What is Buy Now, Pay Later?

According to the analysis (ZenBusiness Inc. 2022), the buy now pays later model shortly termed BNPL is known as the kind of short-term financing that allows one to pay for any products through instalment and purchase the product up-hand and pay the rest amount by the end of the stipulated period. This is one particular kind of agreement between the seller and the purchaser at the point of sale where customers purchase the product of their choice through credit on an instalment basis. This payment is not usually included in the credit card billing statement and depends on the merchant’s terms from whom the customer has purchased. This also reflects on the succeeding statement in some while it also offers the payment option targeted towards the young millennial and families. According to the analysis made by (Bankbazaar.com. 2022), the Buy now pay later provider settles the bill outright along with the merchant on the behalf of the customer. The providers of buy now pay later merchants generally use the particular analytics in getting insights on the purchaser’s purchase behaviour along with the determination of the credit worthiness. 

Though the idea of an ideal world is not true, when one customer purchases a product or service the seller sells this in exchange of allocated money, and the payment is expected to be made the right way. However, in some cases, a customer needs to purchase something but having no sufficient money it wouldn’t be possible to purchase the product right away. Buy now pay later (BNPL) helps the customer and seller to attempt this particular practice where the business deal is made in exchange for partly payment process. Increasing competition in the market and the economic changes and downturn might have an impact on the purchasing power of the customers. Business needs to come up with some extraordinary ideas that help not only to enhance their sales but also help to earn more earnings. This model become attractive and popular among people who expect to buy something on an urgent basis and ensures to pay the amount with extra charges if applicable on or after the stipulated period. Although it is more common among online retailers, some high-street stores do offer this payment option. Families and younger people are frequently the target audience as well.

In addition to banks, other third-party providers also provide “buy now, pay later” plans. Customers receive loans from them without paying interest as long as they repay the money within a certain time frame. Consumers are responsible for paying the interest if there is still a balance due after the grace period expires. To know more students can take help from SourceEssay online assignment help experts.

What Can Be Bought With BNPL? 

In recent months, e-commerce businesses, fintech firms, and even banks have begun to provide customers with BNPL facilities. On their platforms, , Flipkart, Amazon and banks like HDFC Bank and ICICI Bank all accept this payment method. Additionally, several fintech app-based platforms, including  LazyPay, PayTM, PhonePe, Kissht, Moneytap, CASHe, and others, offer BNPL loans. These days, this option can be used to buy a variety of goods, from gadgets to clothing, as well as to order food and book travel. BNPL provides layaways with an even more customer-friendly substitute. Consumers only have to wait for their items for as long as it takes for them to arrive at their doorsteps—there is no need to wait until it is paid for in full to access the item. Your payment can already be postponed for a predetermined period of time using credit cards. If you don’t pay the money back by the due date, these charge interest. But there are some ways in which they are different from BNPL. When compared to credit cards, which can be used at any company that accepts them as a form of payment, BNPL can only be used through a partner merchant. However, a few non-bank lenders levie a small processing fee. NPL facility does not incur any such costs. Compared to BNPL schemes, interest rates on credit cards are typically much higher.

What Is The Catch Behind This Model ? 

Along with the relaxed loan eligibility requirements in comparison to other options, the interest-free repayment window is what attracts customers. However, you ought to be able to make your payment within this time frame. The lender will assess interest on the amount due if a buyer doesn’t pay it within the specified repayment window. Additionally, you might be charged hefty late payment penalties. If you don’t use this facility responsibly, you risk getting trapped in a debt cycle. Additionally, any payment delays will be reported to the credit bureau, which could hurt the buyer’s credit score. This might increase the cost of subsequent loans or, worse, might lead lenders to turn down all pending loan applications. According to (Dhanorkar,  2022), When one sees offers in online shopping to pay for that sweater or mattress over time using services from Affirm, Afterpay, Klarna, and other fintech firms. The rise in online shopping during the pandemic helped these “buy now, pay later” start-ups succeed. Nearly 500,000 merchants are now a part of the partnership between Affirm and the e-commerce platform Shopify (Marketplace. 2022). The model is expanding beyond retail to take into account expenses like rent, travel, and even medical costs. In different ways, businesses generate revenue. Others charge users with fees and interest while some charge businesses for their services.

How To Make The Best Use Of BNPL 

It sounds very appealing to be able to divide a payment into smaller portions and defer it without incurring any interest. For consumers, using the “buy now, pay later” strategy is a common way to make unaffordable purchases. People can be duped into spending more money than they should by small amounts. Check the fine print before rushing to use a BNPL loan to finance every aspect of your life (Dhanorkar, S., 2022). Avoid choosing this option if you have too much debt. The creation of your credit history is something that younger borrowers should be aware of. Your history of timely payments will determine how creditworthy you will be in the future. You might even be given higher spending limits for subsequent purchases if you responsibly use the credit limit and make timely payments. For knowing about the best practice of using Buy now pay later method in business, its important to know about the various available options of purchase. Cash was the first and traditional form of payment, followed by debit and credit cards, then mobile wallets (Pal, A., 2022). Credit cards offer an interest-free period, unlike cash, debit cards, or mobile wallets, which require upfront payment. Here are five strategies to make BNPL effective for a company. 

Select Goods And Vendors Carefully

It’s important to ensure the split rate or thresholds correspond to your price points and customer requirements when deciding which BNPL option to offer. Ask about approval rates and how they stack up against other payment options rather than just focusing on the conversion, order value, and volume statistics provided by your providers. Measure, test, and get ready to iterate until you find the sweet spot for your customers with your BNPL offering.

Likewise, some businesses are endorsed by BNPL options over others. Based on ones segment, it might be more crucial that you think about including it in your checkout. For instance, offering BNPL to customers has been extremely successful in retail. Additionally, BNPL has recently started to grow in the tourism and hospitality industries.

Grant BNPL At The Beginning Of The Payment Journey And Be Proactive.

With the help of dynamic on-page messaging, one can move pay later up the sales funnel to the point where customers are making decisions. In certain situations, the checkout procedure may be significantly prolonged, increasing the chance of cart abandonment.  optimising any options for the customer at the checkout, such as filling out forms with data from the initial purchase is the significant practice.

Reading The Fine Print Is Important

According to essay typer, consumer debt and BNPL are topics that are receiving a lot of attention. Only 22% of respondents claim to understand the conditions attached to it (Checkout.com. 2022). Ensure with the payment terms, late payment penalties, and fees are completely transparent and clear. Customers, as well as reputation, must be protected. But do not create something from scratch. Consumer communication from BNPL providers should be available in the appropriate formats that are responsibly prepared and that can be tailored to a company’s brand.

Include the phrase “pay later” as a key message in all of your marketing communications.

Compared to overdrafts and standard credit cards, which both had scores of 6, BNPL’s average Net Promoter Score is 30, which is significantly higher (Prnewswire.com. 2022) . Make sure customers are aware that they can choose to pay later with you by adding banners promoting BNPL to marketing, email, and add campaigns.

Take Charge And Seize Any Chances For Co-Marketing That Present Themselves.

Co-marketing activities exposed their brand to new consumers, according to 54% of UK retailers, and 23% of those retailers could track the referral of customers directly from their BNPL providers (Company, 2022). Seize the opportunity. Inquire with your BNPL partner about the types of support that are offered and how to get in touch with them. from listings in business directories to spotlight features, special events, and pop-up ads. Think about the best ways you can make the BNPL option more visible and effective for your business.

Pros Of BNPL for Online Business

Improved Conversion Rate

Nothing is more upsetting than watching customers spend a lot of time on your website browsing your products, adding them to their cars, and then leaving your online store without making a purchase. Although there are numerous factors that lead to online shopping cart abandonment, some consumers do so due to money-related problems. With the help of point-of-sale financing, customers can buy the products and goods they want even when their finances are tight. They can use it to benefit from current sales and discounts that your online store is running.

The above-attached figure shows the customer conversation rate into online shoppers throughout the world within a period of 2020-2022 by comparing different regions which help to understand the conversion instinct among the customers to online purchase with the use and preference of Buy now pay later mode. According to the same report it has been considered that online shopping has been established itself to avoid physical hassles in going for store shopping . In the fourth quarter of the previous year, 2021, 4% of people have been reported to be converted into online shopping and the percentage is going to increase in upcoming years as expected by the online retailers after the implementation of BMPL mode of purchase. 

This attached graph shows the conversion of people into online BMPL purchase higher in which generation. This analysis has been made on the year of 2019-2021 where In just two years, the conversion rates for BNPL have more than doubled across every age group, compared to the conversion made primarily in Gen Z and millennials. It’s safe to say that this simple method of payment will continue to gain popularity, and brands will profit greatly if they join the trend. To know more students can take help from online assignments help gold coast experts.

With Buy Now, Pay Later, Potential Sales Rise

Customers might be more inclined to buy when you give them the option of making instalment payments. Customers can even purchase your goods without having any money in their accounts. They only need to be sure they can afford them in the coming weeks or month. This is especially useful for luring in customers who are approaching their next paycheck. If the chosen products are more expensive, the increase in conversions can be especially striking because customers may be more willing to purchase an expensive item they otherwise wouldn’t if they can break the cost of the purchase into manageable payments (Patel, 2022).

Affordable And Flexible Payments For Expensive Goods

Buy now, pay later can also have a significant impact on order conversion for online retailers selling high-value goods like jewellery and electronics. Merchants can more easily sell their goods to the market by allowing customers to pay in increments through BNPL schemes.

Purchase Now, Pay Later May Increase Credibility

Obtaining a trial period for many consumer products used to be virtually impossible, but buy now, pay later frequently makes this possible. Customers can test out your product without committing to the purchase by using a buy now, pay later option. If they enjoy it, they can make their regular payment. If not, since they haven’t spent much, if anything, yet, they can return it without worrying about getting a full refund. The short-term costs of a small increase in free returns may be higher, but the long-term gains from greater customer loyalty may be significant.

An Increased Average Order Value

The typical price a customer pays for a product is known as the average order value, or AOV. After implementing the “buy now, pay later” financing system, many online stores saw an increase in AOV of up to 130% (ZenBusiness Inc. 2022).

A Better Credit Solution May Be Provided To Consumers By Buy Now, Pay Later.

In actuality, for many consumers, a buy now, pay later financing option is much more cost-effective than using credit cards. Aside from that, they are frequently a much safer way to borrow money than using credit cards or payday loans. In contrast to the latter, which can ensnare you in a debt cycle with double-digit interest rates, the former can. Additionally, if your customers are dependent on those to make purchases, they might hesitate to do so altogether or find themselves in a precarious financial position that prevents them from returning.

Cons Of BNPL For Online Business

A Rise In Merchant Fees

Banks and credit companies that provide BNPL services charge both the consumer and the business. But when compared to conventional payment methods, BNPL systems have higher fees, which typically range from 2-6% of the total amount spent (ZenBusiness Inc. 2022) . One needs to be concerned about more than just the higher costs. The opportunity cost of mentioning another payment option is another consideration. According to thesis help experts, when customers select a buy now, pay later option, they are deciding not to use a different payment method with lower fees.

Problems With “Buy Now, Pay Later” Could Put One’s Reputation At Risk.

Because of the aforementioned problems, buy now, pay later solutions have gotten a lot of unfavorable press. Given the benefits they offer to some customers, there is a good chance that these solutions will be viewed favourably in the future. However, only time will tell. Brands that facilitated these payments could become targets if negative media coverage of these solutions intensifies and the general public begins to disapprove of these choices. Though it is something to think about, it is not necessarily cause for alarm because as people become more accustomed to these products, this coverage may disappear or get better.

Obstacles To Integration

It requires some workarounds to incorporate the “buy now, pay later” payment option into your store’s standard checkout process flow. It calls for specialised equipment and technology, both of which can significantly increase the merchant’s costs. The reason is that third-party BNPLs have lower fees than conventional banks, financing experts advise choosing them.

Problems With Accreditation

According to to write that essay expert, The “shop now, pay later” concept may not be suitable for everyone in addition to integration issues. For this payment option to be accepted, businesses must fulfill certain requirements. Additionally, some companies, including tobacco and gaming businesses, are not qualified for this financing option.

The Future Of Buy Now Pay Later And Conclusion

The concept will draw more customers to instantly buy an item of their choice, so the future of BNPL could be very promising. Most lenders who offer this facility offer free EMI repayment, which is likely to eventually replace other payment options as people prefer them, especially young people. At its core, though, it still functions as a loan that the customer must ultimately repay. Because not everyone will be able to repay the loan in full within the specified time period, the lenders providing this service will need to exercise caution when providing it. To avoid interest and a drop in credit score, the clients must comprehend the consequences of late payments. For any business, it’s critical to select the best BNLP package in order to maximise the advantages and minimise the risks for the online store. It’s extremely important to offer customers their preferred payment options and as many payment options as possible. Adding a buy now, pay later option can increase sales, lower cart abandonment rates, and foster customer confidence.

Reference

Patel, N., 2022. Should You Add Buy Now, Pay Later Options to Your E-commerce Site?. [online] Neil Patel.

Marketplace. 2022. Buy now, pay later. What’s the catch?

Dhanorkar, S., 2022. 5 things to know about buy now, pay later schemes. [online] The Economic Times.

ZenBusiness Inc. 2022. Pros and Cons of “Buy Now, Pay Later” for Online Businesses| ZenBusiness Inc..

Bankbazaar.com. 2022. Buy Now Pay Later: All You Need to Know About BNPL in India.

Pal, A., 2022. How to make the best of Buy Now, Pay Later. [online] mint.

Checkout.com. 2022. Best practices for BNPL success.

Company, 2022. Buy Now, Pay Later: Five Takeaways From The UK Market. [online] Prnewswire.com.

Prnewswire.com. 2022. Buy Now, Pay Later: Five Takeaways From The UK Market.

Statista. 2022. Online shopping conversion rate by region 2022 | Statista.

Theorem | Digital Media Solutions Partner. 2022. Buy Now, Pay Later: Boost Conversions & Average Order Value.

Dayalani, V., 2022. How BNPL Startups, Pay Later Models Are Rewriting The Future Of Lending in different regions. [online] Inc42 Media.