How does buy now pay later works & How can it be used?

There’s nothing more enticing to contemporary shopaholics than the option of purchasing now and paying later. Fortunately, their dreams have been converted into reality. As the name suggests, Buy Now, Pay Later can allow consumers to buy commodities without worrying about cash when purchasing something they’re fond of. Since BNPL  can increase e-commerce sales and drive additional impulse purchases, it can rule the online retail world’s payment trends.

If you’re pondering over the thought, “How can a buy now, pay later facility help me when I can pay via credit cards?” You aren’t alone. The pay later app offers a few striking features that are similar to credit cards over time. However, the BNPL has the edge over credit payment methods due to some reason. Keep reading on to learn the working algorithm of BNPL and its meaning.

What does Buy Now, Pay Later entail?

The concept behind buying now and paying later is quite simple: Consumers who have completed an online transaction and are willing to pay via installments over time can execute this option. Here, the consumers won’t have to pay the entire amount upfront.

Like the layaway and working algorithms of credit cards, BNPL is becoming a trending shopping option during the holidays as shoppers can set aside their favorite items while paying for them later on- BNPL allows consumers to “Buy Now and Pay Later.”

Buy Now, Pay Later option allows retailers to clear out products within real-time out their stocks or inventories. Stores are free to offer their personalized financing tools or visit a third party.

How does BNPL work?

By implementing the Buy Now, Pay Later option, consumers can enjoy buying now and paying overtime. Here, the consumers are entered into a certain contract that seeks consumers to pay for both the principal amount along interest in the nearest future. It’s similar to a traditional credit or loan.

Suppose a company offers you a buy now, pay later method via a third party. Once the consumer has chosen this payment option, they have agreed to buy an item without paying anything upfront. Rather they can pay over time. Under such circumstances, a company can profit from the sales upfront via the third party. Thus, the scenario is similar to credit card payments from a business standpoint.

You no longer will have to keep track of the amount you owe as the transaction’s pay later aspect as the burden will be handled by the BNPL provider. It’s similar to a credit card company responsible for collecting money from consumers with a standard credit card payment.

Several third-party “Buy Now, Pay Later” providers conduct a soft credit verification. They are reluctant to offer money to consumers who haven’t paid the money on time. However, this principle isn’t applied universally. While a few BNPL providers charge a centralized interest rate, some of these providers’ interest rates are based on factors such as purchase price. Although a Buy Now, Pay Later transaction relies on strategies like prepayment fees or late fees, the strategy through which this principle is applied can differ amongst different vendors.

What are the benefits offered by BNPL to consumers?

Buy Now, Pay Later is a recent e-commerce trend, and store owners know how much consumers love it. However, what are the overall advantages of providing BNPL options to consumers?

Let’s take a look at it:

To get started, BNPL can increase conversions. Yes, most consumers can load their cart with all kinds of goodies on their favorite e-commerce site to eventually balk at the cost or checkout. Although several consumers are curious to purchase new items once they’re confronted about the accurate price they’ll have to pay- they eventually abandon the cart.

Although the BNPL’s working algorithm is similar to a credit card that offers no savings, the idea behind post-payment for purchasing a single item can attract more buyers to the e-commerce site.

Approximately two-thirds of different shopping carts are not checked out, which can cause huge losses for several e-commerce companies. Nevertheless, stores that include BNPL options during the last checkout stage can observe a significant drop in the rate of cart abandonment. You can also make several payments like APDCL bill payment online via the BNPL facility.

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