What are the Benefits of BNPL for online businesses?
Buy Now, Pay Later (or BNPL) is one of the newer forms of payment for goods online. It provides consumers with greater flexibility when paying at an online checkout by allowing them to pay for items in instalments over a period of weeks or months and most providers don’t charge interest unless payments are missed or overdue. For e-commerce customers, it’s another way of spreading the cost. While BNPL can lead to debt for some, many consumers view it as a short-term loan solution and appreciate the ability to receive their goods before paying in full. But what are the benefits of BNPL for e-commerce businesses?
How BNPL Works
Before we delve into the advantages of BNPL for merchants, let's briefly review how this payment method works.
Many e-commerce businesses offer Buy Now, Pay Later through providers like Klarna, Splitit, ClearPay. When customers reach the checkout, they can choose BNPL as a payment option, enabling them to pay for their goods in instalments, often without any interest at all.
Upon selection, the buyer fills out a brief application form, which is digitally submitted and approved or rejected within seconds. This process involves a soft credit check that does not impact the customer's credit score. Upon approval, the buyer enters their credit or debit card details, and the first payment is processed immediately, with subsequent instalments charged at weekly or monthly intervals until the loan is repaid in full. This flexibility and convenience make BNPL attractive to consumers.
The Advantages of BNPL for E-commerce Businesses
More and more online retail businesses are offering BNPL as a payment option on their checkout page. To offer it, they sign-up to a provider and integrate BNPL onto their website. The transaction fees are generally low, and with a growing number of providers, merchants can compare options to find the best fit. Here are some key benefits for merchants offering BNPL:
- BNPL offers higher conversion rates, on average around 2.1% higher when BNPL is available at checkout.
- Online retailers offering BNPL see 85% higher average order values over other payment options.
- BNPL gives consumers a better shopping experience because they have more choice over how to pay for goods.
- More and more millennials and GenZ use BNPL and prefer to have it as an option (up to 75% of users are from these generations).
- This payment option encourages larger value purchases because consumers can spread the cost - 45% of BNPL customers use it to buy more expensive goods.
Buy Now, Pay Later payment will continue to drive sales for online merchants and will play a pivotal role for online payments, and even offline payments in the future. Doubtless, merchants will need to include it as a method of payment especially as it expands and offers other financial benefits to consumers over time. Without it, merchants face losing business to competitors who embrace this innovative payments solution.