The ideal situation would be for you to pay in full when you purchase a product from an online retailer. Nevertheless, a global economic downturn and intense market competition since the COVID-19 pandemic have adversely affected consumers’ purchasing power. To ensure that sales do not suffer, businesses needed something new, something innovative. That is exactly where “buy now pay later” fits in.
A point-of-sale installment loan, commonly known as Buy Now, Pay Later or BNPL, is a short-term financing option offered by third parties, where customers are able to purchase without having to pay the entire amount up front. In most cases, customers can make a small down payment, then make the remaining payments in EMIs. These EMIs typically carry little or no interest.
Due to their convenience, BNPL payments have become extremely popular among shoppers. In addition to merchants, businesses, and retailers, this new payment method has many benefits to small retail businesses. So, if you run a small business, embrace this trend to get the following benefits:
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Improved Conversion Rates
A small shop owner may find it frustrating to see visitors browse their products, add items to the cart, but then leave. There are plenty of reasons why conversion rates fall, but financial issues are one of the most common reasons people abandon their shopping carts.
This is exactly where BNPL services come in handy. With BNPL, customers can make payments in EMI’s even when they are in a tight financial situation.
Moreover, it allows them to fully utilize discounts and sale days. Thus, in the end, it is your company that benefits.
Higher Average Order Value (AOV)
Average Order Value (AOV) is the average amount customers spend while making a purchase. Different retail stores have different AOV units.
BNPL brought about a 130% jump in AOV after it became a trend. This can be attributed to the spread-out payment plan offered by BNPL, which makes the customer feel that they have more purchasing power.
The reason people prefer this credit payment option over credit cards is that, without interest rates, the purchases fit into their budgets.
Enhancing the customer experience
You can empower your customers by offering them flexible payment options such as the shop-now-pay-later scheme, which gives them more control over their purchases and payments.
Online shops can make big purchases seem achievable by splitting them up weekly, bi-weekly, or monthly. By doing so, your shop can also reach a broader audience, particularly millennials.
Despite the perception that buy now pay later is a benefit only for consumers, this payment option benefits merchants, giving them a strong foothold on the market.