Buy now, pay later (BNPL) is taking over the e-commerce industry. According to a study conducted by The Motley Fool, over 55 percent of customers have used it when shopping online.
BNPL is an alternative payment option that allows customers to purchase products immediately while committing to pay for them in the future. It’s facilitated through a third-party provider. There are third-party providers, such as Affirm and Klarna, that extend their BNPL services to e-commerce stores and their customers. Using their services, you can add BNPL as a payment option to your e-commerce store. Offering BNPL can benefit your e-commerce store in many ways.
Increased Customer Satisfaction
Offering BNPL will likely result in increased customer satisfaction. Many customers prefer the convenience of BNPL over traditional payment methods. When using a debit card, customers may incur overdraft fees. When using a credit card, they may incur over-the-limit fees. Overdraft and over-the-limit fees aren’t a concern with BNPL.
BNPL is simply a form of credit that’s extended to customers from a third-party provider. Unlike most forms of credit, though, BNPL doesn’t always charge customers interest. There are over a half-dozen BNPL providers, many of which offer interest-free plans. Customers can choose one of these plans, and as long as they make timely payments, they won’t be charged interest.
Another reason to offer BNPL is a higher average order value (AOV). It encourages customers to spend more money. With BNPL as a payment option, customers may purchase a higher quantity of products, or they may purchase more expensive products. The end result is a higher AOV.
A study conducted by Klarna found that e-commerce stores experienced a 15 percent increase in their AOV after implementing BNPL. BNPL gives customers the freedom and flexibility of paying for their orders in the future. Instead of paying for the full cost immediately, they make multiple partial payments of equal amounts over time. As a result, customers may spend more money when using BNPL.
Outdo Your Competitors
With BNPL, you can outdo your e-commerce store’s competitors. Payment options can sway customers’ decisions when choosing a store at which to shop. Customers who prefer a specific payment method may only shop at your e-commerce store if it offers that method.
While BNPL has become popular among customers, it’s not offered by all e-commerce stores. Most e-commerce stores, in fact, only offer traditional payment methods like credit card, debit card and PayPal. Your e-commerce stores competitors may offer these payment methods, but they might not offer BNPL. Therefore, you can outdo them by offering BNPL.
You don’t have to worry about chargebacks when offering BNPL. A chargeback is a dispute between a customer and a business that’s mediated by the former party’s bank. If a customer believes he or she was wrongfully charged for a product, the customer may initiate a chargeback.
Chargebacks are a serious headache. You’ll have to spend time investigating and responding to them. Even then, the customer’s bank may reverse the charge, resulting in a loss of revenue. Fortunately, there’s no way for customers to initiate a chargeback against your e-commerce store if they use BNPL.
Customers who use BNPL will make payments to the third-party provider and not your e-commerce store. They can initiate a chargeback against the provider, but they can’t initiate a chargeback against your e-commerce store.
You won’t take on any additional risks by offering BNPL. Even though it’s a form of credit, the risk of nonpayment falls on the shoulders of the third-party provider. If a customer uses BNPL but fails to make the necessary payments, the provider will have to try and collect the outstanding amount. Nonpayments or delinquent payments stemming from BNPL won’t affect your e-commerce store.
When a customer uses BNPL, the third-party provider will pay you the full amount of his or her order. The customer will then, hopefully, make installment payments to the provider. Regardless, there are no risks to offering BNPL. The provider will pay you immediately, and the provider will be responsible for collecting payments from customers.
Easy to Implement
BNPL is easy to implement. With so many customers preferring BNPL, most e-commerce building platforms now support it. Shopify has its own BNPL service through a partnership with Affirm. Known as Shop Pay Installments, it allows customers to make four equal payments over a two-week period without being charged interest.
If you use the Shopify platform, you can easily implement BNPL by activating Shop Pay Installments. There are a few basic eligibility requirements for Shop Pay Installments. Your e-commerce store must be based in the United States, for example, and it must already have Shopify Payments and Shop Pay activated. Assuming it meets these eligibility requirements, you can activate Shop Pay Installments on your e-commerce store.
Of course, you aren’t restricted to using Shop Pay Installments as your e-commerce store’s primary BNPL. Shopify supports other BNPL services, including Klarna and Afterpay. You can easily implement many of these same BNPL services on other e-commerce building platforms as well. If you use the BigCommerce platform, you can download an app to implement BNPL.
Higher Conversion Rate
Your e-commerce store may benefit from a higher conversion rate if it offers BNPL. Getting prospective customers to visit your e-commerce store doesn’t mean you’re guaranteed to generate revenue from them. Revenue is the result of conversions. Only prospective customers whom you convert will increase your e-commerce store’s revenue.
According to internal research cited by Nick Molnar, Afterpay CEO, BNPL can increase the conversion rate of a typical e-commerce store by 20 percent or even 30 percent. More prospective customers will complete the checkout process if your e-commerce store offers BNPL.
BNPL isn’t a substitution for traditional payment methods. Rather, you should offer it as an alternative to credit and debit card payments. Some of the benefits of offering BNPL include increased customer satisfaction, a higher AOV, outdo your competitors, no chargebacks, no risks, easy to implement and a higher conversion rate.