The acronym BNPL stands for Buy Now Pay Later. BNPL is a new system that allows e-commerce users to defer payment for their online purchases. BNPL is a new payment method that began to grow at the start of the pandemic, due to the increase in online sales. It is currently booming among e-commerce businesses due to its benefits to retailers, brands, and consumers. The main users of the BNPL system are young people, especially Millenials and Generation Z. They tend not to use traditional financing methods. They prefer not to owe money to banks and institutions. Through Buy Now Pay Later, they delay payment for products and services until the following month. From Minderest, we explain how it works and what the advantages are. Once you have studied your pricing strategy and profit margin, you can assess the suitability of incorporating this payment method into your e-commerce site.
How BNPL works
The Buy Now Pay Later system embeds into the e-commerce site as an additional payment method. As with any payment gateway, the retailer must request this service from a BNPL company, and manage incorporating it into the checkout process. Once it is activated, the user can defer payment without any analysis of their finances or need for approval.
Likewise, it does not charge the user fees or interest. The retailer takes care of the commissions applied by the BNPL company. However, suppose the customer does not make the payment on time. Then several fees and penalties for non-payment will apply to the customer.
Benefits of BNPL for e-commerce businesses
Along with the clear benefits for users, BNPL also has advantages for retailers and brands that implement it on their websites. On the one hand, it has been shown that this system helps increase the conversion rate, as users make the final purchase decision faster. It also reduces the abandoned basket rate.
In addition to this, users tend to make higher-volume purchases, and increase the average receipt. According to a report by Cardify.ai, it is estimated that 49% of people spend between 10 and 40% more with BNPL services, than they would with credit cards. This results in an increase in retailers’ revenue in a short time, because they are not affected by the payment delay, as they are paid in full in advance by the BNPL company.
On the other hand, having a Buy Now Pay Later system helps retailers sell old or out-of-season stock more easily, by speeding up the final purchase decision. So with the help of promotions or personalised offer campaigns, you can attract consumers’ attention and convince them to purchase more items than they had on their list. In addition, making this service available to users also increases their loyalty. They will prioritise brands with BNPL over similar brands in the market.
To summarise, the Buy Now Pay Later system offers e-commerce businesses:
- Higher conversion rate.
- Lower rate of abandoned baskets.
- Average receipt increase.
- Sale of out-of-season items.
- Increased user loyalty.
- Increased revenue.
Despite this, there is growing concern about the increase in consumer debt, which is why some groups demand more regulation of this type of payment. BNPL is undeniably the fastest growing payment trend at present and is liked and approved of by many users. This demonstrates once again that combining competitive pricing with attractive sales and payment terms is key to speeding up the conversion rate and boosting sales optimisation.