When it comes to making online purchases, consumers want the convenience of being able to buy what they want and need without having to worry about breaking the bank. That’s where BNPL (buy now, pay later) comes in, providing eCommerce businesses with a way to offer their customers this level of convenience and flexibility.
What is BNPL, and how does it work?
BNPL is a type of financing that allows consumers to make purchases and pay for them later, either in whole or in installments. This payment method is becoming increasingly popular, especially among millennial and Gen Zers who are comfortable making online purchases and managing their finances through digital channels.
There are a few different ways BNPL can work, but the most common model is for businesses to offer customers the option to pay interest-free for their purchases over time. The customer pays a small down payment upfront (usually around 10%), then pays the remaining balance in installments over the next few months.
The benefits of BNPL for e-commerce businesses
There are a few key benefits that BNPL can offer eCommerce businesses, including:
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Increased sales
Offering BNPL can help to increase sales by making it easier for customers to make larger purchases. Customers who may have been hesitant to purchase because of the upfront cost can be more likely to do so if they know they can spread the cost out over time.
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Improved customer satisfaction
Customers who take advantage of BNPL are typically more satisfied with their purchase than those who pay in total upfront. They have the flexibility to pay for their purchase over time, making it easier to budget for and manage their finances.
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Increased customer loyalty
BNPL can also help increase customer loyalty, as customers who are satisfied with their purchases are more likely to return and make repeat purchases.
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Reduced fraud risk
One of the benefits of BNPL for businesses is that it can help to reduce fraud risk. Customers are typically required to provide their personal and financial information when they sign up for a BNPL plan, which can help to deter fraudsters.
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Improved cash flow
BNPL can also help improve a business’s cash flow, as businesses receive the total purchase price upfront and then collect customer payments over time. It can help businesses to manage their finances better and free up cash for other purposes.
The downsides to BNPL
While BNPL can offer several benefits for eCommerce businesses, there are also a few potential downsides. These include:
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Increased bad debt
One of the potential downsides of BNPL is that it can lead to increased bad debt if customers default on their payments. Businesses are responsible for the total purchase price, even if customers don’t make all their scheduled payments.
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Difficulty collecting payments
Another potential downside of BNPL is that it can be difficult for businesses to collect payments from customers who default on their installments. Businesses usually don’t have the same legal rights as traditional lenders, making it more challenging to pursue delinquent customers.
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Increased costs
BNPL can also lead to increased costs for businesses, as they may need to pay fees to the BNPL provider or incur other costs associated with offering this payment option.
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Customer data risks
Businesses that offer BNPL may also be at risk of customer data breaches, as customers typically need to provide their personal and financial information when signing up for a plan. Hackers could steal this information in a data breach.
The advantages of using a third-party provider for BNPL
There are a few advantages to using a third-party provider for BNPL, including:
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Lower costs
Businesses that use a third-party provider can typically avoid the increased costs associated with offering BNPL. Providers typically charge businesses a flat fee per transaction rather than a percentage of the purchase price.
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Improved cash flow
Businesses that use a third-party provider can also benefit from improved cash flow. Providers typically pay businesses the full purchase price upfront rather than in installments over time.
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Reduced fraud risk
Another advantage of using a third-party provider is that it can help to reduce fraud risk. Providers usually have anti-fraud measures, such as verifying customer information and monitoring for suspicious activity.
Tips for getting the most out of BNPL
If you’re considering offering BNPL to your customers, there are a few things you can do to make sure it’s successful:
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Choose the right provider
Choosing a reputable and reliable provider that offers competitive rates like Biller is essential. You should also ensure that your chosen provider has anti-fraud measures to protect your business and customers.
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Educate your customers
It’s also essential to educate your customers about how BNPL works. Make sure they understand the terms and conditions of the plan, as well as their responsibility to make payments on time.
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Monitor your account
Finally, monitoring your account closely is essential to ensure everything runs smoothly, which includes keeping an eye on your customer’s account balances and payment activity and monitoring your costs.
