How Does Buy Now Pay Later Transform Online Shopping?
4 min read
In contrast to other payment solutions, buy now, pay later continues to steal the show. BNPL payment offers shoppers a charming and flexible alternative to credit cards, since it can be used for low-ticket items as well. A short-term payment plan is the most convenient option for online shoppers since they do not have to commit to a long-term agreement.
Many pre-existing financial stressors, such as missed payments and declining credit limits, were made worse by the COVID-19 pandemic. BNPL took advantage of one of those payment methods to make payments in the past few years as a result of a decrease in the overall use of credit cards.
What is Buy Now Pay Later and how does it work?
A form of short-term financing known as buy now, pay later (BNPL) enables customers to make purchases and pay for them at a later time, frequently interest-free. BNPL agreements, often known as “point of sale installment loans,” are quickly gaining popularity as a form of payment, particularly for online purchases.
Buy Now, Pay Later solutions were created to give consumers an alternative to credit cards and other types of financing by enabling them to buy a product and pay for it over time in a set number of installments. Although each business has its own terms and conditions, point-of-sale installment loans typically work in the manner described below:
- You choose the buy now, pay later option at the checkout when making a purchase at a participating shop.
- You pay a small down payment, such as 25% of the total purchase price, if accepted
- The remaining balance is then paid in a series of interest-free installments.
- Payments can be made by cheque or bank transfer; they can also be automatically debited from your debit card, bank account, or credit card.
Why do consumers prefer the Buy Now, Pay Later option?
Businesses must comprehend why customers favor BNPL and how to best position themselves to benefit from it as the payment method gains popularity.
- The use of credit cards is declining
With high interest rates, declining credit limits, and poorly managed rewards programs, traditional credit cards have lost a lot of customers since the COVID-19 epidemic broke out. The decline of credit cards may lead to alternative payment options, such as Buy Now, Pay Later.
- Financing options that are more affordable
The BNPL choices offer a more inexpensive payment option than credit cards because they often have lower fees and interest rates. Credit cards generate their revenue through interest rates and late penalties.
- Convenient and flexible
BNPL provides a simple, adaptable method of payment for customers who are hesitant to use credit cards and don’t frequently carry cash. To assure on-time delivery without any payment issues or forgetfulness, BNPL works if you want to order products for a later date. You can pay upfront.
How does Buy Now, Pay Later benefit retailers?
Even if their consumers wish to stretch the expense, retailers still want to be paid straight away. These businesses are able to take on credit risk for both the consumer and the merchant, paying them even if the consumer defaults, thanks to the employment of clever algorithms. The following are some particular advantages that shops will get from using a BNPL option:
Attract new customers — BNPL allows businesses to lower entry barriers and provide customers with flexibility when making purchases by offering things like free returns and dedicated customer support. Businesses that view refunds as an opportunity to strengthen their bonds with customers are more likely to succeed.
Better customer experience — While it may be true that Millennials and Gen Z enjoy shopping, browsing, and simple delivery, they also demand and expect a top-notch shopping experience, just like everyone else. You must create a platform that is capable of attracting and retaining the younger generations as clients.
Increased sales — It can be difficult to buy a big-ticket item, whether it’s due to the shock of seeing such a large sum of cash leave your bank account or the possibility of high interest rates on your credit card. This contributes to the fact that BNPL is improving conversion rates.
To conclude,
With Buy Now, Pay Later, consumers can extend their payment for purchases over time without having to worry about painful interest rate accumulation, upending the payments industry and luring users away from credit card firms. The number of digital funding possibilities will only increase as the globe becomes more technology. Implementing Buy Now, Pay Later into a storefront can only be beneficial for businesses looking to stay innovative and cater to a shifting customer base.
