BNPL is a better option for retailers and customers because it allows you to buy products without having to pay for them immediately. The system is also more secure than traditional credit options like credit cards or small personal loans, which can be difficult for customers with no credit history.
The buy now pay later payment system is most popular among millennials. But, when it comes to benefits, it’s not the millennials who get the most out of it. Even retailers get a plethora of benefits – none of which comes with any catch.
BNPL – A Brief Overview
BNPL is a payment option that allows customers to pay for their purchases over time. The idea behind it is simple: buy something now, and pay off the balance in installments with interest. This can save consumers money and give them more freedom when it comes to paying their bills—and it also helps retailers stay competitive with other stores that offer similar deals.
This short-term financing payment method originated in Germany in the early 2000s, with a growing concern about consumer debt levels and how they affected society.
How does BNPL work?
Buy Now Pay Later is an installment plan that allows customers to pay for their items in full and then spread the payment over time. Buyers can choose how much they want to pay per month, but there’s usually no interest charged on the initial payment.
The customer signs up for BNPL via an eligibility form, which usually takes less than 24 hours to process and results in immediate approval of their application. This process is swift because there are no reviews or credit checks involved.
Once approved, the retailer will begin accepting payments from customers who want this option on purchases ranging from electronic devices to t-shirts and hoodies.
No Credit Risks for Retailers using BNPL
There are no credit risks for retailers when they use BNPL. The transaction is completed at the point of purchase, and you get paid in full. So, you don’t have to worry about chasing customers for payment like you would with a traditional payment plan because your customers will be happy that they can shop without worrying about paying for it later on.
In fact, using this method allows retailers to get more sales because there aren’t any delays between when an order is placed and processed.
BNPL Encourages Customers to Spend More
The BNPL model is a great way to encourage customers to spend more. Customers frequently come back to shop again, and this is because they feel like their next purchase is more affordable, even if it’s just slightly less expensive.
The average customer who buys now and pays later spends an additional $50 on every visit, which means that retailers see a 22% increase in conversions and a 20-30% increase in average order value (AOV).
The buy now pay later option is better for retailers to attract more buyers to their online stores. That’s because it is more secure than traditional credit options.
Credit card companies and small personal loans have high-interest rates, which can lead to debt problems down the road. This is why many buyers prefer BNPL as an alternative to payment systems.