Since the COVID-19 pandemic, various things have changed. There is a massive difference in how the world does its daily transaction. More people have started using e-commerce sites to buy everything from clothes to groceries, medicines, and whatnot. Now more than ever, businesses, regardless of their specialization, are favouring remote working.
Amongst various trends in the buy now pay later or BPNL solution. As per this, the customers are allowed to pay in interest-free instalments. The popularity of this trend is immensely growing because people keep seeking alternative financing methods; BPNL has proven a boon, especially during dire situations of the pandemic.
In this blog, we will give you an in-depth idea of how BPNL works and where it is heading in the future.
What is BPNL, and how does it work?
BPNL or buy now pay later is a payment method that shoppers can use as an alternative to using credit cards. With BPNL, buyers gain the flexibility of purchasing an item immediately without needing to pay for the same straightaway. Instead, the buyer can commit to paying the amount later in monthly or biweekly payments.
BPNL resembles a lot to the “layaway” concept that was introduced years ago by various department stores. As per the layaway concept, the buyers would make payments for the required item in instalments and then take ownership of the item once the payment was made in full.
Let’s consider an example to understand BPNL in-depth:
Customer A wishes to buy an air purifier with a budget of Rs.10,000. While shopping online, he comes across a handful of models, but not all of them are within his budget. The one he prefers the most costs Rs.15,000 and even has all the features he is looking for.
Here is how his journey with the BPNL solution will be:
Since paying Rs.15,000 in a go can prove challenging, customer A can opt for the BPNL solution and obtain a 4-way split. This way, instead of paying the total amount, customer A is only required to pay Rs.3750 every month.
Customer A can sign in with the BPNL lender (link is typically provided with the eligible product) by providing personal details like name, email address, phone number etc. Once the application is approved, the seller of the air purifier is paid the full purchase price by the lender.
Now, customer A can bring the air purifier home and make payments as per the schedule he agreed to.
Why do shoppers like Buy Now Pay Later ?
There are various reasons why shoppers like the buy now pay later solution – convenience, flexibility and transparency of the solution remains the first three.
A survey conducted in 2020 shed light on compelling reasons why consumers chose BPNL.
Here are some top reasons:
- 45% believed that BPNL helped them make purchases that otherwise wouldn’t have fit into their budget.
- 37% said that BPNL prevented them from paying credit card interest.
- 25% said that BPNL helped them borrow money without a credit check.
- 19% use BPNL because they don’t like using credit cards.
How is BPNL gaining momentum in the market?
Buy now pay later is one of the fastest-growing e-commerce payment methods because the lenders make it relatively easy to integrate the payment processing technology with the e-commerce website. In fact, the integration can be done in just a few simple clicks.
Due to the low barrier for e-commerce integration and huge benefits for potential sales volume, avoiding BPNL solutions will only put a business at a competitive disadvantage.
Merchant benefits from Buy Now Pay Later
Not just the customers but even merchants benefit by offering pay-over-time options. 60% of shoppers favour brands that offer pay-over-time options. Merchants have witnessed:
- Higher average order values and conversion rates using Merchant BPNL solutions.
- Increased likelihood of repeat purchase and customer satisfaction adds more loyalty to the brand.
As mentioned before, now more than ever, people have started using e-commerce sites to purchase anything and everything. This rapid acceleration in e-commerce’s growth is fuelled immensely by the BPNL’s popularity, convenience and flexibility.
So, it isn’t wrong to say that BPNL is here to stay. In fact, it is here for the long haul.