More payment flexibility through Buy-Now-Pay-Later or BNPL

More payment flexibility through Buy-Now-Pay-Later or BNPL

How Buy Now, Pay Later is Transforming Online Shopping

Buy Now, Pay Later (BNPL) is a point-of-sale financing option that has gained popularity recently, especially with younger demographics. To address the problems with financing, particularly complexity and credit cards with excessive fees and APRs, BNPL solutions first appeared in the early 2010s. According to a study, these frequently excessive fees have forced customers to hunt for alternative payment options, which directly contributed to BNPL's growth.

Missed payments and declining credit limits were just two of the financial stress-related problems that the COVID-19 pandemic made worse. Due in part to this, the overall use of credit cards in the United States has decreased over the past few years, creating a space for other payment methods to appear. BNPL seized this opportunity. BNPL solutions were created to give customers the option to acquire their products and pay in a predefined number of installments over time as an alternative to credit cards and other types of financing. These options are frequently provided to clients at low or no interest rates and with no additional costs, thus there is no expense to the client.

Retailers seeking to gain a competitive edge in the market now have a real opportunity thanks to the constantly expanding use of BNPL solutions; they just need to seize it.

Who is the target customer for BNPL?

According to a survey, the rise of BNPL among Generation Z has increased by 600% since 2019, while the rate for Millenials has more than tripled. Historically, the target market for BNPL has been the younger generations, Millennials and Generation Z. Although Gen X and Baby Boomer adoption rates aren't far behind, the rise of BNPL among younger generations suggests that it may eventually replace cash as the main form of payment.

How Does BNPL Work?

Customers often have the choice at checkout to receive their product immediately but pay for it in full after 30 days or throughout several smaller installments. They commonly pay in three or four evenly spaced installments, each directly deducted from their credit or debit card. In either case, as long as they pay on time, there are no additional fees or interest to pay. Participating merchants pay the service a fixed fee per transaction in addition to a 2-6% commission.

Buy Now, Pay Later payment options

Though the exact details vary by country, most BNPL services offer customers three basic options:

  • Pay Later in full after 30 days.
  • Pay Later Installments into 3 or 4 equal, interest-free installments.
  • Finance It, splitting the cost of larger purchases into as many as 36 monthly payments. Interest charges can apply.

The Buy Now, Pay Later checkout experience

Think about the BNPL experience from the standpoint of the client. They select checkout after finding an item they want and adding it to their basket. All is well thus far. But this is when things start to get interesting.
They will have access to alternatives like Pay with Sezzle and Pay with Klarna in addition to more conventional payment methods like credit/debit cards and PayPal. Customers are allowed to buy now and pay later right next to the sections where they enter their credit card information, giving them more flexibility with their purchases thanks to a variety of flexible payment alternatives.

Pay Later at the point of sale

Customers in various nations can order a physical or digital BNPL card, enabling them to make immediate purchases from merchants who do not generally accept this payment method. Purchases are charged to their account, and they have the option of paying right away, within 30 days, or with finance. Traditional brick-and-mortar stores can also provide BNPL payment plans, even though the majority of BNPL transactions take place with internet merchants. Customers who choose this option typically create a QR code using the BNPL app, which is scanned at the time of sale. The customer can wait to pay while the retailer receives credit. Customers' spending power can improve and their ability to plan their finances can be increased when they can choose how and when to pay without incurring interest.

Why Do Consumers Like Buy Now, Pay Later?

Businesses must comprehend why customers favor BNPL and how to best position themselves to benefit from it as the payment method gains popularity.

Expect the demand for flexible payment solutions to rise as younger generations become more independent and have greater spending power, and as credit cards continue to lose favor. With Buy Now, Pay Later, consumers can extend their payment for purchases over time without having to worry about painful interest rate accumulation, upending the payments industry and luring users away from credit card firms. The number of digital funding possibilities will only increase as the globe becomes more technology. Implementing Buy Now, Pay Later into a storefront can only be beneficial for businesses looking to stay innovative and cater to a shifting customer base.