Today, everything from carrots to cars is bought online. High penetration of the internet, easy availability of smartphones, and improved ‘tech awareness’ among people are the main factors contributing to the stellar growth of eCommerce.
Now, when you dissect eCommerce, you’ll find several intuitive modules and interesting concepts at its core. Personalization, cash on delivery, augmented reality, and chatbots are some of the revolutionary technologies or ideas that have changed the way the world shops. Another name on this list is ‘Buy Now Pay Later (BNPL)’. The sudden surge in the number of BNPL gateways and ‘pay later apps’ is a testament to the raging popularity of this payment option.
If you are a regular online shopper, then there are high chances that you might have come across this term before. But what exactly is it, and why is it a real game-changer in the world of eCommerce? Let’s find out.
What is Buy Now Pay Later?
It’s exactly what it says - You buy something now and pay for it later. No prizes for guessing that :)
On a serious note, BNPL is a smart financing option that enables you to buy a product without the need to pay for it immediately. It’s a short-term loan offered by the merchant or a lender (who has partnered with the merchant) with zero or minimum interest charges.
With that basic introduction, let’s now understand how BNPL is helping businesses and customers today.
How BNPL is helping businesses today
#1 Reduced Cart Abandonments
Cart abandonment is a plaguing issue for most eCommerce business owners. A complex checkout and a lack of suitable payment options are usually the main reasons for visitors to abruptly end their shopping journey.
BNPL can easily overcome this as it empowers customers to pay at their own convenience. They can even split the price of expensive orders into smaller installments. According to a recent Mastercard study, businesses were able to reduce the cart abandonment rate by 35% after integrating BNPL.
#2 Higher Average Order Value
People like to shop and buy things for themselves and their loved ones. If given a chance, we’ll all shop frequently and purchase new products available in the market. Probably the only thing stopping us from doing this is the unavailability of immediate funds.
This is easily solved by BNPL as visitors no longer have to worry about immediately paying for an order. The very thought of ‘shop now pay later’ convinces them to add as many products to their cart without feeling any guilt. This gives a great opportunity for businesses to do more upsells, resulting in higher AOV.
It has been found that the AOV can increase by as much as 45%, depending on the BNPL option chosen.
#3 Improves trust
Imagine yourself to be a customer looking to purchase a new piece of furniture. Now, you visit a website that seems to have a great deal, but you’ve never heard about it. What would you do? In all probability, you will be hesitant to try out that brand. You may even switch to another brand that’s popular (despite them not offering any good deals). That’s the power of trust (or the lack of it).
When you incorporate BNPL, customers will automatically lower their guards as they get to try your products without instant payment. They’ll feel more comfortable with your brand, giving you a chance to serve them. If you do your job well, their trust levels will improve, and they will come back for repeat purchases.
How BNPL is helping consumers
Most online stores have integrated BNPL as part of their checkout process. This makes it extremely easy for consumers to adopt BNPL, as all you have to do is choose a BNPL provider at checkout and create an account with them. Once that’s done, things will start moving on autopilot. Next time you make a purchase, you just have to select BNPL as your payment option.
The best part is most providers don’t charge any interest for the amount borrowed. Only a late fee is levied in case you fail to make payment on time.
2. Better alternative to credit card
BNPL is getting more popular than credit cards due to numerous reasons. For starters, there are no strict credit checks in BNPL. Only a soft check is performed, and if all’s well, your account will be instantly activated. Secondly, unlike credit cards, there are no high interest rates. In fact, most BNPL payments are interest-free. Thirdly, there is no major impact on your credit score if you fail to make timely BNPL payments. This is not the case with credit cards. Lastly, the terms of BNPL are much simpler than those of credit cards.
3. Ability to spread costs
Ever since the pandemic struck, there has been a huge strain on most people’s finances. The cost of living has shot up, and people are unable to spend on anything besides essential commodities. This is where BNPL becomes a savior. It enables people to spread their costs, giving them the flexibility to ‘order now pay later’ for all kinds of products. This also gives them time to save the required money that they can conveniently pay later.
Consumers and merchants across the globe are embracing BNPL due to the myriad of benefits it offers. Businesses can enjoy reduced cart abandonment, higher AOVs, and improved sales due to better trust. Consumers, on the other hand, enjoy the limitless flexibility it offers. Long story short - It enables both the main stakeholders in the eCommerce ecosystem to fulfill their needs without any strain.
When you use Vajro for building your eCommerce mobile app, you get instant access to BNPL thanks to our plug-n-play integrations with some of the best buy now pay later apps like Sezzle Pay Later solution, Klarna, Clearpay, Quadpay, and Afterpay. To know more about Vajro and these integrations, book a demo now.