may also benefit from this option.
When taking on unsecured debt, consumers should be careful even though BNPL offers instant satisfaction. Aside from the possibility of it quickly adding up and creating financial troubles, BNPL has other drawbacks as well.
Buyers aren’t able to build good credit with this financing option, and traditional credit cards offer no rewards or perks. A refund may also be delayed if the buyer returns the item. To avoid being flagged for default, they’ll need to keep making payments until the issue is resolved.
Your first step will be to select a provider and register with them. To integrate the new payment option into your e-commerce site, you’ll need to follow their instructions.
Your customers should be informed of the BNPL option early on in their buying journey once you’re all set up. As a result, they are more likely to use it. The inclusion of the option on a product’s detail page may encourage consumers to purchase products that they might otherwise overlook.
It’s important to do your research and fully understand the terms of your BNPL provider before choosing. You should make sure your business and consumers are both comfortable with the charges involved. If you choose the wrong BNPL provider, your reputation could be damaged, so think carefully before choosing.
New providers are expected to enter the buy now pay later space as the trend grows, such as credit card companies offering similar services. In the meantime, however, it might be best to choose one of the major players, since their reputations are well established. You may want to consider these four.
For years, PayPal has been a trusted name in the eCommerce space, making their “Pay in 4” solution popular with both retailers and customers. As with other PayPal purchases, it’s protected by Purchase Protection, and customers can choose from four interest-free installments. Your credit score won’t be affected by the credit check, and you’ll get a decision in seconds.
As a retailer, you have the option of adding both “Pay in 4” and PayPal Credit to your PayPal checkout. PayPal offers the advantage of no additional costs. Your existing PayPal rate includes both Pay Later options. Your eCommerce site can include dynamic Pay Later messaging thanks to PayPal’s easy integration.
Afterpay is another popular option with 19 million customers worldwide. The company allows buyers to pay for their purchases over six weeks in four installments. Due to the absence of application fees and interest payments, Afterpay is free for consumers as long as they pay by the due date. Merchants, however, must pay a fee. Its current fees are $0.30 per transaction and 4% to 6% commission. Shopify, WooCommerce, Wix, Stripe, Magento, and more are just a few of the platforms that Afterpay integrates with easily.
There are two financing options offered by Klarna: “Pay in 4” and “Pay in 30”. The loans are both interest-free.
Merchants currently pay a fixed fee of $0.30 per transaction, as well as variable fees ranging from 3.29% to 5.99%. A variety of partners are also integrated with the platform, including Shopify, Adobe, Wix, and Stripe.
0% APR is also available from Affirm. Customers can pay in four installments over two weeks or pay for up to 36 months with this platform. As part of the buying process, they will also pre-qualify customers so that they can see their purchasing power at a very early stage.
There is a fixed fee of $0.30 per transaction and an average commission of 5.99% on this platform, similar to many others. Other popular platforms that are integrated with Affirm include WooCommerce, Shopify, Wix, and Salesforce Commerce Cloud.
In recent years, “buy now pay later” financing has become very popular, and it is unlikely to fade away anytime soon. Online retailers benefit from it in several ways, so not having it can be a competitive disadvantage as more sellers offer it.
Make sure you fully vet your BNPL provider and are prepared to pay the associated fees before implementing BNPL in your business. Also, make sure the provider you’re considering integrates smoothly with your existing sales system.
Find out how BNPL can benefit your business by hiring an e-commerce management expert. As soon as you complete all these steps, you will be able to enjoy all the benefits BNPL has to offer, such as increased sales and better customer service.