Have you ever browsed through an online store and just loved their products? But then you remember that paycheck is a month away and you are living on a budget. As merchants, while this might merely be a targeting problem, the solution can lead to increased sales in the immediate future.
The solution: BNPL, commonly referred to as Buy Now Pay Later.
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What is Buy Now Pay Later (BNPL)?Simply put, BNPL is just an acronym made of four words that conveys exactly what it means. Technically, it is a third-party solution that allows consumers to make purchases in the present and pay for them on a future date without any additional or hidden fees/interest. While these might sound like a huge risk for a merchant, BNPL arrangements are becoming increasingly popular amongst online shoppers who are using them to purchase everything from electronics to daily-use products.
Why do customers prefer BNPL?Think of offering BNPL like a slightly modified game of life where your customer doesn’t have to wait for a ‘payday’ to purchase something they like while scrolling through options with their family on a swanky toy car.
BNPL offers simple installment plans, various financing options and flexible terms ranging from 3 months to a couple of years (depending on the provider). This acts like a give-and-take situation where customers get more than they give in the present. They receive the purchased product before completing the full payment and have the option to pay on fixed, later dates, without adding up any interest. Additionally, there is a lack of additional costs like transaction fees, maintenance fees and oftentimes, penalties.
This also allows customers access to products that once seemed too expensive or unattainable hence making it a preferred option amongst the younger audiences. Moreover, they have limited access to credit due to a lack of credit history and not insignificant sources of income. While BNPL doesn’t completely ignore the credit history, it uses its own algorithm to arrive at the credibility of the customer.
Therefore, if your brand caters to the millennials and GenZ, this is definitely an option you should start using.
The BNPL trend in India
India ranks third on the list of countries making the highest proportion of purchases using the BNPL plan after Indonesia and Mexico. While the country’s BNPL market is currently pegged at $3-3.5 billion, it is estimated to reach the $45-50 billion mark by 2026.
Moreover, it is safe to say the pandemic has propelled the growth of BNPL services in the country owing to the huge increase in online purchases and reduced disposable income. To add to the list of reasons for a BNPL integration, the number of users in the country is expected to rise to 80-100 million customers by 2026 from the current 10-15 million.
5 ways your online business can benefit from BNPL
While we think plug-and-play should be your present payment philosophy with BNPL, here are some specific benefits merchants would enjoy from the implementation:
1. Potential to drive more sales
Even though online purchases are on the rise, stores that offer BNPL can have up to a 25% increase in high-value product transactions. Think of it like this - customers would more likely be tempted to buy a product that costs 5,000 rupees if they could split the payment into 5 installments of 1,000 rupees.
Sounds like an attractive deal, doesn’t it?
A pro-tip: Highlight the varied payment options on the product pages so your customers don’t have to ponder much. Think of it like this: Your checkout page is the mark before the finish line. Getting customers to the mark can be as easy as a short run but making sure they cross the finish line is a task. So the faster you get them to the mark, the lesser time they have to change their minds.
2. Boosts average order value
You wouldn’t expect a customer to purchase 20 products in one go or spend more than a few thousands in one transaction, right? But BNPL facilitates this by encouraging them to buy more and pay at their convenience. This, in turn, boosts the average order value (AOV) and results in increased profits. Moreover, ZestMoney’s recent BNPL report affirmed that brands offering pay later options saw a 160% increase in AOV.
3. Offers minimum risk for the merchant
BNPL providers pay you, the merchant, directly and take full responsibility for non-paying customers. This reduces your risk and fulfills the customer's wishes thereby presenting a win-win situation for everyone involved.
4. Promises customer loyalty
The financial flexibility available at checkout helps turn customers into loyalists at an accelerated rate. The possibility of paying later gives customers every reason to stay and avoid looking for alternative brands with better deals. This is likely to increase the time a customer spends with you throughout their life and increases customer lifetime value for you.
When you provide customers flexibility, you essentially deliver a positive purchase experience which also ensures a reduction in the number of abandoned carts and increases customer retention.
5. Offers a higher conversion rate
Higher customer retention eventually leads to an increased conversion rate that helps optimize the process and further the bottom line. Quick and effective implementation of BNPL as a payment option can help develop an edge over competitors.
While the assurity of gaining these benefits hugely depends on the BNPL terms offered by the third-party provider and your business processes, this integration practically makes the payment process frictionless.
How can businesses offer BNPL on their online stores?
Buy Now Pay Later can easily be called the ‘one-click wonder’ with the interface and technology that Shopify provides. You can use the below tool and get started right away.
Simpl offers two apps on the Shopify App Store to help you configure the Simpl Pay-in-3 product:
- Display/Messaging app to enable the display of the Simpl Pay-in-3 messaging on the product page or the check-out page. It helps indicate to customers that they can avail or explore a BNPL option for a particular product.
- Payments App which is to be installed to activate the Simpl Pay-in-3 payment method on the Payments screen.
Simpl simply helps enhance purchase protection, increase cart conversion rate and increase the basket size while helping you get paid upfront while offering all-around flexibility.
You can browse through more options in the Shopify app store and get started on your BNPL journey now.
Implement now, benefit later with BNPL
Barter, currency exchange, cash on delivery, credit cards, debit cards, online payment, net banking, online wallets and now BNPL. Getting on the trend wagon has only benefitted merchants, whether they are traditional goldsmiths or modern-day D2C retailers.
To allow customers to bask in the glory of retail therapy, merchants have to lessen the immediate burden on their pockets. That’s why our BNPL mantra - Implement now, benefit later!
Once implemented, you will feel like a long-term investor whose best stock is BNPL which gives huge returns over a long period of time. While you weigh the pros and cons of investing, let us make a compelling case for you.
- Leads to greater sales, increases conversion rates and reduces cart abandonments
- Offers a higher average order value while posing a minimum risk to the business owner
- Provides greater financial flexibility that ultimately leads to increased customer retention and loyalty
- Appeals to a generation that will determine the future of brands and their fortunes
Benefits aside, BNPL is not a one-size-fits-all solution. While it can be adapted to the business vertical and the audience, making sure that you don’t lose your brand identity is crucial. For instance, the payment option makes luxury products accessible to a larger group of customers but it may contradict the brand’s messaging and essence. However, if these brands are looking to target a younger audience, BNPL becomes an effective option.
To bring in your A-game, it is necessary to properly integrate your BNPL solution into your store. Pay attention as we list down a few tips that will help you make the most of BNPL for your online store.
- Know your target audience. If your customer isn't interested in the pay later option, the integration will have the opposite effect.
- Before finalizing a BNPL provider, check their credibility, installment terms and transaction limits. If you agree with their signup, integrate and start playing.
- WE NOW OFFER BNPL PAYMENT OPTIONS! Did that come across too loud? Well, it should! Highlight the payment option on landing pages, product detail pages and checkout pages.
- If you deal with high-cost transactions daily, use social media ads & educate your audience about the flexibility of BNPL.
- Train your staff to help clear customer doubts and set up a dedicated support team to answer any BNPL query.
- Keep track of RBI's regulatory updates and fintech trends to make sure you're on the right path when it comes to BNPL.
While BNPL might be the trend, be sure to check out other payment options that can be offered to stay ahead in the game and win customers.
People also ask
1. How do I choose the right BNPL provider?
Choosing a provider can be tricky especially when there are multiple great options. Ask yourself these 5 questions to make your selection easier.
- Is it a good fit for my business?
- Does it provide maximum choice and flexibility for my customers?
- Will it help in expanding my customer base?
- Will it boost my customer retention and long-term value?
- Does it deliver the best customer experience?
If your answer to all these questions was a yes, you have your solution!
2. Which are the best Buy Now Pay Later apps in India?
There are many options available on Shopify. Some of the most popular in India include:
3. How can small businesses benefit from BNPL?
BNPL encourages purchases that may not have been made in the absence of an easy installment method. This payment method helps target customers without credit cards and retarget cart abandonment. Moreover, statistics show how offering BNPL results in repeat monthly transactions.
4. What are some cons of BNPL for online stores?
No payment option is perfect. Similarly, BNPL comes with its own challenges and limitations like higher transaction costs, issues with in-store integrations and confusing provider terms.
However, as a new payment alternative here to revolutionize the industry, there is room for improvement. BNPL providers all over the globe are highly optimistic about coming up with resolutions to support businesses and end customers alike.
5. Do you have to pay interest on Buy Now Pay Later?
A minimal interest fee is levied on shoppers which differs from provider to provider. While customers are offered zero-interest or interest-free periods by several providers, businesses offering BNPL have to pay a minimal transaction fee on the overall purchase cost of each order.
6. How does Buy Now Pay Later differ from a credit card?
BNPL applications are instant, don’t require exhaustive checkups of the credit history, have no hidden fees and entail interest rates lower than credit cards.
On the flip side, for businesses, BNPL providers have relatively easier onboarding processes, offer custom services to partner merchants and provide the flexibility of designing payment programs that best suit your target audience, an aspect missing with most credit card companies.