In recent years, it has been noticed that Buy Now Pay Later services have witnessed tremendous growth in the e-commerce market and how it has helped financially for both the merchants and the consumers. Buy Now Pay Later (also known as BNPL) is a popular consumer financing model allowing shoppers to purchase goods and services upfront but defer the actual payment later, typically in instalments. BNPL has become a convenient payment model and has gained significant traction recently for merchants and consumers.
The following article will take you through on how BNPL works and helps in increasing payment conversion rates.
How does Buy Now Pay Later Process Work?
The process is straightforward, enabling customers to select the BNPL option at the checkout, bypassing the need for immediate payment. Instead, the total cost is split into equal instalments over a predetermined period, often interest-free, although some providers may charge fees or interest depending on the plan. This approach appeals to consumers seeking greater flexibility and affordability, as it permits them to enjoy their desired products without facing the financial burden of an upfront payment.
Let’s look deeper into how Buy Now Pay Later has become a win-win for merchants and consumers.
How does BNPL Drive Higher Conversion Rates for Merchants and Consumers?
Buy Now Pay Later offers simple instalment plans with flexible terms, ranging from weeks, months and maybe even years (depending on the service or provider). Now, let’s understand through a simple example of how BNPL works.
Suppose Abhay wants to buy a product which is around Rs. 1000. At checkout, Abhay can choose the option to Buy Now Pay Later. Once he opts for this option, the BNPL provider processes the request, checks the credit score, and approves the required consumer amount. Payment will be deducted for the first payment, and a certain amount, in this case, Rs. 250, will automatically debit as remaining instalments, i.e., three.
Now let’s understand how it works from the merchant and consumer perspective and how they increase payment conversion rates.
Merchants
When merchants offer BNPL service on their websites, it not only makes it easier for consumers but it enhances the whole business in the following ways:
- Increases Sales
Having the BNPL option encourages impulse buying and reduces purchase friction for customers as they can immediately acquire desired product without the need for sudden full payment. This, in turn, leads to higher transaction volumes and boosts overall sales for merchants.
- Expands Customer Base
Offering BNPL increases the potential customer base and introduces new clients to the business. Here, merchants can attract customers who high upfront costs have deterred.
- Reduced Abandoned Carts
Cart abandonment rates are one of the common issues faced in e-commerce. Having the BNPL option reduces the chance of this issue, as shoppers can complete their purchase without hesitation, even if their current budget is limited.
Consumers
Having a Buy Now Pay Later option for consumers makes it flexible and affordable to manage their budget when making immediate purchases. The following points would help us to understand how it allows consumers to increase their payment conversion rate:
- Quick and Seamless Process
BNPL services offer minimal requirements with streamlined approval processes, giving consumers a hassle-free checkout experience and making it easier and faster to complete purchases.
- Interest-Free Periods
Most BNPL services offer interest-free periods without incurring additional costs, allowing consumers to make purchases if they can repay within the specified timeframe.
- Transparency and Predictability
BNPL plans provides a clear structure on the instalment amounts and repayment schedules to the customers, which offers clear transparency and helps in better financial planning and predictability.
Also Read: Pros and Cons of Buy-Now-Pay-Later for Businesses
Conclusion
Thus, choosing Buy Now Pay Later plan, helps merchants to enhances and increases their businesses, gaining higher conversion rates. Whereas for consumers, having such flexible options for both customers increases the chance for more sales and purchases. Having BNPL services in e-commerce, fosters tremendous growth in the e-commerce sector and shape the future of retail transactions.
Salman is a prolific environmental writer, and has authored more than 500 articles in reputed journals, magazines and websites. He is proactively engaged in creating mass awareness on renewable energy, waste management, sustainability and conservation all over the world.
Salman can be reached on salman@cleantechloops.com
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