Buy now, pay later (BNPL) has become an increasingly popular payment plan with businesses in recent years. It allows consumers to make purchases there and then, even if their bank account isn’t quite where they’d like it to be. You’ve probably seen the BNPL button cropping up more and more and this is because this type of payment plan can be very beneficial to both businesses and their customers.
So if you’re an e-commerce business owner and you’re considering adding this payment option to your website, that’s great! There are just a few things you need to know before you do. To help make sure you’re informed, Irish Parcels have put together this guide on the most important things you need to know about buy now, pay later payment plans, so you can decide if this approach is right for you.
1. How buy now pay later works
In a nutshell, buy now, pay later allows consumers to purchase the goods or services they want and pay for these in instalments rather than a one-off payment made right there and then. This option is offered to approved customers at the checkout and essentially means that the BNPL provider pays the merchant in full when the transaction is made (minus a small fee which we’ll discuss in more details later) and then customers pay back the provider over the agreed time period.
2. How you can protect your business
One of the biggest concerns for those considering buy now, pay later options is that someone might not be able to pay back the money they owe. The good news is, if you use a BNPL service provider you’ll get all the funds upfront anyway. This means the provider will have to do the chasing should the customer miss a payment.
What’s more, these options are only available to those who pass a quick credit check, also run through the service provider. So those with a bad credit rating are unlikely to be allowed to continue with the BNPL purchase if the provider doesn’t believe they’ll make the repayments. This helps to give you peace of mind that offering a buy now, pay later option isn’t going to impact your business negatively.
3. The different providers to choose from
There are several different providers you can use to add buy now, pay later options to your e-commerce website. With the increase in popularity of this type of spending, more and more providers are emerging and some of the most popular ones right now include:
- Klarna
- Clearpay
- Laybuy
- Payl8r
- Openpay
This is by no means an exhaustive list and there are other options out there. What’s more, all of the above providers offer different payment plans for customers and different benefits to businesses so you need to do your research and choose wisely before settling on a provider.
4. The fees involved for your business
Fees won’t just apply to customers who wish to defer their payment. Of course not! If you are relying on a provider you’re not going to be getting this service for free. For businesses, much like accepting credit cards, there will be a small fee for using buy now, pay later services to complete sales. This is usually around two to eight per cent of each transaction, though the amount you pay will vary depending on the provider you choose. So again, make sure you do your research first so you can ensure you get the best deal. Just be aware that fees do apply.
5. How customers know you offer this payment plan
You might be wondering how you can make customers aware that you’re offering this type of payment plan. Well, typically you’ll be able to display a ‘buy now, pay later’ button at the checkout alongside the more common credit card and PayPal logos. You can also add this as an option when they’re selecting their payment method at the checkout.
If you do decide to add this option to your e-commerce site you might also want to do a bit of advertising around the subject. Use your favourite platforms and marketing techniques to let your customers know they can now purchase your goods without having to settle the bill until payday!
6. The benefits of offering buy now, pay later plans
Finally, in this last section, we’re going to take a look at the benefits of using buy now, pay later schemes and why your e-commerce business should consider it. There are several big benefits to offering BNPL and these include:
Building brand loyalty
Customer will appreciate the fact that they can purchase the goods they need right there and then without having to pay straight away. They are therefore more likely to be loyal to your brand and come back to you in the future, knowing that this service is on offer, particularly if they’re living paycheque to paycheque and don’t always have enough money in their bank. It’s another way to improve the consumer experience and make them want to shop with you again.
Boosting your sales
How many times have you seen a customer abandon their cart right before they’re set to checkout? Or at the very least take three items out of their basket and only end up purchasing one? This happens a lot and usually because the consumer has had time to think about their decision and to check their bank account before realising they don’t have enough money to go ahead with the purchase.
Buy now, pay later can reduce the number of abandoned carts as people no longer have to pay straight away. This might also encourage them to make larger purchases, perhaps a few spontaneous items they didn’t actually need, as they know they can pay in instalments and don’t have to find the money right away.
Shunning credit cards
And finally, today’s consumers tend to shun credit cards because of the hidden fees and large amount of interest. As such, buy now, pay later has become a much more beneficial way to get the goods they want despite being short on cash. So take this chance to jump on the trend and let your e-commerce business reap the benefits.