As we know, 2020 saw more people shopping online like never before. If you are one of those people, you may have noticed a lot of new payment options popping up. They're not just the normal "alternate" ways to pay like Apple Pay or Google Pay. They are the ones offering customers to pay in 'interest free payments' overtime.
The Buy Now, Pay Later (BNPL) craze is ramping up, FIS has reported that BNPL's market share is expected to double by 2024.
What is Buy Now, Pay Later?
BNPL is a payment solution that allows a customer to purchase goods and pay for them in interest-free installments overtime rather than paying fully upfront.
Your mind may cast back to Layby but it isn't just reserving a product and receiving it after you complete the payments. BNPL allows you to receive the products after making a downpayment (usually 25%).
One of the big pulls of BNPL is that their repayments are interest free, which is better than a credit card!
How it works
As a retailer you want to get paid as fast as possible for your goods. With BNPL services, you receive 100% of the payment upfront. Your BNPL provider takes on the credit risk, so you don't have to worry about chasing payments. You, the retailer, will be charged anywhere from 2% - 8% per transaction for having the payment option on your site.
What are the benefits to customers?
Signing up to become a BNPL user is extremely easy, there's no harsh credit checks, you can create an account and be ready to make your first purchase in less than 10 minutes.
A huge benefit for customers is that they get more choice as they can now afford options. Rather than going for only what they can pay for then and there, they can choose something a bit more expensive and pay off in installments.
Younger generations are choosing BNPL services over credit cards, as there is no surprise bill at the end of the month. Their repayments are set out at checkout and are interest free. Extra fees will only be charged if a repayment is missed.
What would the benefits to a retailer be?Increased Conversions
Afterpay boasts that their partners see a 22% increase in cart conversion, and more repeat shoppers.
It could be that consumers dread seeing a big chunk of money leaving their bank account or the prospect of high interest rates on their credit card but you may find your customers abandon their carts at check out. This, in part, is why BNPL is having a positive impact on conversion rates, with customers only having to pay a part of their total bill, it seems less daunting.Increase of repeat purchasers
Buy Now, Pay Later customers tend to repeat purchase after using that payment option with a retailer. Stats from Klarna shows a 20% increase in purchase frequency for customers shopping with KlarnaPay within 30 days.
Buyers appreciate choice
"7% of all cart abandonments are from the site not having enough payment options" - Baymard Institute. The more options you give your customers to pay, the lower your cart abandonment will be.
How to get started?
Afterpay lets consumers make a purchase and pay the full amount in four equal payments, due every two weeks. If a consumer misses a repayment, Afterpay charges them $10 plus $7 if they do not make the payment within a week.Klarna
Klarna originated in Sweden that has been introduced to Australia through CommBank. This platform offers their users a choice in how they will make their repayments: "pay later" and "slice it".
Pay later means consumers receive a bill for the full amount after 30 days, and with slice it, consumers can pay in four installments spread out over a six week period.ZipPay
ZipPay have an option for two accounts, one for payments up to $1,000 and one for payments over $1,000.
Zip charge a monthly fee of $6 which is waived if your statement balance is zero. Consumers can choose to pay weekly, fortnightly or monthly.LatitudePay
LatitudePay consumers can spend as much as $1,000 and make repayments over a 10 week period.
Consumers are charged a late fee of $10
Once you pick the provider that suits you the most, you can get in contact with them and they'll talk you through how to add their payment option to your site.
Will you be adding a buy now, pay later solution to your site?
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