There are several ways merchants accept payments from their customers, from the swipe of a credit or debit card to checks. But there is a new payment option gaining popularity – Buy Now Pay Later (BNPL). This payment method allows customers to pay for purchases over time in installments usually without interest charges.
In Canada, BNPL payments are estimated to grow by 63.5% annually to reach CAD7.6billion in 2022. Customers are interested in using BNPL for various reasons; it helps them budget, it’s a convenient mode of payment, and it allows them to buy items they might not otherwise be able to afford if they had to pay in full on the spot.
As a merchant, you may be wondering how BNPL works and how you can implement it into your business. This article will break down what BNPL is and the basics of how it works in-store and online. We’ll also cover some ways in which merchants can benefit from using BNPL as a payment option.
What Is Buy Now Pay Later?
Buy Now Pay Later (BNPL) has been available for years, but recently it gained traction during the COVID-19 pandemic as the number of people shopping online increased. BNPL is a type of short-term financing that allows customers to buy items immediately but pay for them in installments over a typical period of 12 months or less.
Usually, a 25% upfront payment is made then the rest of the total amount is paid in installments determined by the BNPL service provider. Typically, BNPL does not charge interest or affect your customers’ credit card scores. However, some BNPL service providers will charge late fees.
Merchants who choose to offer BNPL rely on a service provider. The BNPL provider settles the full amount after fees to the merchant at the time of sale. The BNPL provider then oversees that installment payments are made on time until the product is paid for in full. The merchant typically pays the BNPL service provider a small percentage of the total sale price and a set fee per transaction.
How Does BNPL Work In-Store (At Point of Sale)?
In brick-and-mortar retail stores, a merchant can offer BNPL at their Point of Sale (as a payment method and offer it at checkout). How BNPL providers offer BNPL at the point of sale varies significantly. When weighing up which BNPL to choose, the ease of use, hardware requirements and the time it takes the customer to make the purchase needs to be considered. When a customer opts for the BNPL option, they might undergo a quick soft credit check that does not affect their credit score, however a provider like Gratify does not require this soft credit check due to their advanced AI driven decision engine.
Once approved, the consumer pays a certain percentage of the total amount of the item. The remaining balance is paid in installments to the BNPL provider, who has already paid the merchant the full amount for the item upfront, minus a small fee.
How Does BNPL Work Online?
BNPL experienced a huge uptick online during the pandemic as physical stores were temporarily closed. Even as things begin to open up again, BNPL continues to be a popular choice for customers who shop online.
Offering BNPL online is very similar to offering it in store. Merchants add the BNPL option to the online checkout process. A customer can then select it as a payment method, add their details, choose a repayment plan, and complete the transaction on a computer or mobile device.
What Are the Benefits of BNPL For Your Business?
Integrating Buy Now Pay Later into your business can have the following benefits:
1. Higher average sale size
Providing BNPL results in a 30% to 60% increase in average sale size. This is because customers have a higher purchasing power with this payment method. In addition, they can afford more products because they are paying for them in installments.
2. Higher Conversion Rate
3. Attract New Customers
Some customers would like to buy from you but cannot afford to pay the product’s total price at the time of the sale. Offering BNPL as a payment option shows that you want to work with all customers, including those who want to stick to a budget. By broadening your payment options, you also broaden your customer base by turning visitors into buyers.
4. Gives Your Business a Competitive Advantage
With interest in BNPL as high as 65% among some consumer age groups, chances are your competitors are integrating it into their business. Customers enjoy the flexibility and benefits of using BNPL.
That means they’ll likely buy from a merchant that offers BNPL as a payment method. Integrating BNPL into your checkout will help your business stay competitive and provide an advantage over competitors who have not yet implemented it into their business.
5. BNPL Builds Customer Loyalty
In every business, customer retention is essential. Customers will likely buy from you repeatedly if you offer BNPL because it enables them to purchase items they otherwise would not be able to afford.
BNPL allows merchants to show they understand the customer journey and want to offer more payment flexibility. This ultimately enhances the customer shopping experience, fostering greater loyalty to your brand.
BNPL is a growing trend that continues to gain a foothold among popular payment options. Whether you want to integrate BNPL into your POS transactions or add it to your online payment options, BNPL allows you to reap the benefits of a more flexible payment option.
Not only can it give your business a competitive advantage, it can also lead to overall better outcomes for your business – a higher conversion rate, more customers, and greater loyalty to your brand.
How Can Payfirma Help?
Payfirma has partnered with Gratify to help your business provide a simple and affordable way to offer BNPL to your customers. Our team of experts is happy to answer any questions you may have about this service and how it can benefit your business. Please get in touch with us today at [email protected] or call us at 1-800-957-0534 for more information on how we can help you get started.