In the business-to-business (B2B) environment, it might appear that giant firms have all the perks. They have significantly more resources, clients, and experience. However, in recent years, a new trend has evolved that allows smaller enterprises to compete with Buy Now, Pay Later (BNPL) in B2B. Buy Now, Pay Later (BNPL) FinTech businesses are on their way to changing the way customers purchase things. While BNPL is not a completely new concept, it is the most recent and sophisticated form. Traditionally, shoppers could utilize EMIs and other types of credit, such as credit cards. However, BNPL has simplified the entire procedure for customers. Furthermore, BNPL enterprises do not charge the end user any interest in using their services.
Let’s Understand what BNPL is – Buy Now, Pay Later
Buy Now, Pay Later (BNPL) is a kind of quick-term finance in which consumers can make purchases and pay for them later, usually with no interest. BNPL agreements, often known as "point of sale installment loans," are becoming an increasingly popular payment option, especially when shopping online. This is also known as store finance, retail finance, or point-of-sale credit, and it differs from short-term financing in that the agreement is made between the consumer and the merchant, rather than a third party handling the loan. BNPL is available in both physical and online retailers. New technology allows for a quick and straightforward credit application procedure online, but it may also be utilized in physical stores via a Mobile App.
How does BNPL Work
Buy Now, Pay Later Programs are not all the same. Each firm has its own terms and regulations, but in general, point-of-sale installment loans work as follows –
- You buy at a partner store and select Buy Now, Pay Later at the checkout.
- If you are authorized (which happens in seconds), you make a small down payment, like 25% of the total purchase price.
- The remaining balance is then paid in interest-free installments.
- You can pay by cheque or bank transfer; payments can also be automatically transferred from your debit card, bank account, or credit card.
Since they both imply delayed payments, BNPL is not the same as making a credit card transaction. When you pay using a credit card, you are simply obligated to make the minimum payment due on the card every month. Except if you make use of a card with a 0% introductory APR, interest will accumulate on the remaining stability up to you pay it off in full. A balance may be maintained permanently.
Some purchases may not match Buy Now, Pay Later financing. As well as the amount you may finance in this manner may be limited. However, Buy Now, Pay Later may be a compelling option to pay for smaller goods when shopping online, and its popularity expanded in 2020 as e-commerce in general grew.
How BNPL can Leverage Retailers
Even if their consumers wish to stretch the expense, retailers prefer to be paid straight immediately. On a customer's purchase, a BNPL provider such as Klarna, Affirm, or Sezzle will quickly transfer funds to the store. The use of clever algorithms enables these organizations to take credit risk for both the store (paying them even if the customer fails) and the consumer.
Here are some of the key advantages that merchants will get by implementing a BNPL option
Improved Client Experience
While it is true that Millennials and Gen Z enjoy shopping, browsing, and simple delivery, they, like everyone else, demand and expect a superior shopping experience. If you want to attract and maintain younger generations as clients, you must build a platform that is up to the task. That must happen before you ever consider incentive programs, loyalty schemes, or any other nice-to-haves.
Enhanced Client Lifetime Value (LTV)
BNPL is eventually beneficial to consumers since it provides them with greater freedom and control over what and how they buy. Merchants gain new Millennial and Generation Z clients, increase recurring visits, and convert larger average basket sizes. Since a great purchasing experience is critical to client retention, positive experiences imply they'll return again and again. Furthermore, once customers realize you have a BNPL option, they will return to you for their next big-ticket item.
Boosted Sales
Merchants who accept different payment methods, such as BNPL, encourage customers to buy more things. Customers are more likely to buy things when they are confident in the payment procedure. Customers pick and browse for more than one thing when they have the option of dividing payment according to their convenience.
Brings in New Consumers
People want to feel the cloth between their fingers and see if the shoes fit before committing to a purchase, which has long been an issue for internet shops. Buy Now, Pay Later specialists to provide an excellent opportunity to make this work in the internet environment. Organizations that use BNPL can decrease entry barriers for customers and provide them more flexibility when making purchases by offering features such as free returns and specialized support employees. It's enticing to dismiss free returns as a waste of money, yet they're quickly becoming a necessary business tool.
The Final Word
Expect the need for flexible payment methods to grow as younger generations mature and obtain more purchasing power, and as credit cards continue to wane in use. Buy Now, Pay Later offers a flexible alternative to disrupting the payments industry, stealing clients away from credit card firms, and allowing them to spread their payments over time – without the unpleasant interest fee accumulation.
Digital financing solutions will only expand as the globe becomes more technologically advanced. Implementing Buy Now, Pay Later into a storefront can only help firms that wish to stay on the cutting edge and accommodate a shifting client base.
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