Buy now pay later (BNPL) is an alternative to credit cards. It’s a payment method that has been around for decades but is gaining more traction with online sales. Rather than use it for big-ticket items, like sofas and fridges, consumers are using it on impulse purchases like jewelry, gadgets, and fashion. Consumers like BNPL because it involves minimal or no credit checks.
As online sales increase, BNPL sales will grow too. Out of 2,744 respondents, 7% said they would use BNPL over the 2021 holiday. In comparison:
- 55% of shoppers have used debit cards
- 51% shopped with credit cards
- 43% used cash
What has industry insiders excited is the growth projections for BNPL. The growth is due to its popularity among the millennial and Gen Z segments. Major brands and companies are also adopting the payment method. These factors could easily lead the 7% figure to double or triple in the coming years, a growth figure other payment methods can’t replicate. According to Bloomberg, the BNPL market was $93 billion in 2020 and could be over $181 billion by 2022.
What Is the BNPL Scheme, and How Does It Work?
BNPL involves three parties: the merchant, BNPL service provider, and customer. The BNPL payment method enables a customer to receive a product and pay for it in installments, usually four to six weeks. The installments can be weekly, biweekly, monthly, or whatever the agreement says. The payment period can even stretch to a year.
It taps into the desire of customers to get whatever they want without having to worry about their bank balance. Shoppers also prefer it because it doesn’t have the high-interest rates credit cards are known for.
As a merchant, you can enlist the services of a third-party BNPL service provider. You will only be responsible for paying a small fee and a percentage of the sale to the service provider. Once the customer finishes the purchasing process, you get the full payment for the product. The BNPL service provider will be responsible for getting the installments from the customer – they essentially take on the risk of non-payment.
How can BNPL Boost Online Sales?
If you want to increase sales in your online store, you should consider BNPL. It’s a simple tactic that can yield results. Once you have BNPL, here’s what you can expect:
- It becomes an incentive for visitors to stay longer and shop in your store. Sometimes people ‘window shop’ through websites looking at products. You can convert visitors to sales if you can offer a compelling payment method.
- The payment method is convenient. Customers don’t have to worry about making manual payments since it will be automatic. They also appreciate not having to have cash on hand to make a purchase or worry about interest payments later. BNPL also doesn’t make customers pay maintenance fees, which is standard among credit cards.
- The risk of nonpayment is borne by a third party, so as a merchant, you have little to worry about. You have a satisfied customer who will likely come back or refer your business.
- Low cost, flexible, and convenient payment options improve the customer experience and customer loyalty. Customer loyalty brings repeat sales. It’s easier and cheaper to market and sell to your existing customers. Repeat sales are ideal because they have low acquisition costs, easy conversions, and usually increase value over time.
- BNPL helps customers manage their cash flow, thereby increasing the amount of products they can buy. You can use it to increase the Average Order Value (AOV). AOV is the average order amount that customers spend on your site.
- You can use it to reduce cart abandonment. Cart abandonment is sales lost at the last moment. If you can remove the cost barrier by offering easy payment terms, you increase the chances of customers finishing the purchase.
- It can also lower the rate of returns. Since customers will be paying in installments, they are more likely to stick with the purchase decision.
Fifty-three percent of US shoppers say the speed of delivery is important when evaluating online orders. Speed is something that customers demand, and retailers struggle with. Customers want same-day or next-day delivery, and they want it for free. Large eCommerce retailers can afford to offer that service, but medium and small enterprises may have a hard time offering that. But they can provide the service if they outsource to a reliable third-party fulfillment company. The fulfillment company will store, pick, package, and ship your products and give you the edge that large retailers have regarding logistics.
Improve Sales with BNPL
If you want to increase your online sales, you should consider using a BNPL payment method. You can enlist the services of a service provider who will take the majority of the risk. Once you have it in place, it will enhance the customer experience and improve revenue.
