Online shopping has provided opportunities for multiple small businesses and start-ups. With such popularity, the online platforms are constantly modifying to suit the needs of the customers. One such significant change with regard to the payment aspect is the Buy Now, Pay Later option. Buy Now Pay Later, shortly called BNPL, is a substantial improvement in the e-commerce game. BNPL can be very beneficial for the customers. But is it helpful for an e-commerce site owner? Let’s find out by analyzing the pros and cons of the situation. First of all, BNPL is not directly offered by e-commerce sites, except big players like Amazon, who have their own payment app called Amazon Pay Later, which is inbuilt in the Amazon app. There are a number of apps providing credits and BNPL options that can be added as a payment gateway adjacent to Credit cards, Debit cards, Digital wallets, and so on. The following are some top players in BNPL:
- Shop Pay by Shopify
- Paypal Credit
- Zip payments
- Global Payments
What could be the reason for more people using the BNPL options?
From the customer’s point of view, BNPL is providing an opportunity to buy more at a minimal cost without any liabilities. Credit cards and credit scores are definitely a headache. There is a mixed mindset in customers for using credit cards as the primary mode of payment. With too much complexity, high-interest rates, and high additional convenience charges, Credit cards are losing their value. BNPL may sound similar to Credit cards. But the critical difference is the choice of small payments without any interest.
The BNPL apps provide Interest-free payments with multiple installments. They provide flexibility and ease of purchase. Another significant difference is the reduced transaction costs of only $0.30. Also, they give a lot of offers and promotions while using BNPL gateways. Most target customers for e-commerce sites and businesses are millennials. With a convenient and transparent system, BNPL systems are getting popular among the millennial populations who are a bit skeptical about the use of Credit cards.
BNPL for e-commerce store owners:
This is definitely the right time to add BNPL payment gateways to your e-commerce store. What are the advantages for e-commerce store owners? Let’s see one by one. BNPL will directly increase the Average Order Value and will reduce the abandonment of products in your cart. Average Order Value or AOV is the total average cost of a single purchase by a customer. Cart abandonment is a type of typical consumer behavior in most online shopping stores, which involves dropping a product right before check out or payment. The primary reason for such cart abandonments is the price of the commodity. As an e-commerce site owner, it is impossible to compromise the price of a product to increase sales. Therefore, BNPL will be a benefit for both the customers and the business owners without price compromises.
When there are options for paying later, customers tend to buy more products they require instead of restricting themselves from buying them. So, BNPL will reduce the customer behaviour of dropping products from the shopping cart. This will boost the sales of your products.BNPL payment option will help to increase the loyalty of your customers. Improved customer loyalty will result in an increased Customer Lifetime Value (CLV). BNPL will be a competitive advantage for e-commerce sites. With increased competition, the customer experience can be improved by providing an option that is feasible and suitable for them.
Nowadays, BNPL is being the primary choice of customers. So why to restrict the best option for your customers? Unlike customer payment, business owners expect quick returns from the sale rather than payment in small installments over a long period of time. BNPL payment apps like Klarna, Shopify provide instant prices to e-commerce website accounts. This indicates that BNPL is a win-win situation for both the customers and the e-commerce business owners. Recent studies have revealed the increased addition of BNPL gateways in e-commerce websites, boosting and increasing the sales, buying pattern, and reducing cart abandonments. BNPL payment gateways are practically advantageous for consumers and business owners. BNPL enables consumers to buy products well ahead of their salary day. This gives a superior advantage for e-commerce site owners. Though there are options like subscriptions, saving combos, loyalty programs, etc., it is difficult to maintain the loyalty of a customer.
How to add BNPL to your website:
The first step is to register and create an account in a BNPL payment app like Klarna, Afterpay, Shop pay, etc. Buy Now Pay Later Shopify integration is very simple and easy with Shop pay. Once your payment app account is activated, you must register your e-commerce website as a seller by providing all the official details about your firm. General information required includes the size of your business, your annual sales, and your contact details. Once your account is approved from their end, you can directly add the payment gateway to your e-commerce website. Once it is added, your customers will now be able to choose and pay with these alternative payment options.
Currently, with the increased digitization and cash-free transactions, BNPL is an excellent advantage for business owners. But one major drawback is the high merchant costs to be paid by the business owner to the payment apps. The merchant cost is around 3-4% which is higher than that of Credit card or Debit card services. Also another major disadvantage is the requirement of software tools to integrate and incorporate the payment gateways in your website. Looking into the absolute net return value, these costs incurred will be comparatively low. Competition and alternative options are very high in the e-commerce community. There’s always a better product with a better price. Hence it is crucial to capture the audience. As a famous quote says, “When in Rome, be a Roman,” it is advised to alter your e-commerce payment options according to the current market position. BNPL will be an added advantage for your growing e-commerce website.
Aline Huseby is a Sales & Marketing Manager at ChargeAfter. She would like to share content on Finance Industry like Point of Sales financing, Buy now Pay later, consumer financing & Ecommerce financing for valuable reader.