A major problem that online stores face is ghosted cart.
Customers browse a store, add their favorite items to their cart, then go away from the site before they complete the transaction. The companies later create retargeting campaigns and email follow-ups to allure some shoppers back to the site to complete the purchase, but often the moment has gone, and the transaction is lost forever.
This is not just messing up the current sales, but it also ends up missing the chance to earn the trust and build a lasting relationship with the customer, affecting the potential business in the future.
There are a lot of reasons why customers might decide not to complete a sale, but one of the most common reasons is not having sufficient funds in hand.
This is where the “Buy Now Pay Later” solution comes into play.
What is “Buy Now Pay Later” (BNPL)?
The “Buy Now, Pay Later” is a type of payment option available at checkout of e-commerce websites and stores. It lets consumers purchase goods and pay in installments, similar to a credit card. It is an interest-free credit platform that helps the buyers to distribute the purchase cost over months instead of paying the entire amount in advance.
Different BNPL providers offer these services in various names like pay-over-time, point-of-sale financing, or point-of-sale loans. However, the basics remain more or less the same. BNPL providers pay the dealers the full amount, excluding the service fee, while the customers who opted for BNPL service pay the provider as per the terms.
When a customer opts for the BNPL financing option, the provider will have a quick credit check of the customer. Once the provider approves the customer, the terms of service and terms of repayment will be displayed to the customers. On accepting the terms the customer can checkout as always.
How does BNPL service work?
You have an important festival arriving this month, and you have a big list of things to be purchased. Your account balance does not allow you to shell out money on purchasing dresses or other things right now, but you know that you will have enough money by the start of the next month. You do not like borrowing from your friends or family nor approaching a bank for such a nominal amount. Thanks to the ‘Buy Now, Pay Later’ option.
It is a payment method just like cash, credit card, debit card, or payment wallets. The idea is simple. A customer finds a product he wants but cannot afford at the moment. However, he knows for sure that he will have enough money to pay for it later. During such situations, the customer can buy an item immediately and own it without any extra delays.
BNPL can be used by creating an account on the provider’s website or app. To use the BNPL payment option, the account can be logged in at the time of an online purchase. If the purchase is made in a store, a purchase code can be displayed through the mobile app.
However, you can opt to use the BNPL option only if the retailer has partnered with the BNPL service provider. In most cases, the BNPL payment method is instantly approved.
As long as the repayments are paid on time, the customer need not worry about any extra costs. BNPL also does not require any sign-up fees, and there is no interest added to the purchase amounts.
And most importantly, the retailer or the merchant gets the entire amount from the BNPL service provider as if it was a normal transaction done by the customer. It is because most of the BNPL providers cover the purchase cost and take on the debt of the customer. They also take up the responsibility of fraud protection and payment defaults.
Benefits of ‘Buy Now, Pay later’
BNPL is the hot new eCommerce trend. The customers love it. But what does it offer to the merchants? Listed here are the top four benefits that BNPL offers to the merchants and retailers.
1. Increase the Customers’ Lifetime Value
Giving your customers a flexible payment option helps to earn their loyalty. These loyal customers will keep coming back to you for shopping, which impacts the frequency or value of their purchases. They will shop with you without the risk of cart abandonment. The more loyal the client is, the more the purchases. As a result, the durability of a customer’s lifetime value is increased.
2. Boost Conversions
Imagine, you filled your cart with all your favorite items with all joy and excitement, only to find out during the checkout that you lack money. The joy disappears in a moment. It makes you abandon the cart and come out of the store.
Here, the purchase and sale are lost, the customer lost his favorites, and the merchant lost his profits.
Now with BNPL, the customer is triggered to purchase the product.
Merchants who use the BNPL option have reported that they are experiencing a sharp drop in cart abandonment rates and an increase in larger order values.
3. Tapping Into Trend
Young people are the driving force of this trend. Millennials are saying NO to credit cards, and are looking for new ways to pay over time. This makes Buy Now Pay Later the most preferred option among the Millennials. The generation of consumers, who are considered the engine of eCommerce for decades to come, is choosing BNPL as their preferred payment option, thus forming a strong base of returning customers.
4. Increases Sales
Psychologists have proved that the pain of spending money is much stronger than the joy of buying. The more the money is spent, the more negative emotions. BNPL option helps in solving this problem. The customers can own the products instantly while delaying the payment. This feature of BNPL has a big impact on the psychological thinking of the people. This makes customers buy more without worrying about the money being spent. Thus, it increases sales.
Important Features Of Buy Now Pay Later Services
The following are the basic features of the Buy Now Pay Later service.
1. Different loan term options
Different providers offer different loan term options. The most common four loan term options are
- Pay in full within 30 days with no interest
- Pay in the short term with multiple installments, with no interest and no price difference
- Pay in the short term with various installments, having no interest, but a price difference
- Pay in the half-way term, with multiple installments, with no difference in price but with accrued interest
2. Completely Online
The process of applying for the BNPL as well as loan management for this financing option is completely done online. There is instant approval of the applications online within minutes. There is no signature or physical documentation required.
3. Varying Purchasing Power
Depending on the BNPL service provider that the merchant has tied up with, you can be eligible for purchases from a minimum amount of 2500 to a maximum of 250000.
4. Widely Accepted
Various businesses have started offering BNPL as a payment option. And wherever you find a credit card payment acceptance, you can also find the BNPL payment option.
Why You Should Provide BNPL Services To Your Customers?
As millions of consumers worldwide have begun adopting BNPL services, it is only smart for businesses, regardless of their size or type, to get associated with these service providers. Listed below are a few key reasons why you must offer a BNPL service for your customers.
- The Millennials prefer BNPL
- Not all shoppers have credit cards
- Improves sales
- Enhances the customer experience
- It is more affordable
Do ‘buy now pay later’ Service Providers’ run credit checks?
The buy now, pay later service providers to run a real-time soft credit check on the customers. This means the provider will confirm the consumer’s profile details and run a check on their credit records. This credit check will not show up on the credit score like a hard credit check.
What are your BNPL options?
There are different types of BNPL solutions created to meet customers’ needs. Adding these solutions to your eCommerce store is a simple process if the providers are already integrated with your eCommerce platform. If you are starting with the BNPL service from scratch, then you will need to edit the code or create a customized solution. Companies offering eCommerce website design services can help you with this.
Implementing Buy Now, Pay Later
The BNPL services for your eCommerce business is not a one-size-fits-all solution. It depends on your type and size of the business, your audience, your company’s financial condition, your business goals, your risks, and growth opportunities. Thus, to choose the best BNPL service contact an eCommerce website development company. They can help you integrate BNPL into your store.
For good, bad or worse, BNPL services will continue to exist. Economic uncertainties, distrust of credit cards and big banks, and increased awareness of the dangers of consumer debt have created the perfect conditions for BNPL services to thrive. Just remember that as BNPL grows in popularity, so too will the scams and frauds associated with it. As merchants, you should do your best to stay updated to avoid getting attacked by these cyber issues.