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Buy Now, Pay Later: Questions to Consider Before Adopting BNPL as a Payment Gateway

Every business wants to cater to the needs of its customers, but it is always crucial to explore a simple question - at what cost? BNPL has made a grand entry into the fintech scene, and its persona has fairly swayed customers. 

These are times of instant gratification; hence, it makes all the more sense for customers to thoroughly enjoy the flexibility BNPL provides and use it as a regular payment method. 

Quite the same goes for businesses, as BNPL allows them to explore a new dynamic of customers and enhance their conversion rates and average order value. As per Coherent Market Insights, the global market for "buy now, pay later" platforms will grow at a CAGR of 21.2% to $12,969.0 million by 2022.

If we speak particularly about India, Microlending, a component of digital lending, has been the most effective in reaching an untapped client base of approximately 300 million Indians who have avoided the official credit market. 

BNPL presents itself as an appealing service to retailers. However, before implementing BNPL, merchants must weigh both the benefits and the expenses.

Consider these questions before you lay a bet on BNPL: 

What are the costs, and when will they be recovered?

It's critical to comprehend how BNPL affects sales so you can estimate how much any following transaction fees will cost your company. A timeline should be set for yourself to achieve the level at which BNPL begins to pay for itself. If you're unsure if sales will cover the expense, your company might not yet be at a size that justifies it.

What BNPL plan will accommodate the pricing points of your products the best, and will you require any further accreditation?

BNPL can have many diverse features. Generally speaking, if a loan is interest-free and spread out over three or four installments, such with Tamara or Klarna, it is highly improbable to be subject to credit regulation.

If you sell pricey items and need to provide extended financing, you might require a pay-by-finance BNPL, which entails applying for a credit permit. Try and ensure your planning takes this into account.

What are the chances that providing BNPL will improve customer returns? Are you equipped to deal with this operationally?

Customers who opt to test products at home before purchasing may increase sales in several industries, such as fashion. They may easily buy products in various styles or colors thanks to BNPL. They don't have to pay anything or wait for a refund to return unwanted effects. A free return facility increases the likelihood of this.

Does BNPL appeal to the demography of your ideal customers?

The BNPL provider Klarna claims that millennials and Gen Z make up 70% of its client base, and Afterpay estimates that its average customer is 33 years old. Make sure your firm would profit from providing BNPL at the point of purchase by analyzing your core demographic.

A quick summary of benefits for BNPL merchants

  • The primary advantage of BNPL for online retailers is a boost in conversion or a decrease in the number of abandoned carts.
  • The ability to make large purchases using interest-free EMI alternatives has led to higher transaction value.
  • Technology can be easily implemented because solid BNPL products (mainly offered by FinTechs) are already incorporated with merchant networks and accessible plug-ins.
  • The possibility of new or recurring purchases and client retention is better over the repayment period.
  • Despite their size, medium-sized retailers can still benefit from analytics with minimal effort.

It’s a Wrap! 

Search for a provider with a buy now, pay later system that can be integrated with your POS (point of sale). What's also necessary is to select a partner you can trust to showcase your company since customers do not often differentiate between a merchant and the third-party payment provider they're utilizing.

To get the best out of Buy now, Pay later for your business, you must carefully choose the most suitable for your company.

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