The “Buy Now, Pay Later” (BNPL) model has surged in popularity, revolutionizing the way customers approach purchasing. Offering BNPL as a payment option can be a powerful tool for increasing sales and customer satisfaction, but is it right for your business? Here’s a closer look at what BNPL entails, its benefits, and the factors to consider before adopting it.
What Is Buy Now, Pay Later (BNPL)?
BNPL allows customers to split their purchase into smaller, interest-free payments over a set period, typically weeks or months. Providers like Klarna, Afterpay, and Affirm handle the payment process, enabling businesses to get paid upfront while the provider assumes the risk of customer repayments.
Benefits of Offering BNPL
Boosted Sales
Studies show that businesses offering BNPL see an average of 20-30% increase in conversion rates. Customers are more likely to complete their purchases when they can spread payments out.
Larger Average Order Values
BNPL users often spend 30-50% more per transaction compared to traditional payment methods, leading to higher revenue for your business (Best, 2024).
Improved Customer Experience
Adding flexible payment options like BNPL gives customers more control and convenience, making the purchasing process smoother and more accommodating. This added flexibility can reduce friction at checkout, encouraging customers to complete their purchases confidently.
Upfront Payments for Businesses
BNPL providers pay businesses the full amount of the sale upfront, ensuring cash flow remains consistent.
Considerations Before Implementing BNPL
Provider Fees
BNPL services typically charge merchants a fee per transaction. Discussing with your provider can ensure these fees won’t erode your profit margins.
Target Audience Fit
BNPL options are growing in popularity across various consumer groups, driven by the desire for flexible, interest-free payment solutions. While younger generations, like Millennials and Gen Z, are often early adopters of BNPL, its appeal is expanding to include other demographics.
Integration and Setup
Confirm that your current e-commerce platform or POS system supports BNPL integration. The process should be seamless for both your business and your customers. Consult your payment partner to get set up with what’s right for your business.
Is BNPL Right for Your Business?
BNPL can benefit businesses that sell higher-ticket items where customers may hesitate to pay upfront, operate in competitive markets where flexible payment options can provide an edge, or cater to customers seeking greater control over their budgets. By allowing customers to make purchases without paying interest and breaking payments into smaller, manageable installments, BNPL offers a practical solution that can encourage purchases and enhance customer satisfaction. However, businesses with lower-cost products or unique customer preferences may benefit from consulting with their payments provider to evaluate whether BNPL aligns with their goals and customer needs, ensuring the solution adds value to their operations
Buy Now, Pay Later is more than just a payment option, it’s a strategy to enhance customer satisfaction and grow your revenue. By carefully evaluating your audience, costs, and integration needs, and consulting with a knowledgeable payments partner to craft the right suite of payment solutions, you can confidently determine if BNPL aligns with your business goals.
Sources:
Best, Raynor. “Buy Now, Pay Later Size in the U.S. 2029 | Statista.” Statista.Com, Dec. 2024, www.statista.com/statistics/1255760/bnpl-lending-market-size-usa/.
“Buy Now, Pay Later: Market Trends and Consumer Impacts.” Consumer Financial Protection Bureau, Sept. 2022, www.consumerfinance.gov/data-research/research-reports/buy-now-pay-later-market-trends-and-consumer-impacts/.
Gupta, Ruchi. “Buy Now Pay Later Statistics: Market Size, Users, Debt (2024).” FinMasters, 5 Mar. 2024, finmasters.com/buy-now-pay-later-statistics/.