Unlike traditional times, the modern customers are looking for seamless payment options to improve their checkout experiences. These days, several digital payment options like e-wallets, debit card and credit card payments, EMI payments, cash on delivery using digital payment apps, and more; allow customers to indulge in their preferred payment mode. And one such option is buy now, pay later (BNPL).
Amongst the top eCommerce trends, BNPL or Buy Now Pay Later is emerging as one of the popular financing services for the ease it offers to customers while shopping online. As customers don’t have to pay for products/services straight away, it ensures a hassle-free checkout experience for a customer and guaranteed revenue generation for a retailer.
What is BNPL?
BNPL or Buy Now Pay Later is a modern payment method where customers can purchase a product and pay for it in installments, often interest-free, over a set period of time, which is generally a few weeks or months. Also known as Point Of Sale (POS) installment loans, BNPL lets customers borrow money for a short term to order online and pay later in future installments.
The buy now pay later services are usually facilitated by third parties. Customers fill out a basic form with their details and register themselves with digital lenders like Hoolah (using Salesforce Commerce Cloud), Seedly, Rely, EarlySalary, ZestMoney, Atome, and more. These payment providers have a tie-up with the retailers and can make the payment to the merchant on customers’ behalf.
Subsequently, stores that offer buy now pay later options enable their customers to shop for products in advance and pay for them later via third party apps.
How is buy now pay later different from credit cards?
Quite honestly, the buy now pay later eCommerce solution does resemble credit card payments, but only in the type of service being offered. They are, however, quite different, as explained below:
| Attribute | BNPL Service | Credit Card Payment |
|---|---|---|
| Bill Payment | Customers pay the billing amount in a fixed number of installments | The credit card bill needs to be settled monthly in one go |
| Interest Charged | Usually, no interest is charged if the customer avails the BNPL financing and pays the balance within the stipulated time | Credit card companies levy heavy interest to the customers |
| Rewards | Does not support offering reward points | Credit card companies offer purchase points, cash backs and other lucrative rewards |
| Credit agreement | No set credit limit | Credit limit is set |
| Approval | Completely digital and instant approval | Hard credit check is must to qualify for using a credit card |
How does buy now pay later work?
Small-scale businesses and even large retail chains worldwide are tying up with digital payment providers to render a seamless customer shopping experience. All customers have to do is select the BNPL service at the time of checkout and benefit from the ‘order online pay later’ financing scheme.
Our payment partner, Atome simplifies the buy now pay later process by dividing it in three easy steps.
- Select Atome on the checkout page of the retailer.
- Make payment by splitting the bill.
- Keep a track of the installments on the Atome app.
Let’s understand the BNPL service in detail with a simple example.
Suppose a customer purchases a product worth $200 and chooses to pay for it using a BNPL payment option provided by the retailer in four installments. Then, the customer can buy the product readily and pay $50 monthly or weekly as maintained by the payment provider. This approach benefits customers as it decreases the financial burden on them and allows them to experience frictionless customer service.
5 ways how BNPL fuels customer’s payment and checkout journeys
Brands offering BNPL have high regard for enhancing their customers’ buying journey. While attaining the goal of providing a seamless shopping experience to their customers, businesses also gain something valuable in return. Many of the best buy now pay later stores have recorded a surge in their sales after successfully implementing this strategy for their business. Furthermore, a survey by Finder suggests that online purchases using buy now pay later services are growing at a rate of 39% per year. Here’s how BNPL fuels customer’s payment and checkout journeys.
#1: Faster and secure payment gateways
Buy now pay later options empower customers to use one-tap payment and make their purchases convenient and fast. Also, the customer’s details are encrypted and safe with the BNPL payment provider. Thus the online payments done using the BNPL services are secure and trustworthy. According to Finder, 44% of buyers use BNPL for its ease and convenience.
#2: Increases buying power
When merchants provide the BNPL service, more and more customers make online purchases more frequently because they get an option to pay for a product in future while embracing it in their hands today. BNPL significantly reduces the financial burden on customers, which in turn increases their buying power. BNPL service has resulted in a tremendous increase in the number of active users worldwide. As of June 2021, BNPL service provider Klarna reported approximately 90 million active users.
#3: Simple approval process
BNPL has emerged as one of the best and most convenient methods to make payments in the digital commerce ecosystem. One of the factors contributing to this rise is the simple approval process facilitated by minimal documentation, digital KYC, no hard credit history check, and instant approval. Klarna, Affirm and PayPal are some emerging payment providers that offer fast sanctioning for availing BNPL service.
#4: Offers no-cost EMI payment
Buy now pay later options give customers the freedom to spread out their payments while shopping online with short-term small loans. Additionally, customers can take advantage of the no-cost EMI payment and pay the billing amount in interest-free installments. However, there might be a penalty that customers have to pay if they do not repay the loan in the fixed number of installments and the agreed time period.
#5: Transparent pricing model
BNPL provides a transparent pricing model with no hidden costs from the customers. Customers can use the buy now pay later sites to check the status of their payment and their outstanding balance. There are no additional fees that BNPL imposes on customers, which adds to the trustworthiness and more involvement with the eCommerce business. The transparency offered by the BNPL service allows retailers to boost customer engagement and loyalty. For example, Atome allows its customers to check the status of their payments on the app and also receive notifications about their payment cycles.
Improving customer experience with BNPL
Buy now pay later is one of the fastest-growing eCommerce trends as it empowers customers to enjoy a seamless experience while shopping online and benefits merchants by boosting customer engagement and sales numbers. As an eCommerce business model is all about offering the customers a frictionless and smooth buying experience, buy now pay later options not only allows retailers achieve this goal efficiently and effectively but helps them reduce cart abandonment rates and boost customer retention figures.
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