Buy Now, Pay Later: Breaking Down This Popular Payment System
Layaway, allowing customers to put down a deposit to hold an item until they can pay in full, is becoming a thing of the past. In today’s world, retail customers like instant gratification. If money is a concern, they are turning to new ways to satisfy that need through alternative payments.
In fact, according to Statista Consumer Insights, “roughly half of U.S. adults have used Buy Now, Pay Later services.”
Buy Now, Pay Later (BNPL) programs are becoming increasingly popular to meet this consumer demand. Kyle Wittet, Vice President of the Oracle Retail Practice at BTM Global, discusses the benefits of BNPL programs and the basics of setting up streamlined integrations.
What is a Buy Now, Pay Later Program?
A BNPL program, or a “point-of-sale loan,” is a financing option that allows consumers to make purchases upfront and then pay for them in installments over time.
With these programs, customers can defer payment for their purchases, typically without interest or with interest-free promotional periods, depending on the specific program’s terms.
This option provides flexibility and convenience for consumers by spreading the cost of purchases over several payments, often without the need for a traditional credit card or loan. BNPL services are usually offered by third-party providers partnering with online and in-store retailers. We’ll discuss this more later in the article.
Retailers who offer this additional tender are seeing improved sales because they’re accommodating customers who can get the product they want immediately. This not only improves sales but also leads to improved customer satisfaction.
“At BTM Global, we’re big proponents of BNPL programs,” said Wittet. “We want our clients to be successful, hit sales targets, and satisfy their customers. These programs are helping do just that.”
Setting Up a BNPL Program
If you are thinking about setting up a Buy Now, Pay Later program for your store, here are a few things to consider.
- Research BNPL Providers: Research different providers to find the one that best suits your business model and customer base. Consider fees, interest rates, approval rates, customer service, and integration options with existing payment systems.
- Understand Costs and Fees: Understand the costs and fees associated with offering a BNPL program, including any merchant fees, transaction fees, and other charges imposed. This will help you determine the financial impact of providing BNPL to their customers.
- Decide What’s Eligible: Depending on your offerings, you may not want everything in your stock eligible for this payment method. Consider which category of products are allowed. At BTM Global, we can work on integrating these distinctions into your POS so everything is organized and easy to manage.
- Integrate with E-commerce Platforms: Make sure your chosen BNPL provider integrates seamlessly with your e-commerce platform or POS system. This will allow your customers to easily select BNPL as a payment option during checkout. BTM Global can help merchants with integration.
- Educate Staff and Customers: Educate staff about the program so they can effectively communicate it to customers. Additionally, give customers clear information about how the program works, including eligibility criteria, payment terms, and potential fees.
- Promote BNPL Option: Actively promote the option to customers to increase awareness and encourage adoption. Showcase it on your website, in-store signage, email marketing campaigns, and across social media channels.
- Comply with Regulations: Comply with all relevant regulations and consumer protection laws, including disclosing terms and conditions, providing clear information about fees, and protecting customer data and privacy.
By carefully considering these factors and implementing best practices, retailers can establish a BNPL program that meets their customers’ needs while driving growth and increasing sales.
“Retailers have a choice of what payment vendors they wish to partner with and most these days offer a BNPL solution,” Wittet noted. “We can connect with your payment vendor and coordinate discussions about bringing this type of payment program to your store.”
Common BNPL Vendors
With so many vendors, it can be hard to know where to start. Here are a few third-party vendors that offer BNPL programs for retailers.
- PayPal: PayPal offers two BNPL services. “Pay in 4” allows customers to split their purchases into four interest-free payments over six weeks. “Pay Monthly” is intended for bigger-ticket items ($199 and $10,000) with six-, 12-, and 24-month payment plans. Both are available to PayPal users and are accepted by millions of merchants worldwide.
- Afterpay: Afterpay allows customers to split their purchases into four interest-free payments over six weeks. It’s widely used in various industries, including fashion, beauty, electronics, and more.
- Affirm: Affirm provides transparent financing options with fixed monthly payments for purchases. Customers can select the payment plan that best suits their needs, with terms ranging from three to 36 months.
- Klarna: Klarna offers flexible payment options, allowing customers to pay for their purchases in installments or defer payments for up to 30 days. Many online retailers across different sectors accept Klarna.
- Perpay: Perpay provides consumers with a convenient platform to shop for a wide range of products, from electronics to home goods, and split their payments into manageable installments without traditional credit checks or interest fees.
- Zip: Zip offers a versatile payment experience that includes in-store purchases and bill payments with four installments over six weeks.
- Sezzle: Sezzle allows customers to split their purchases into interest-free installments over six weeks without impacting their credit scores. It is particularly popular among younger consumers and is accepted by various online retailers.
Of course, these are just a few examples. BNPL vendors will likely continue evolving with new entrants and industry changes.
Meet Your Customers Needs
If you think a Buy Now, Pay Later (BNPL) program can benefit your sales goals, take that first step. As a systems integrator, BTM Global works with clients and their payment providers to create a streamlined system that works for everyone.
