What are the Benefits of Buy Now Pay Later for Businesses?

There are multiple payment options for customers whether B2B or B2C when it comes to shopping. However, businesses still look for better and more attractive payment options to boost their sales and increase customer loyalty.

One of the most trending payment methods these days is the “buy now, pay later” option. This method enables customers to do shopping without requiring cash in hand. BNPL (Buy Now Pay Later) is an alternative payment method with varied benefits. 

By using BNPL, businesses encourage more B2B or B2C sales by allowing customers to purchase now and pay later in installments. It simplifies the payment option. Plus, customers who aren’t ready to spend may also be ready to make a purchase. 

In this article, we will highlight the importance of BNPL along with the challenges and how it works. Let’s get started for more information. 

What is Buy Now Pay Later (BNPL)?

As you can understand by the name itself. It is a kind of payment option in which a customer, buyer, or client acquires or purchases a product today and promises to make a payment in the future in installments. This means the consumer doesn’t have to wait for payday to purchase an item. 

For example, if a customer purchases an item for $100 using the Buy Now Pay Later service. He/she can pay the amount in equal installments, say in four installments at $25 each. It enables the customer to purchase the item today and make simple payments in series later. 

After this, you, the business owner, receive the full payment of the product in advance excluding any fees that may apply like a credit card. 

With the help of Buy Now Pay Later, consumers are able to check out without paying the full payment immediately at an online store. Mostly, they will pay the amount in a series of payments, usually four. 

BNPL is simple, transparent, and quick compared to credit cards that involve high charges and fees. It has emerged as a leading monetary solution for many economies lately. In fact, as per stats, more than 50% of US consumers have used the BNPL service. 

Many BNPL services have emerged recently including Klarna, Afterpay, Zip, and Affirm. These services facilitate online purchases for customers and allow businesses to boost their sales. With easy credit options and modest terms, these services have become a go-to choice for many B2B and B2C customers to purchase products. 

How Does the BNPL Service Work?

Now you understand what “Buy Now Pay Later” is, it’s time to understand how the whole process works with the nitty-gritty of this payment option. It starts with the BNPL shown as an option in the payment flow. So, the customers can select the Buy Now Pay Later option in the payment form when they checkout. 

The customers have to select the BNPL provider from the list of options. After this, they are redirected to the BNPL service provider’s website or app. Next, they are prompted to log in or create an account. After logging in or creating an account, customers have to choose a repayment plan – typically monthly or bi-weekly – and accept the terms. 

After selecting the repayment options, they complete their purchase, and the transaction is done. Customers get the product they have purchased and the business gets the full payment of the transaction minus applicable fees. 

So, as you can see it’s a simple and hassle-free process. It benefits both the business owners and the customers. Now the next section highlights the benefits of BNPL for businesses. Let’s check these benefits below. 

How Does “Buy Now Pay Later” Benefit Businesses?

The benefits of BNPL for customers are clear. While customers face a strict approval process and high fees with credit cards, the Buy Now Pay Later service offers faster approval and lenient restrictions. Plus, the BNPL providers do a soft credit check that doesn’t affect the concerned individual’s credit rating. In addition, the interest rate is either low or customers enjoy interest-free credit. 

So, there are lots of benefits of the Buy Now Pay Later service for customers. Now let’s look at the benefits of this payment for businesses. 

Help in Attracting New Customers

Adding BNPL as a payment option in your online store can attract customers who prefer such options. The number of shoppers choosing the BNPL option has increased over the years. In fact, there was a sharp in the number of shoppers using BNPL during 2020-2021 that rose by 80%. It is still growing. Hence, you can increase your customer base by adding a Buy Now Pay Later payment method. 

Apart from this, offering multifarious payment options will also attract more customers. It helps you create a more familiar payment experience for different types of customers. Youngsters prefer the BNPL option more because they usually lack a credit card. As per stats around 11% of Gen Z and above 26% of millennials have used Buy Now Pay Later. 

Increase in Conversion Rate

Customers will purchase an item, especially something large if they can pay for it at the time. BNPL provides them the opportunity to get the funding to buy such a product and pay conveniently later. This is where the buy now, pay later option can push them forward in the buying process. They are more likely to buy a product when they have a suitable payment option. 

So, having a Buy Now Pay Later option in your purchasing pipeline can help you increase your conversion rate. For example, customers will be happy to make four interest-free payments of $25 in the future and buy the product now rather than paying a lump-sum amount of $100 to buy a product. They won’t hesitate at the price tag if the payment method is convenient. 

Increase Your Sales

With the BNPL option, you can increase your sales by encouraging customers to buy products even if they are waiting for their paycheck. Plus, customers with less-than-perfect scores can also buy products with the help of the buy now, pay later method. Hence, there will be more customers purchasing your products. It will lead to more sales and business. 

In addition, it also helps boost your sales by attracting those people who may be reluctant to spend money right now or planning to save. With BNPL, they can save by spending only a fraction of what they would if bought the product by repaying money in installments. So, they can have instant funds that they can pay in smaller amounts over a period of time.    

Provide a Better Customer Experience

Businesses also benefit from BNPL in terms of improved customer service. Buy now, pay later payment services enable customers to get quick funding and purchase a product conveniently without thinking about their budget constraints. Besides, they get funding without a complex approval process. They also need not worry about credit checks because a soft credit check happens to approve the funding. 

Customers aren’t required to fill out applications, pay fees, or face any additional processing time to buy products. The buy now, pay later payment option is a hassle-free and quick method to get funding and buy products. There is no headache for customers and the process is quite easy.

Get Paid and Avoid Risks

The key benefit of going with the Buy Now Pay Later method is that you receive the total transaction amount in advance. It means you don’t have to worry about whether the customer pays all the installment amounts or not. The customer risk is taken by the BNPL providers. Hence, you can live peacefully as your payments are cleared upfront.

It also shields your business from fraud. So, if there is a case of fraud, the BNPL provider will bear the consequences and the cost associated with the fraud. You can simply focus on growing your business by adding more customers and the risks are handled by the BNPL providers. 

Reduce Cart Abandonment

Cart abandonment is a major concern for businesses. They always want their customers to complete their purchase transactions. However, there are many reasons for cart abandonment and one of them is the absence of suitable payment options. Indeed, customers are likely to not move further after adding a product to their carts if they think there is no appropriate payment option. 

The buy now, pay later payment method provides an opportunity to buy products without worrying about funding. They have the funds they need to buy the product and are likely to finish the purchase process. Consequently, it will help reduce cart abandonment and help businesses increase their product sales. 

Is the Buy Now Pay Later a Good Payment Option for a Business?

Buy Now Pay Later is an attractive payment option for both businesses and customers. It offers excellent benefits that make it a suitable option for business to boost their sales and for customers to buy products. Moreover, this payment method is quite useful for businesses, especially when:

• High-value goods and services are being sold like travel fares and luxury items. Businesses selling this type of products and services can utilize BNPL to boost sales. 
• Retailers who want to improve average cart size but sell low-value goods or services can take the benefit of the Buy Now Pay Later method to boost their sales. With this method, they can attract customers who don’t have credit cards or are unable to pay otherwise. 

Moreover, BNPL services may not be a suitable payment option when:

• You do business with B2B customers. For instance, the BNPL service offered by Stripe supports only B2C customers. 
• Your products or services are available through recurring purchases or subscriptions. Since, the buy now, pay later method doesn’t support this type of purchase, your business may not get the benefit of implementing this payment method. 

How Do You Set Up the BNPL Method for a Business?

It is not difficult to set up buy now, pay later for your business. This process begins by selecting the right BNPL provider that matches your business goals and expectations. You will be required to apply for it and provide your business details. This process can be a bit hectic and lengthy. 

However, you can choose another method in which you can integrate BNPL with a software provider. It expedites the implementation and ease of use of the buy now, pay later payment method. The use of software makes the process simple and hassle-free.

What are the Cons of Buy Now Pay Later?

Buy Now Pay Later is a good payment option that offers benefits to both ordinary customers and businesses. However, like any other payment system out there, it is not 100% perfect. There are some drawbacks that you must know before making a decision in this regard. The following are all the limitations of the BNPL payment option that you as a business must know to make an informed decision. 

Confusing Deals

In recent times, BNPL B2B providers have mushroomed with a variety of packages and offers for businesses. It results in a lot of confusion for businesses. Hence, choosing a perfect deal is not easy. It is especially challenging for small businesses. These businesses must carefully assess the advantages and disadvantages of the buy now, pay later method to make the right decision. 

Integration Challenges

Another disadvantage of BNPL is the integration challenge. It is not easy to integrate this payment method into your business model. The tricky method of integrating it into your business model can pose challenges in getting the desired benefits of this payment method. 

Encourage Consumer Debt

BNPL can encourage consumer debt. Since it offers an easy payment option and customers can buy products without paying anything upfront it could lead to excessive shopping. Consequently, customers might spend more than what they can afford. So, it leads to customer debt. 

To Wrap Up

Making payments convenient and quick is essential for businesses to attract more customers and retain the existing ones. Buy Now Pay Later payment method is becoming popular these days It is a convenient method that offers lots of benefits to both businesses and customers. 

You can transform your business with the BNPL payment method. It will help your business increase sales and boost conversion rates. It opens the door to new opportunities for businesses They can attract new customers by offering an option to pay later in installments. 

While there are many benefits of the Buy Now Pay Later payment option, there are also some disadvantages. Hence, you must look at every aspect of integrating BNPL into your business to make the right decision.